UNIVERSITY OF ZIMBABWE
An analysis of the impact of corporate culture on the execution of strategy at Interfin Bank (2010-2011)
By
Joshua Gocha (R068340C)
Dissertation submitted in partial fulfilment of the requirements for the degree of Master of Business Administration in the Graduate School of Management University of Zimbabwe
Supervisor: Mr M. Mutowo
Academic Year: 2011
DEDICATION
This dissertation is dedicated to my family and friends for all the support during a challenging period.
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DECLARATION
Student Declaration – I Joshua Gocha do hereby declare that this dissertation is as the result of my own investigation and research, except to the extent indicated in the acknowledgements and references and acknowledged sources in the body of the report, and it has not been submitted in part or in full for any other degree, to any other University or College.
______Signature (Student) Date
Supervisor Declaration - I, ………………………….. do hereby confirm that the work reported in this dissertation was carried out by the candidate under my supervision as University supervisor. This dissertation has been submitted for review with my approval as University supervisor.
______Signature (Supervisor) Date
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ACKNOWLEDGEMENTS
I take this opportunity to thank all the lecturers and tutors in the MBA programme at the University of Zimbabwe. I also thank my supervisor, Mr. Mutowo for all his support and patience.
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ABSTRACT
Corporate culture can either be an asset or a liability to an organization depending on the nature of the internal and external environments within which a company finds itself.
In this study the researcher analysed Interfin Bank, a registered commercial bank which is faced with the need to develop a sustainable high-performance culture which supports strategy implementation. Interfin Bank is a new institution formed in the year 2010 after the merger of CFX Bank Limited and Interfin Merchant Bank of Zimbabwe Limited. The study looked at the fit between corporate culture and strategy implementation at Interfin Bank from year 2010 to year 2011.
The researcher analysed the background of Interfin Bank, that is, its formation and current performance. The researcher also explored the current problems facing the merged bank. The researcher looked at the various concepts on corporate culture and strategy from authors such as Schein (1985), Thompson (2005) and Johnson (2004), among others. The methodology used in this study is based on a research design that combined quantitative research with a qualitative exploratory procedure. The research instruments used were interviews on senior management at Interfin Bank as well as questionnaires which were administered to the chosen sample. The response rate was good at 80 percent which enabled a fair analysis of the data.
The main conclusion is that corporate culture at Interfin Bank is not yet supporting strategy execution and the bank has not yet developed its own set of values or shared culture. The respondents also view the new bank’s management as being radical since the merger took place in year 2010.
The recommendation by the researcher is that Interfin Bank needs to develop its own unique and shared culture that will support strategy implementation in view of competition from the several financial institutions. This will enable Interfin Bank to realize the benefits of acquiring another bank such as the enhancement of financial performance.
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TABLE OF CONTENTS
Dedications…………………………………………………………………………….(i)
Declaration…………………………………………………………………………….(ii)
Acknowledgement………………………………………………...... (iii)
Abstract…………………………………………………………………………..…...(iv)
Table of Contents………………………………………………………………….....(v)
List of figures…………………………………………………………………………..(x)
List of tables……………………………………………………………………….….(xi)
CHAPTER ONE
1.0 Introduction……………………………………………………………………..1
1.1 Background to the study……………………………………………………...2
1.2 Business Environmental Analysis…………………………………………..12
1.3 SWOT Analysis……………………………………………………………….18
1.4 Industry Analysis……………………………………………………………...19
1.5 Statement of the problem…………………………………………………….22
1.6 Research objectives………………………………………………………….22
1.7 Research Questions………………………………………………………….23
1.8 Research proposition…………………………………………………………23
1.9 Justification of research………………………………………………………23
1.10 Scope of research…………………………………………………………….24 v
1.11 Limitations of research………………………………………………………..24
1.12 Structure of dissertation………………………………………………………24
CHAPTER TWO
2.0 Introduction………………………………………………………………….…25
2.1 Corporate Culture defined…………………………………………………...26
2.2 Nature of corporate culture ……………………………………………….…31
2.3 Dimensions of corporate culture……………………………………………33
2.4 Elements of corporate culture…………………………………………….…34
2.5 Characterizing culture…………………………………………………….….44
2.6 Subcultures and Countercultures…………………………………………...58
2.7 Role of Culture………………………………………………………………..59
2.8 Ten parameters of corporate culture……………………………………….61
2.9 Impact of culture on performance…………………………………………..62
2.10 Culture Change and Culture Management………………………………..63
2.11 Criticism of Corporate Culture………………………………………………64
2.12 Corporate culture and strategy……………………………………………..65
2.13 Strategy Implementation………………………………………… ………….67
2.14 Importance of Strategy…………………………………………... ………….71
2.15 Cultural Approach to Strategy………………………………………………72
2.16 Creating a fit…………………………………………………………………..72 vi
2.17 Business Strategies………………………………………………………..75
2.18 Conclusion………………………………………… ……………………….77
CHAPTER THREE
3.0 Introduction…………………………………………………………………78
3.1 Methodological Convictions………………………………………………78
3.2 Research Design and Approach…………………………………………79
3.3 Population and Sampling…………………………………………………84
3.4 Sources of Errors…………………………………………………………86
3.5 Types of Sampling………………………………………………………..87
3.6 Nature of Investigation……………………………………………………93
3.7 Surveys…………………………………………………………………….93
3.8 Case Study………………………………………………………………..94
3.9 The Interview Method…………………………………………………….95
3.10 The Questionnaire Instrument…………………………………………..97
3.11 Measurement Scale ……………………………………………………..99
3.12 Data Collection Report…………………………………………………..99
3.13 Data Analysis…………………………………………………………….100
3.14 Limitations………………………………………………………………..100
3.15 Conclusion………………………………………………………………..100
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CHAPTER FOUR
4.1 Introduction……………………………………………………………..101
4.2 Response Rate…………………………………………………………101
4.3 Corporate Culture………………………………………… ……………104
4.3.1 Key features of culture…………………………………………………105
4.3.2 Development of unique and shared culture…………………………106
4.3.3 Team Spirit……………………………………………………………..107
4.3.4 Resolving issues through teams…………………………………….109
4.4 Changing the culture………………………………………………….109
4.5 Subcultures…………………………………………………………….111
4.5.1 Subcultures supporting departmental strategies…………………..111
4.5.2 Subcultures bonding Departments………………………………….111
4.6 Importance of culture…………………………………………………113
