Corporate Culture and Company Effectiveness


Т.Б. Иванова, М. Вакарелу, Е.А. Ковалева



            Corporate Culture and Company Effectiveness










Москва





                znanium com





электронно-библиотечная система
Инфра-М


2016

Т.Б. Иванова, М. Вакарелу, Е.А. Ковалева



            Corporate Culture and Company Effectiveness



Учебник










Москва
Инфра-М; Znanium.com

2016

Иванова, Т.Б.

      Corporate Culture and Company Effectiveness: учебник / Т.Б. Иванова, М.
Вакарелу, Е.А. Ковалева. - М.: Инфра-М; Znanium.com, 2016. - 125 с.




















© Т.Б. Иванова, М. Вакарелу, Е.А. Ковалева,
2013, 2016

        Contents

Abstract                                                             
Introduction                                                         
Part One. Corporate Culture in Theory                                
1.1 Genesis and Definition of Corporate Culture                      
1.2 Key Elements of Corporate Culture                                
1.3 Cross-Cultural Communication and Business Activity               
1.4 Corporate Culture and Company Effectiveness                      
Part Two. Business Case. Construction Technologies Ltd. and its      
Corporate Culture                                                    
2.1 Construction Technologies Ltd. - General information             
2.2 Economic Activity of Construction Technologies Ltd.              
2.3 Social Effectiveness and Corporate Culture of Construction       
Technologies Ltd.                                                    
2.3.1 Components of Corporate Culture                                
2.3.2 Cross-Cultural Communication and Corporate Culture             
2.3.3 HR-Dynamics                                                    
2.3.4. Psychological Climate                                         
2.3.5 Corporate Culture and Economic Effectiveness                   
Part Three. How to Create Effective and Innovative Corporate Culture 
3.1 Measures to Improve the Current Corporate Culture                
3.2 Evaluation of Effectiveness                                      
Conclusion                                                           
Appendix                                                             
List of References                                                   

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      Abstract

      In hypertension of market competition, all companies try to find different innovative solutions to improve its positions and increase its profit. Some of them choose accounting tools; others try to apply marketing instruments, the rest go to management experiments. Meanwhile, there is one point that for many years didn‘t seem to be highly recognized, but lately it has become widely spoken about. It is corporate culture and national mentality as instruments for effective management, especially in the times of globalization.
      This paper is dedicated to corporate culture and national mentality in theory and practice. We also pay special attention to peculiarities of cross-cultural communication between different ethnic groups gathered in multinational companies. The practical part which we entitled —Business case” we try to show complex diagnostics of a company‘s effectiveness. The third part of our work is focused on methodology of corporate culture changes. We show a way of innovative corporate culture formation to raise company‘s social and economic effectiveness and make the working process cheaper, more comfortable aimed at labor productivity increase.
      Methods and methodology applied in this paper can be used by top managers and HR-departments of multinational companies in their aspiration to bring fresh air to the company‘s environment making it effective and attractive for the personnel and new-comers. The material suggested can be also used in academic sphere.


      Introduction

      Nowadays all the companies are increasing its effectiveness by spreading worldwide to resist the global hyper competition. Top-management is using different instruments to make their companies survive and be prosperous. These instruments are searched for practically in every sphere of business activity: accounting, marketing, strategic planning, HR management, education, etc. Not the