4.6.1 Culture as an asset that eases communication……………………114
4.7 Management Approach………………………………………………114
4.8 Culture Supporting Strategy…………………………………………116
4.8.1 Staff Involvement in Strategy Formulation…………………………116
4.8.2 Culture enhancing Performance and Productivity………………..117
4.8.3 Culture Supporting Strategy Implementation……………………..118
4.9 Strategic Planning Workshops……………………………………..119
4.10 Competitive Advantage……………………………………………..120 viii
4.10.1 Low Cost Leadership………………………………………………120
4.10.2 Product Differentiation…………………………………….……….121
4.11 Conclusion………………………………………………………….…122
CHAPTER FIVE
5.1 Introduction…………………………………………………………123
5.2 Conclusion………………………………………………………….123
5.3 Research Proposition Testing……………………………………124
5.4 Recommendations…………………………………………………124
5.5 Further Area of Study……………………………………………..125
5.6 Conclusion…………………………………………………….……126
References…………………………………………………………………127
Appendices…………………………………………………………………137
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LIST OF FIGURES
Figure 1.1 Total Assets Market Share ……………………………………….8 1.2 Savings Deposits……………………………………………….…10 1.3 Time Deposits…………………………………………………..….11 1.4 Loans and Advances……………………………………………...12 1.5 Real GDP growth…………………………………………………..15 1.6 Industry Analysis…………………………………………………...20 2.1 The Cultural Web…………………………………………………..38 4.1 Response Rate per Division……………………………………..103 4.2 Former Employer………………………………………………….104 4.3 Key Cultural Features…………………………………………….105 4.4 Unique and Shared Culture………………………………………106 4.5 Team Spirit…………………………………………………………107 4.6 Conflict Resolution…………………………………………………109 4.7 Creativity Promotion……………………………………………….110 4.8 Subcultures…………………………………………………………111 4.9 Subcultures bonding departments……………………………….112 4.10 Culture being an Asset……………………………………………114 4.11 Management Approach……………………………………………115 4.12 Staff Involvement…………………………………………………..116 4.13 Culture supporting Performance………………………………….117 4.14 Culture supporting Strategy Implementation…………………….118 4.15 Strategy Workshops………………………………………………..119 4.16 Low cost leadership………………………………………………..120 4.17 Product Differentiation……………………………………………..121
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LIST OF TABLES
Table 1.1 Retail Banking Performance………………………………..……..6 1.2 Employee Turnover………………………………………….…….16 1.3 Interfin versus NMB Bank…………………………………………21 2.1 Dimensions of Organizational Culture………………………..…34 2.2 Characterising Culture…………………………………………....48 3.1 Samples Chosen………………………………………………..…92 4.1 Summary of Responses…………………………………………102
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CHAPTER 1
1.0 INTRODUCTION Corporate culture has become an important topic in business worldwide. While corporate culture is an intangible concept, it clearly plays a meaningful role in corporations, affecting employees and organizational operations throughout a firm (Northcraft 1990).
While corporate culture is not the only determinant of business success or failure, a positive culture can be a significant competitive advantage over organizations with which a firm competes. According to Thompson (2005) corporate culture is a managerial task that shapes the outcome of efforts to execute a company’s strategy.
According to Robbins (1999) it is the corporate culture that sets values and standards which shape up how employees behave in their work environment. Also, according to Plunkett (2001) corporate culture has four functions, namely, it gives members an organizational identity; it facilitates collective commitment; it promotes social system stability and lastly it shapes behaviour by helping members make sense of their surroundings. Put simply, corporate culture is the way things are done in a particular organization.
In today’s dynamic business world, especially in Zimbabwe, strategies are dynamic. Hence, it is but logical that your corporate culture has to be dynamic too. It needs to adapt to the demands of business.
This study explores the issue of “fit” between strategy and corporate culture at Interfin Banking Corporation Limited (Interfin Bank) by analyzing whether corporate culture supports strategy execution.
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1.1 BACKGROUND TO THE STUDY
Interfin Bank started operating as a commercial bank in March 2010. Interfin Bank is a new institution that was born from the acquisition of CFX Bank Limited by Interfin Merchant Bank of Zimbabwe Limited. Interfin Merchant Bank Limited had been operating as a merchant bank in Zimbabwe since the year 2000. On the other hand CFX Bank was a commercial bank operating since the year 2002. CFX Bank Limited was formed out of CFX Merchant Bank and Century Bank Limited. The acquisition enabled a practical transformation from a merchant bank to a commercial bank.
During the second quarter of 2009, Interfin Merchant Bank of Zimbabwe Limited applied to the Reserve Bank of Zimbabwe (RBZ) for a commercial banking license so that it could transform itself from a merchant bank to a fully-fledged commercial bank. The license was granted by the RBZ in January 2010 and Interfin Merchant Bank decided to acquire CFX Bank Limited so that it could ride on the branch network and robust core banking system that CFX Bank Limited had. CFX Bank Limited had announced that it could no longer continue operating due to viability problems. Therefore the two banks merged to form Interfin Bank and in the process retained some staff members from both CFX Bank Limited and Interfin Merchant Bank. However, other staff members were recruited from outside the two organizations. Interfin Bank currently has two hundred staff members and has twelve branches with the head office being in Harare.
Interfin Bank provides a full spectrum of financial solutions for Zimbabwe's unique environment including retail banking, treasury services, corporate finance, trade finance transactions, corporate banking and advisory services.
Interfin Merchant Bank’s Motives for Acquiring CFX Bank
The shareholders of Interfin Merchant Bank felt of the need to keep up with a changing environment in Zimbabwe and decided to acquire CFX Bank Limited. The other reasons were as follows,
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i. To enter new product or market areas since the process of internal development was slow. ii. The lack of commercial banking resources by Interfin Merchant Bank to compete successfully in the commercial banking sector was a major driver. The necessary innovations could not be put in place quickly enough. iii. Cost efficiency made the acquisition favourable. CFX Bank Limited had Equation 3, which is a robust core banking system. It must be noted that CFX Bank Limited was a long way down the experience curve and had achieved some efficiencies which were going to be difficult to match quickly by Interfin Merchant Bank’s internal development.
1.1.1 WHAT INTERFIN BANK STANDS FOR The vision of the bank is to become an innovative and dominant commercial bank in Zimbabwe. The mission is to become a dynamic provider of customer focused financial solutions that create value for all stakeholders.
Interfin Bank’s character and focus is to be a multiple commercial branch network bank targeting medium to large corporates, high net worth individuals and segments of the mass market, serviced by a customer centric culture, offering an expanded product range, which leverages on technology and is driven by skilled and robustly trained human resources.
A comprehensive set of values were crafted by Interfin Bank and the management noted that the success of the bank depends on reviving and living the Interfin Bank’s corporate values, which are as follows:-
• Commitment • Professionalism • Entrepreneurship • Teamwork • Integrity 3
These values are key to strategy implementation since Interfin Bank came out of two banks that had their own values and beliefs.
1.1.2 INTERFIN BANK’S BALANCED SCORECARD
Interfin Bank’s management met and crafted new strategies for the bank in April 2010 so as to move the institution forward and these were the highlights:
Financial Perspective
• Profitability (Focused strategies in Treasury, Corporate Banking & International Banking). • Business growth (Real growth of balance sheet and market share). • Review business model in line with the changing environment. • Improved reporting.
Customer Perspective
• Strategic alliances (nurture existing and forge new ones). • Regional expansion by establishing technical partners. • Increase profitability and market share in current local products and offshore products. • Introduce technologically driven products that address specific customer needs. • Client relationship management. • Increase lending facilities, local and offshore. • Extensive market research and product development. • Resuscitate advisory services (Corporate Finance). • Enhance brand visibility.
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Internal Perspective
• IT upgrade to improve on core banking system and other systems. • Improve on internal controls. • Full compliance with exchange control regulations.
Learning and Growth Perspective
• Skills development. • Strategic recruitment with emphasis on qualifications. • Succession plans based on skills, experience and qualifications. • Targeted training and development programmes. • Performance management to include productivity indicators. • Change management to handle the transition (culture change). • Staff motivation. • Retention schemes. • Reward for performance. • Staff discipline (zero tolerance for intransigence, poor attitudes, non-compliance and incompetence).
1.1.3 RETAIL BANKING PERFORMANCE
The retail banking division is the face of the bank. The division’s main thrust is to raise deposits through the opening of customer accounts. The activity that happens in this division reflects the liquidity of the bank. The more the deposits that the bank raises, the more the funds that are available for the bank to on-lend. The table below shows the performance of Interfin Bank’s retail banking division.
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Table 1.1: Interfin Bank’s Retail Banking Division Performance 31.01.11 28.02.11 22.03.11 Budget 31.03.11 LIABILITIES
10,593,319 11,684,574 15,010,298 20,000,000 Customer Deposits
ASSETS
322,879 568,079 740,990 1,250,000
INCOME
No. 14,451 15,692 16,669 50,000 Accounts
(USD)
Source: Interfin Bank Retail Division (April 2011).
The statistics show that the bank was 33% below budget in terms of customer deposits as at 31 March 2011. In respect of income contributed by retail division, this was 69% below budget as well. This explains the cost to income ratio of 68% for Interfin Bank as at 31 December 2010 and staff costs to total costs of 50% which are high in terms of the industry accepted ratio of 25%. Looking at the number of customer accounts, as at 31 March 2011 the bank was 200% below the expected number showing that more work needs to be done to open more customer accounts and be in line with competitors like CBZ Bank.
1.1.4 STRUCTURE OF THE ZIMBABWE FINANCIAL SERVICES SECTOR BANKING SECTOR REVIEW Zimbabwe's banking sector is struggling due to under-capitalisation and macro- economic pressures. The sector requires fresh foreign capital injection and deep- 6
pocketed shareholders to operate viably. Since the introduction of the multiple-currency system in 2009, the sector has faced a crisis of depositor confidence, non-performing loans and advances and capital inadequacies.
The market also continues to be characterized by liquidity constraints and narrowing margin returns as investors are continuously demanding a reasonable return for their invested funds. This highlights the need for more decisive steps to promote portfolio restructuring in order to ensure there are sufficient margins to generate additional capital buffers. Recently Renaissance Merchant Bank was placed under curatorship. According to reports the bank had a negative capital of US$16, 7 million against the prescribed minimum capital of US$10 million for merchant banks.
Zimbabwe's inflation remains low and stable, as evidenced by the deceleration to levels below 3% by the first quarter of 2011. In April 2011, annual headline inflation remained unchanged at 2.7%. Food and non-food inflation stood at 2.95% and 2.58%, respectively. Food inflation was largely driven by fruits and vegetables, which were in short supply. These were being complemented by imports from South Africa, which are adversely affected by a strong Rand. The increase in non-food inflation was mainly due to transport costs, which responded to increases in domestic fuel prices
MARKET SHARE IN TERMS OF ASSET BASE For the period under review total banking sector assets (excluding Genesis and ZABG) amounted to $3.78 billion as at 31 May 2011. CBZ led the pack with total assets of $810.1 million representing a market share of 22%. CBZ’s market share decreased from a firm position of 28.07% and 27.09% in 2009 and 2010 respectively. Standard Chartered Bank was ranked second with an asset base of $351.7 million representing a market share of 9%. Again, Standard Chartered Bank’s market share decreased from 12.95% and 14.44% in 2009 and 2010 respectively. Stanbic and Banc Abc had market shares of 9% respectively. With an asset base of $202.8 million Interfin
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Bank’s market share was 5% while NMB’s market share was 4%. Figure 1.1 below illustrates the sector’s market share as at 30 May 2011.
Figure 1.1: Total Assets Market Share
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Banks such as Standard Chartered Bank, Barclays Bank, CBZ Bank, MBCA Bank and Metropolitan Bank, demand deposits constituted well above 70% of their deposits. The $1.5 billion worth of demand deposits as at end of May was distributed as follows: • CBZ led the pack with a balance of $421 million. • Stanbic Bank, Standard Chartered Bank, Barclays Bank, FBC Bank, MBCA Bank, Banc ABC and Interfin Bank followed with balances of ranging from $291.9 million to $40 million respectively. • Other institutions, whose balances were below the $40 million mark constituted 9% and amounted to $135 million of total demand deposits. NMB Bank, CABS and Agribank had nil balances on their demand deposits.
Savings Deposits The top four market shakers for savings deposits are Metropolitan Bank, BancABC, ZB Bank and Kingdom Bank within the range $68 to $46 million, with Metropolitan Bank and BancABC constituting 26% of total saving deposits. ZB Bank and Kingdom Bank had 23% and 18% of total savings deposits respectively. They were within the range of $58 to $46 million. Standard Chartered Bank and Barclays Bank had 4% and 2% of total savings deposits respectively. These were within the range of $9 and $5million. The remaining 1% was apportioned among the remaining banks, including Interfin Bank as shown in figure 1.2 below.