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last, but one of the most important roles belongs to corporate culture as an instrument of effectiveness, especially for multinational organizations, acting in various parts of the glob. New ways and models of struggle for effectiveness are indispensable to withdraw successfully from the recession.
      Though all people are different and each ethnic group acts due to peculiarities of its mentality, top-managers are to cooperate with each other to reach the common target - to find a way out from the present economic situation in which most economies depend greatly of energy resources.
      Global economic situation urges the humanity to take steps go in search of mutual understanding and comprehension. It is especially difficult but extremely important to model an effective corporate culture in multinational companies which face problems cased by national differences and cross-cultural communication.
      There are numerous approaches and definitions of corporate culture, formulated by different researchers as corporate culture is studied in the frames of different sciences: management, theory of organization and organizational behavior, sociology, psychology, etc. Due to its multidisciplinary character and unique science integrity corporate culture creates special environment for effective company management which helps business maintain its position in the market economy.
      Nobody can give the concrete date of the appearance of the term —corporate culture”. Some researchers consider that the proper concept belongs to the period of urbanization in Europe in the Middle Ages. It is when guilders (professional unions) were formatted. Its structure was closed and governed by its own Status, ethics of relations, attributes, rules of behavior and contacts with the outer world. Members of the organization identified themselves with its goals and tasks; corporate interests were protected and personal problems found its solution in the organization‘s frameworks.
      Other specialists think that the term —corporate culture” was borrowed from military language of XIX century which was created by a German field marshal

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named Moltke and was used to characterize relations between officers. These relations were formed by Chapters to be observed; honor tribunals, which led to duals. Scars received in duals were considered the most honorable attributes. Corporate ethic rules were both written and oral being a kind of law to be followed strictly by everyone without any exception. Violation of the laws led to expulsion of the person from the military community.
       In the 30th of the XX century there were the first attempts to analyze corporate culture which were taken by American researcher E. Mayo, who headed a group of scientists of Hawthorn experiment for the company Western Electrics in Chicago (1927-1932). The experiment was undertaken to find out the impact of some factors on labor productivity. The researchers discovered some —shadow” social-psychological factors which were not considered by the —classic” management.
       In the 50th of XX century such industrial Western countries as America and Great Britain turned their eyes to peculiarities of organizations as cultural systems. The results of the research done appeared in a number of publications among which mention should be made of —Person who Rules” by an American sociologist M. Dalton. In his book the author described characteristic features of cultures and subcultures which appeared in a natural way in different American and Canadian companies reflecting employees‘ needs and interests.
       In 1969 a research of a group of scientists, primarily sociologists, with X. Trace at the head who represented Cornels University was published in US. They studied social aspects of personnel and production management and found the influence of production traditions and customs on the economic effectiveness of the corresponding companies.
       Later, in 80th-90th of XX century research of economic problems joint sociologists to say that corporate culture may turn into an important factor of effectiveness. Most publications on this topic are found in US. —Theory Z” by a Japanese professor Ouchy altogether with —In Search of Effective Management” by Pitters and Waterman Among became bestsellers. Its basic ideas are still relevant

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and valuable. In particular, the authors‘ statement of the human factor impact on effectiveness. They considered that it is the personnel and the environment created by them, may cause company‘s dramatic success or complete bankruptcy. People with their values, customs, and traditions; skills; motivated by corporate aims are the basic factor for successful business development. When people meet together for any activity they form spontaneously a certain corporate culture or subculture. If the corporate culture is formed consciously it follows the company‘s mission and aims. ( See: Алексеенко В.Б., Иванова Т.Б. ТОПЫ: слагаемые успеха, или как достичь эффективности в управлении бизнесом: Учеб. пособие. - М.: РУДН, 2010. 456 с. - стр. 193-209)
        Some theoreticians also link the appearance of corporate culture studies with the name of Hofstadter; others consider that officially it was firstly used in 1982 when two scientists T. Deal and A. Kennedy started to research the effectiveness of multinational American companies. They defined corporate culture as a system of informal rules that spells out how people are to behave most of the time. 1
       Most definitions of the corporate culture are based on universal human values, which may unite the personnel and help them share the feelings of corparticipation in business activity, as corporate culture of a multinational organization means creation of common basis and common environment for all the branches of the company acting oversees for making its management easier. Mention should be made that this common basis contained in the concentrated form the main features of the national mentality proper to the country of the company‘s origin.
       From the definitions given, it becomes clear that effective corporate (organizational) culture is one of the key points of successful business, but the process of its creation is rather complicated, especially when we are talking about multinational companies. The cause of difficulties in this case occurs not only