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Figure 1.2: Savings Deposits
Time deposits As shown in figure 1.3 below, 73% of total time deposits amounting to $630 million was held by five banks. These were CBZ Bank with 24%, Stanbic Bank with 10%, BancABC with 10%, Standard Chartered Bank with 8%, Barclays Bank (6%), CABS (6%), ZB Bank(5%). Interfin Bank had just 5%.
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Figure 1.3: Time deposits
MARKET SHARE IN TERMS LOANS AND ADVANCES The sector’s total loans and advances stood at $2.4 billion. CBZ Bank loaned $556 million which constituted 23% of the total market loans. Stanbic Bank and BancABC came second with $246 million and $230 million both with 10% of the total loan and advances market share. Stanchart ranked third with total loans of 8% totaling to $192million. Barclays Bank and Interfin Bank were on the fourth position with 6% and their loans were $148 million and $143 million respectively.
The fifth position has four banks which are Kingdom, CABS, NMBZ and ZB which had 5% their total loans were within the rage of $133miilion to $110miilion. Agribank, Royal Bank, Metropolitan Bank, TN Bank and Eco-bank had 2% of total loans market share. On a relative basis, during the month of May 2011 the sector loaned $0.79 on average for every dollar deposited. Interfin Bank loaned $0.88 to loans for every dollar deposited Interfin. The distribution of total loans and advaces is illustrated in figure 1.4 below.
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LOANS AND ADVANCES
USD 600,000,000.00 USD 500,000,000.00 USD 400,000,000.00 USD 300,000,000.00 23% USD 200,000,000.00 10%10% USD 100,000,000.00 8% 6% 6% 5% 5% 5% 5% 4% 2% 2% 2% 2% USD 0.00 2% 1% 1% 1% 0% FBC CBZ CABS POSB NMBZ MBCA TRUST ROYAL METRO TETRAD STANBIC ZB BANK BancABC TN BANK IBC BANK ECOBANK BARCLAYS KINGDOM AGRIBANK STANCHART
Figure 1.4: Loans and Advances
1.2 BUSINESS ENVIRONMENTAL ANALYSIS In order to fully understand the external and internal environment of Interfin Bank, PEST and SWOT analysis will be conducted in the study. The implications of the environment, impact on Interfin Bank’s strategies.
1.2.1 Political Environment
The negative political environment prevailing in Zimbabwe has affected Interfin Bank since the international partners continue to shun the local market. Partners like MoneyGram, the money transfer partner is not willing to enter into more viable strategic partnerships with Interfin Bank because of the prevailing political situation. Banks like JP Morgan Chase New York in the United States of America, do not allow United States Dollar payments, originating from Zimbabwe, to go through their systems because of the political environment in Zimbabwe. There continues to be that growing sense of insecurity and investment levels are very low. After the signing of the Global Political Agreement by the main political parties, the political situation has slightly improved. Any differences that still exist among the political parties are being discussed by the parties as an ongoing process. A stable political environment makes it conducive for the country’s business entities to move forward. 12
1.2.2 Economic Environment
Zimbabwe's inflation remains low and stable, as evidenced by the deceleration to levels below 3% by the first quarter of 2011. In April 2011, annual headline inflation remained unchanged at 2.7%. Food and non-food inflation stood at 2.95% and 2.58%, respectively. Food inflation was largely driven by fruits and vegetables, which were in short supply. These were being complemented by imports from South Africa, which are adversely affected by a strong Rand. The increase in non-food inflation was mainly due to transport costs, which responded to increases in domestic fuel prices.
Zimbabwe's annual inflation rate for the month of May measured by the all items Consumer Price Index declined 0.2 percentage points to 2.5% on the back of price stability. Zimbabwe’s annual inflation was unchanged in the previous 2 months at 2.7%.
The world economy has been gradually recovering from the recent recession with developed and emerging economies recording positive growth. The global economy is forecast to grow by 4.3% in 2011, according to the International Monetary Fund report of 2010. Emerging economies continued to be buoyant driven by the recovery in commodity prices and the positive impact of monetary and fiscal interventions aimed at preserving and stimulating economic growth rates in response to global recessionary pressure. Emerging markets are expected to grow by 6.5% in 2011 (IMF 2010).
Regulatory authorities in financial markets across the world have continued to tighten regulations and oversight on the activities of the financial services industry aimed at preventing and reducing the impact of systematic risk.
The prevailing policy uncertainty has limited the availability of external investment capital for Zimbabwe thus depriving liquidity not only to the banking sector but to the entire economy. Confidence in the banking sector continues to improve but there is still a high level disintermediation as a result of low income levels and the high levels of informal trade and Interfin Bank is affected. The informal sector is not captured in 13
national economic analyses but its impact is evident in the demand for consumer goods especially mobile services, food and beverages.
The tight liquidity conditions in the economy have been exacerbated by the low levels of savings which together with the low disposable incomes and the informal sector, have starved the formal economy of liquidity resulting in the banking industry only receiving short term deposits and consequently not being able to lend for a long term (Financial Gazette 2011). The tight market liquidity is evident in the cost of money which is above 15% per annum on United States of America credit.
The lack of efficiencies and long term investment capital are posing significant challenges for the manufacturing sector as the economy shifts away from import substitution to comparative advantage based production (The Herald 2011). Interfin Bank’s manufacturing customers are operating at low capacity utilization levels of below 40% and exports coming through the bank have gone down from $10 million dollars per month to $3 million dollars. Transport and communications sectors are also operating at low capacities.
With an estimated real GDP growth of 4.8% and 8.1% according to the IMF Report of 2010 and Zimbabwe Treasury respectively, the economy is expected to complete its second year of buoyant economic growth after a decade of economic decline. As shown below and according to the IMF’s World Economic and Financial Surveys of November 2010, the world outlook points to a growth in real GDP as at end of 2010; Sub-Saharan Africa 5.5%, EURO area 1.5%, United Kingdom 2%, USA 2.3%, and South Africa 3.5%.
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Real GDP Growth ( 2008, 2009 and Projections for 2010 & 2011.) Real GDP Real
EURO Area Sub -Saharan Africa United Kingdom USA Bostwana South Africa Zimbabwe
Figure 1.5: Real GDP G rowth
Zimbabwe’s overall socio -economic situation has been improving since official dollarization was adopted almost two years ago.
An investment banker with a regional bank noted tha t most indigenous banks require fresh capital from shareholders and considering that institutions are struggling to meet the Reserve Bank of Zimbabwe minimum capital requirements, it means there is urgent need for foreign investment (Herald 2011).
Country risk will remain the greatest hindrance to accessing offshore lines of credit and with the export sector struggling to recover, the gap between demand and supply of loanable funds may persist for at least the next three years implying higher margins on the lending rates. Whils t we do not expect any other bank to wind up in the near term, after the placement under curatorship of Renaissance Merchant Bank by the Reserve Bank of Zimbabwe in June 2011, we do not discount the possibility as more are likely to
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restructure and mergers and acquisitions will occur, as in the case of Interfin Merchant Bank and CFX Bank Limited to form Interfin Bank.
1.2.3 Social Environment
There is a high incidence of HIV/Aids infection affecting the working population and the population in general. Interfin Bank’s staff members have not been spared as the right skills succumb to the HIV/AIDS pandemic. One advantage which Zimbabwe has is that the cultures in the nation are united and very tolerant of one another. There is diversity and oneness prevails. This oneness was however affected by the harsh economic climate in recent years with resulted in citizens not utilising the banking services.
The harsh economic climate has also led brain drain as Interfin Bank lost the following key personnel from May 2010 to July 2011,
Table 1.2: EMPLOYEE TURNOVER NUMBER OF DIVISION RESIGNATIONS Retail 12 Corporate Banking 3 Treasury 2 Operations 4 Marketing 2 Asset Finance 1 Risk 2 Total 26 Source: H.R. Department 2011
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1.2.4 Technological Environment
Due to the economic downturn that the country experienced, we are still very far in terms of adopting the latest technology. The Finance Minister, Tendai Biti stated in his last fiscal policy presentation for year 2010 that the country is still operating in the 1970’s (Zimbabwe Independent 2011). He was implying that since the 1970’s, there has not been any meaningful advancement in terms of technology. The state infrastructure is worn out and systems used are obsolete. This has affected Zimbabwe’s competitiveness since the country cannot match other goods on the global market. However the country has started to make great strides in improving technology in the country. This has seen the laying out of fibre cables to connect the country to the more efficient internet connectivity. Rapid changes in technology present Interfin Bank with opportunities as well as challenges. For example, Interfin Bank’s core banking system still needs to be upgraded further so that customer service is continuously enhanced and to enable the bank to compete with banks like CBZ Bank and FBC Bank.
1.2.5 Legal Environment
The country’s constitution is yet to be amended and this has presented challenges to the operating environment. The formation of companies still presents challenges to prospective business people since there are so many hurdles one has to deal with when forming a company. We also have the Indigenisation Bill introduced by the government. We all agree that it is a good piece of legislation but the way it was introduced to the local and international community may not have been proper and this has affected the competitiveness of Zimbabwe as a country since investors are shying away. Interfin Bank has not been spared by these issues. Exchange Control regulations by the central bank remain very stringent affecting the normal running of banking business.
Interfin Bank as a new entrant needs to continuously craft new strategies so that the bank meets its objectives.
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1.3 SWOT ANALYSIS The SWOT analysis (Strengths, weaknesses, opportunities and threats) bring out the internal capabilities that Interfin Bank can use to deal with external threats and at the same time taking advantage of opportunities that prevail in the environment.
1.3.1 Strengths
Interfin Bank has a positive credit rating given by the Global Credit Rating, an internationally recognized rating company. The bank has relatively risk free assets. Looking at the management, the management is adequately qualified with all managers having a degree and years of experience. Interfin Bank has been a market leader in satellite television subscriptions from the days of Interfin Merchant Bank and the market has confidence in the bank.
1.3.2 Weaknesses
The bank has been experiencing weak strategy implementation. A number of milestones were set in April 2010 but many of these remain outstanding with the implementation plans not being followed. The bank needs to craft a customer service charter so as to improve on customer service. The bank needs to fight the negative market perception when it took over CFX Bank Limited. This is because the CFX brand had been tarnished in the market after the bank had several brushes with the regulatory authorities leading to curatorship at some point in year 2004 and customers lost their hard earned money. Succession planning in the bank is not robust and not well documented. Morale of staff remains low since the merger as staffs are still uncertain about their future. This has resulted in negative employee perception of leadership styles. The bank is also suffering from poor internal and external communication.
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1.3.3 Opportunities
One major opportunity for Interfin Bank is growing the balance sheet and what is only needed is twisting around the bank’s fortunes. The financial institution also has an opportunity to enhance the new brand. A new logo was unveiled in April 2011 and the bank has the potential to lift the brand to a higher level. Interfin Bank as a new institution has the opportunity to bring on board international strategic partners such as Mauritius Commercial Bank, PTA Bank, Afrexibank and Rand Merchant Bank- South Africa. These international alliances used to do deals with the former Interfin Merchant Bank.
1.3.4 Threats
One of the major threats facing the bank includes the continuous improvement and innovation of systems and products by other local financial institutions. Banks like FBC Bank and Kingdom Bank are leading the way in terms of bringing out technologically advanced products. The bank is also facing the threat of continuously losing competent staff members to rival banks. International correspondent banks have been threating to cut ties with local banks and Interfin Bank faces the same threat.
1.4 INDUSTRY ANALYSIS Detailed below is the industry analysis as guided by Michael Porter’s Five Forces Model. According to Thompson (2005) the five forces model holds that the state of competition in an industry is a composite of competitive pressures operating in five areas of the overall market. This assists Interfin Bank to isolate the power of suppliers and communities, the degree of rivalry and ease of entry, as well as possible substitutes for the bank’s products and services.
Together the five-forces model determines the profit potential for the banking industry in Zimbabwe. It helps management decide whether the financial institution should remain
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in or exit the financial services sector. It provides the rational for increasing or decreasing resource commitments.