¹ Deal T. E. and Kennedy, A. A. (1982, 2000). Corporate Cultures: The Rites and Rituals of Corporate Life, Harmondsworth, Penguin Books, 1982; reissue Perseus Books, 2000

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because of language barriers, it is hidden deeper: first of all it is a distance between national mentality which is accompanied by different standards of life, different approaches of business organization, cultural peculiarities in communicative strategy and tactics and many other things that may be noted at first as remarkable. To avoid the possible barriers it is necessary to take into consideration the following points:
      1)       Proper understanding of national cultural differences and consequences for successful management
      2)       Proper organizational culture. An organizational culture will either act as an enabler or an inhibitor regarding most work aspects, such as open communication; support given by managers to their personnel and the degree to which personnel possessing psychological, physiological, social and cultural differences will be either included or excluded in fulfillment of the mutual tasks.
      Certainly there exist a lot of methods for researching and analyzing cross-cultural barriers during the communicative process and business making, but none of them is considered to be the prefect.

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        Part One. Corporate Culture in Theory

      1.1. Genesis and Definition of Corporate Culture

      For Russian business environment the term —corporate culture” is relative new in spite of the fact that in Western countries proper research and application of this concept began in 80-th. The notion —corporate culture” came to substitute the well-known notion of —organizational culture or organizational behavior”. Organizational culture and organizational behavior are factors which have strong impact on company‘s effectiveness as they create motivational environment for productive activity with minimum expenses. The question about how to increase productivity has been occupying constantly minds of researchers in different countries.
      Until the beginning of the 90th in countries based on social property on the main means of production which were called —socialist countries”, the main role on the organizational culture was played by the ideological doctrine which meant that there were no exploiters and labors. The population showed labor heroism as the results of their work belonged to them. So ideologically their work was done firstly for the country and then for them. Trade Union organizations didn‘t need to defend the working people‘ rights because all the main means of production such as factories, mines, land, etc. were public and belonged to the Socialist State. The responsibility of Trade Union organizations was to take care of the workers needs and necessities.
      Unfortunately it turned to be impossible to make Soviet people feel inclined to make profit and to experience responsibility for what they were doing. The cause of it is a kind of contradiction in the character of the Russians. On one hand the Russians are ready for hard, unpaired heroic labor for the sake of ideals and dreams, but on the other hand they do not worry about saving money or show responsibility for the results of their achievements.
      The main explanation of this fact is historical formation of the Russian national culture based on orthodox Christianity due to which one shouldn‘t worry

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about hard work to become rich - if he is poor, miserable, homeless it is the society to take care of him. The worst is his situation the more he is beloved by God.
       The difference in mentality between Orthodox believers and Protestants, who pushed the Western countries for progressive development and industrious labor, lies even in fairy tails which are told children. The English fairy tails start with the following words: —He was poor but honest”, meanwhile in the Russian stories it is poor who is honest, but it is almost impossible to find an honest person with dignity if he is rich.
       The historical religious background forms special attitude to well-to-do people in modern Russian society. It was Nicolay Berdyaev, among others, who spoke about double character of the Russians which determines their national mentality and national corporate culture. In this sense the term —corporate” means —common”, shared by the whole population. Nicolay Berdyaev in his article —Soul of Russia” which appeared at the beginning of the XX century proposed the model and method to study national culture which later was borrowed by foreign researchers. (Бердяев Н.А. Душа России в «Судьба России», М.: Изд-во МГУ, 1990)
       Another explanation lies in the historical development of Russia which for many years was a feudal society in which peasants (agricultural workers) didn‘t have any interest working for the landlord who didn‘t appreciate properly the results of their hard work considering serves to be his complete subordinates with whom he could do anything he liked. Long years of feudalism formed lack necessity for responsibility and concern about what happens around. For a serve it was easier to live if he didn‘t think about his unjust situation. Feudalism was reformed in Russia later than in Western countries that at the same period entered the industrial stage of development, forming the feeling of responsibility for human life, for one‘s deeds, for the family.
       In Western countries up to the 70th of the XX century the main factors which stimulated high level of productivity were the following:

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