POWER OF SUPPLIERS
o Suppliers of funds ask for a premium/unethical deals due to market shortages & existence of many players o Key employees may withdraw their skills
BARRIERS TO ENTRY DEGREE OF INDUSTRY THREAT OF RIVALRY SUBSTITUTES • Prohibitive capital requirements & • Stiff competition around pricing • Substitutes may be in the capital outlays & service delivery among form of property, stocks, required to commercial banks as well as establish insurance other financial institutions infrastructure act offering similar services as deterrent to new entrants • Stringent licensing requirements
POWER OF CUSTOMERS/COMMUNITIES
• Customers may switch to competitors on the basis of perceived pricing & quality of service • Customers may also multi-bank to spread their risk
Figure 1.6: Interfin Bank’s Industry Analysis
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1.4.1 INTERFIN BANK’S COMPARISON WITH A COMPETITOR
Interfin Bank’s research department carried out a benchmarking exercise in January 2011 and observed that the new bank was lagging behind in terms of meeting its set objectives. The competitor used for this purpose was NMB Bank which operates along the same lines as Interfin Bank.
Table 1.3: Interfin Bank versus NMB Bank as at 31 December 2010 ARENA INTERFIN BANK NMB BANK COST & o Cost:income ratio 68% o Cost:income ratio 53% QUALITY o Cost of funds 68% o Cost of funds 43% o Service delivery – fair o Service delivery – better o Brand equity –famous o Brand equity – more famous TIMING & o Responsiveness – swift o Responsiveness - swifter KNOW-HOW o Skills base - good o Skills base - better o Product diversity – fair o Product diversity - wide o IT systems – 2005 version o IT systems – 2010 version STRONGHOLDS o Links with regulatory o Links with regulatory authorities – fair authorities – very good o Geographical o Geographical representation - better representation – fair o Group synergies - fair o Group synergies - strong
Source: Interfin Bank’s Research Department
The commercial banking industry now more than at any other time in its history is directly confronted with a fundamental issue, which is survival. Faced with further deregulation, continued competition from other financial service organizations, and rapid and unexpected change, Interfin Bank can no longer be just financially oriented; it must
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be customer, sales and service oriented. The bank can no longer sit back and expect customers, retail or commercial, to come to it. Interfin Bank must seek out quality consumer and corporate business and establish meaningful multiproduct relationships.
1.5 STATEMENT OF THE PROBLEM
Interfin Bank is a new institution which was formed from two banks that were operating in Zimbabwe, that is Interfin Merchant Bank of Zimbabwe Limited, a merchant bank and CFX Bank Limited, a commercial bank. Since the merger the bank has been experiencing loss of market share; targets set by executives are not being achieved; some customers are closing their accounts and low staff morale prevails as evidenced by the frequent workers’ meetings. The bank is experiencing lack of strategic alliances with local and foreign partners; poor brand visibility; retarded balance sheet growth and a high cost to income ratio. The merger meant bringing together two sets of different corporate cultures, backgrounds, skills, norms and behaviours. It also meant crafting new strategies and the implementation of those strategies.
It is therefore the intention of this study to analyse whether the prevailing corporate culture supports strategy implementation at Interfin Bank.
1.6 RESEARCH OBJECTIVES
The following objectives were formulated in order to achieve the main purpose of this research:
i. To establish the key features of Interfin Bank’s culture.
ii. To establish the nature of relationship between corporate culture and strategy formulation and implementation at Interfin Bank.
iii. To find out whether corporate culture assists Interfin Bank in gaining competitive advantage in the financial services sector.
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iv. To investigate whether the new management team at Interfin Bank supports strategy implementation.
1.7 RESEARCH QUESTIONS
The following research questions will guide the researcher thereby meeting the objectives of the study,
i. What are the key features of Interfin Bank’s corporate culture?
ii. Does Interfin Bank’s corporate culture support strategy implementation?
iii. Is there a fit between corporate culture and strategy at Interfin Bank?
iv. Is corporate culture aiding competitive advantage at Interfin Bank?
v. Does the new management at Interfin Bank support strategy implementation?
1.8 RESEARCH PROPOSITION
The corporate culture at Interfin Bank supports strategy implementation.
1.9 JUSTIFICATION OF RESEARCH
The challenges prevailing in the Zimbabwean economy have seen many financial institutions merging so as to counter the harsh economic environment. This merging of banks results in the new institutions not meeting their intended targets and the benefits of the merger are not realized.
This research seeks to examine whether corporate culture supports strategy formulation and implementation in a merged bank like Interfin Bank. The researcher will examine the culture integration at Interfin Bank and align it to strategy formulation and implementation. The researcher will come up with recommendations that other institutions that are going to merge or change ownership will adopt so that implementation of strategy is done effectively and set targets are met.
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1.10 SCOPE OF RESEARCH
The study covers the period 2010 to 2011. This is the time Interfin Merchant Bank acquired CFX Bank Limited to form Interfin Bank. The study will look at the strategies formulated by Interfin Bank in year 2010. The sample will be drawn from managerial employees of Interfin Bank.
1.11 LIMITATIONS The research will include a questionnaire whereby the interviewees will assess the impact of corporate culture on strategy implementation at Interfin Bank. This presents some probability of subjectivity whereby some respondents may be biased depending on whether they came from Interfin Merchant Bank or CFX Bank Limited. The respondents may feel that the subject under study is sensitive forcing them to withhold valuable responses.
1.12 STRUCTURE OF THE DISSERTATION
The first chapter of this dissertation covered the background of the study, statement of the problem, research justification, research objectives, research questions, proposition and scope of the study. Chapter Two will focus on contributions made by other authors on corporate culture and strategy. An analysis of the concepts will be made. In chapter three the researcher will look at research methodology and data analysis techniques. Chapter four will consist of the research findings. Finally chapter five will look at the conclusion and recommendations.
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CHAPTER 2
LITERATURE REVIEW
2.0 INTRODUCTION
This chapter focuses on literature related to the study of corporate culture and business strategy formulation and implementation. The chapter will define corporate culture and also look at the various theories on corporate culture.
Schein (1985) contends that many of the problems confronting leaders can be traced to their inability to analyze and evaluate organizational cultures. While there are many common elements in the large organizations of any country, organizational culture is unique for every organization and one of the hardest things to change (Ashkanasy 2000). According to Schroeder (2000) there has been an undisputed increase in both managerial and theoretical interest in the field of corporate culture. This interest is not attributable to one single factor, but a concern with new and improved ways of managing for success has been a central theme. Culture is man made in the sense that it is formed through events which take place in history in order to help individuals cope with their environment (Plunkett 2001).
Mergers and acquisitions have flourished in the past decade. According to Beech (2005) success in such activities is likely to depend upon not only the resulting economic synergy but also on the cultural compatibility of the merging entities. Corporate Culture is embedded deeply in the organization and in the behavior of the people there (Brewis 2007). Every organization has a culture, its set of beliefs, values and learned ways of managing and this is reflected in its structures, systems and approach to the development of corporate strategy (Child 2003). Chan (2002) noted that cultural dimension is central in all aspects of organizational life. An important task of managers is to try to manage the ideas and understandings of their subordinates (Cray 1997).
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According to Denison (1990) most large organizations have a dominant culture and numerous sets of sub-cultures. A dominant culture expresses the core values that are shared by a majority of the organization’s members (David 2005). Sub-cultures tend to develop in large organizations to reflect common problems, situations or experiences that members face (Denison 1990). According to Pedersen (1989) the exponents of the corporate culture paradigm are well known authors such as Deal and Kennedy (1982); Peters and Waterman (1982); Athos and Pascale (1981) and Ouchi (1981).
According to Kotter (1992) strong cultures promote successful strategy implementation while weak cultures do not. By strong culture, its means there is a shared belief in practices, norms and other practices within the organization that helps energize everyone to do their jobs to promote successful strategy implementation (Klein 2003).
2.1 CORPORATE CULTURE DEFINED
According to Hatch (2004) corporate culture refers to the shared philosophies, ideologies, values, assumptions, beliefs, expectations, attitudes and norms that knit an organization together. Hofstede (2002) defined it as the human invention that creates solidarity and meaning and inspires commitment and productivity. Jacob (2005) defined it as a system of shared values (what is important) and beliefs (how things work) that interact with a company’s people, organizational structures, and control systems to produce behavioral norms. While no strong consensus has been formed on a definition, in the present study corporate culture is defined as the pattern of shared values and beliefs that help individuals understand organizational functioning and thus provide them with norms for behavior in the organization (Pullen 2005).
Organizational culture is based on shared attitudes, beliefs, customs, express or implied contracts and written and unwritten rules that the organization develops over time and that have worked well enough to be considered valid (Smith 2002). According to Thompson (2005) corporate culture refers to the character of a company’s internal work 26
climate and personality as shaped by its core values, beliefs, business principles, traditions, ingrained behaviours and style of operating.
Corporate culture manifests in the ways the organization conducts its business, treats its employees, customers, and the wider community (Schwartz 2000). Another author Magala (2005) noted that it is the extent to which autonomy and freedom is allowed in decision making, developing new ideas and personal expression and how power and information flow through its hierarchy. To add to this idea, Bauman (2004) stated that corporate culture is the strength of employee commitment towards collective objectives. Pacanowsky (1982) as cited by Linstead (2009) noted that corporate culture is not just another piece of the puzzle, it is the puzzle. The same author also highlighted that culture is not something an organization has; culture is something an organization is (Linstead 2009).
Alvesson (2007) defines corporate culture as a system of common symbols and meanings which provides the shared rules governing cognitive and effective aspects of membership in an organization and the means whereby they are shaped and expressed. On the other hand Finlay (2000) defined culture as being the shared norms of behavior, values and assumptions that knit a community together. Corporate culture, sometimes also called organizational culture, therefore refers to the shared values, attitudes, standards, codes, and behaviors of a company's management and employees (Louis 1999). According to Korth (2000) corporate culture is rooted in an organization's goals, strategies, structure, and approaches to business activities. Another author Bloisi (2003) defines culture as the configuration of learned behavior whose component elements are shared and transmitted to the members of a particular society.
The taproot of corporate culture is the philosophy, the attitudes, the beliefs and the shared values upon and around which the organization operates (Thompson 1989). Blunt (1992) defines corporate culture as the collective programming of the mind which distinguishes the members of one category of people from those of another. Shared values, what people genuinely believe to be good or bad, desirable or undesirable, acceptable or unacceptable, are the essence of organizational culture (Brown 2003).
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According to Robbins (2005) corporate culture refers to a system of shared meaning. Cartwright (2001) also referred to organizational culture as being the positive elements, where individuals or groups subscribe to organizational goals of product and service quality and are committed and energetic in their pursuit. According to Macmillan (2000) corporate culture refers to the style and learned ways that govern and shape the organization’s people relationships.
According to Simmons (2001), it is the leader's job to provide the vision for the group. A good executive must have a dream and the ability to get the company to support that dream (Sadri 2001). The leader must also provide the framework by which the people in that organization can help achieve the dream (Trist 1998). This is called corporate culture. Generally, corporate culture refers to the prevailing implicit values, attitudes and ways of doing things in a company (Liao 2005). According to Johnson (2007) it often reflects the personality, philosophy and the ethnic-cultural background of the founder or the leader. Corporate culture dictates how the company is run and how people are promoted (Martin 2003).
Brown (2003) also defined organizational culture as the basic assumptions and beliefs that are shared by members of an organization, that operate unconsciously and define in a basic taken-for-granted fashion an organization’s view of itself and its environment. However according to Garibaldi de Hilal (2006) culture is not merely a set of shared values, but a set of basic assumptions and beliefs which operate in an often unconscious ‘taken for granted’ fashion, as a powerful determinant of individual and group behavior.
According to Hofstede (2001) organizational culture describes the fundamental assumptions people share about an organization’s values, beliefs, norms, symbols, language, rituals and myths that give meaning to organizational membership and are collectively accepted by a group as guides to expected behaviours. Another author Nguyen (2003) refers to corporate culture as a set of understandings or meanings shared by a group of people that are largely tacit among members and are clearly
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relevant and distinctive to the particular group which are also passed on to new members .
According to Cooke (2000) culture is an integrating mechanism, the glue which holds together a potentially diverse group of organizational members. Cartwright (2001) further defines corporate culture as a pattern of basic assumptions, invented, discovered or developed by a given group as it learns to cope with its problems of external adaptation and internal integration, that has worked well enough to be considered valid and therefore, to be taught to new members as the correct way to perceive, think and feel in relation to those problems.
2.1.1 Definitions by other Authors
According to Kotter (1992) culture refers to:
(a) The values that lie beneath what the organization rewards, supports and expects;
(b) The norms that surround and/or underpin the policies, practices and procedures of organizations;
(c) The meaning incumbents share about what the norms and values of the organization are.
On the other hand Peters and Waterman (1982) as cited by Pugh (1998) noted corporate culture to be a dominant and coherent set of shared values conveyed by such symbolic means as stories, myths, legends, slogans, anecdotes and fairy tales.
Another definition came from Dodsworth (2007) who noted that culture is a set of understandings or meanings shared by a group of people that are largely tacit among members and are clearly relevant and distinctive to the particular group which are also passed on to new members.
O’Donovan (2006) came up with three positions on corporate culture as follows:-
i. Culture as building block – corporate culture is assumed to be designed by management and having a strong impact on results. 29
ii. Management as symbolic action – culture is seen as mediated in actions, language use and arrangements primarily affecting beliefs and understandings, thus having mainly consequences on attitudes and orientations, and less directly so for ‘substantive outcomes’ such as profits.
iii. Culture as a terrain of possibilities and pitfalls – understanding culture is important for managers’ possibilities in navigating in and with the organization.
2.1.2 Three Layers of Organizational Culture
According to Phegan (2000) the culture of an organization consists of three layers namely, values, beliefs and taken-for-granted assumptions as detailed below:-
i. Values – Values may be easy to identify in an organization and are often written down statements about the organization’s mission, objectives or strategies.
ii. Beliefs – Beliefs are more specific, but again they are issues which people in the organization can surface and talk about. They might include a belief that the company should not trade with particular countries, or that professional staff should not have their professional actions appraised by managers.
iii. Taken-for-granted assumptions - They are the aspects of organizational life which people find difficult to identify and explain. They are referred to as the organizational paradigm, a paradigm being the set of assumptions held relatively in common and taken for granted in an organization.
This sampling of definitions represents the two major camps that exist in the study of organizational culture and its "application strategies." The first camp views culture as implicit in social life Kaplan (2001). According to Brown (2003) culture is what naturally emerges as individuals transform themselves into social groups as tribes, communities, and ultimately, nations. The second camp represents the view that culture is an explicit social product arising from social interaction either as an intentional or unintentional consequence of behavior (Brown 2003). According to Woodward (2003) culture is comprised of distinct observable forms that groups of people create through social
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interaction and use to confront the broader social environment. This second view of culture is most relevant to the analysis and evaluation of organizational culture and to cultural change strategies that leaders can employ to improve organizational performance (Brown 2003).
According to Denison (2000) culture is formed by screening and selecting new employees who share the same values as your organization. However, culture evolves, it is not static (Cole 1999). Both internal (hiring, staff turnover) and external (technology, competition) factors shape your culture (Cummings 1999). Your beliefs, vision, objectives and business practices may be compatible with culture (Finlay 2000).
Following Kotter (1992) seminal study of corporate culture and performance, adaptive cultures are more appropriate not only for dealing with uncertain environments but, by extension, also for implementing the prospector/differentiation strategies that tend to be adopted in uncertain environments.
2.2 NATURE OF CORPORATE CULTURE
Morgan (2000) identified the following three major perspectives in corporate culture research:
i. The integration perspective
According to Morgan (2000) this portrays a strong or desirable culture as one where there is organization-wide consensus and consistency. Espoused values are consistent with formal practices, which are consistent with informal beliefs, norms and attitudes (Adler 2004). Cultural members share the same values, promoting a shared sense of loyalty and commitment. According to Andrews (1998) where inconsistencies, conflict or subcultural differentiation occur, this is portrayed as being a weak or negative culture. The majority of the research highlighting relationships between culture and performance have emerged from researchers who have adopted this perspective. According to Robbins (1999) this perspective views organizational culture as a system of shared meanings, unity and harmony.
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ii. The differentiation perspective
This emphasizes that rather than consensus being organization-wide, it only occurs within the boundaries of a subculture (Morgan 2000). At the organizational level, differentiated subcultures may co-exist in harmony, conflict or indifference to each other (Chatman 2003). Maanen (1991) in his study of Disneyland found groups of employees who considered themselves as being distinct. These subcultures related to different jobs, different levels of organizational status, gender and class. Claims of harmony from management masked a range of inconsistencies and group antagonisms. According to Pettigrew (1990), in his examination of an advertising agency, found that class, gender and hierarchical status differentiated agency employees into a nested set of subcultures, each with its own distinctive pattern of reaction. What is unique about a given organization’s culture, then, is the particular mix of subcultural differences within an organization’s boundaries (Ogbonna 1993). According to Pugh (1998) this perspective views an organization’s culture as a compilation of diverse and inconsistent beliefs that are shared at group level.
iii. The fragmentation perspective
According to Morgan (2000) this approach views ambiguity as the norm, with consensus and dissension co-existing in a constantly fluctuating pattern influenced by events and specific areas of decision making. As stated by Frost (1991) from the fragmentation perspective, consensus fails to coalesce on an organization-wide or subcultural basis, except in transient, issue-specific ways. Rather than the clear unity of the integration perspective, or the clear conflicts of the differentiation viewpoint, fragmentation focuses on that which is unclear (Hatch 2000). According to Phegan (2000) this perspective views organizational culture as lacking any form of pattern as a result of differing meanings between individuals and within individuals over time. This view rejects the idea of ‘shared meanings’ in favour of the idea that people attribute meanings to phenomena in organizations (Simmons 2001).
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Many of the studies in corporate culture focus on only one of these perspectives. Peters and Waterman (1982) rests on the mistaken assumption that organizational culture consists of shared meanings and commonalities that are quite homogeneous, monolithic and organization-wide. Little or no consideration is given to the potential existence of subcultures or dissension unless as an indication of a weak culture.
However, Martin (1992) argued that any corporate culture contains elements congruent with all three perspectives. Mohan (1993) also argued, using data from a variety of case studies, that any culture contains elements that can be understood only when all three perspectives are used. From a senior manager’s point of view, the integrationist perspective may be congruent with a manager’s desire to see his or her values and policies shared and followed (Mulling 1999). Middle management may want to distance themselves from senior management and therefore subcultures and a differentiation perspective may be more appropriate (Martin 1992).
Therefore within a company there may be organization-wide consensus on some issues, consensus only within certain subcultures on other issues and an ambiguous state on the remainder (McGuire 2003). Schein (1999) suggested that there may be a core set of ideological guidelines within an organization, which requires a minimal consensus and consistency; otherwise organizations would not function. Therefore consistency, consensus, harmony and integration may occur but within the midst of inconsistencies, ambiguities, conflicts, disruption and dissolution.
2.3 DIMENSIONS OF CORPORATE CULTURE
From the research done by Robbins (1999), there are seven dimensions that, in aggregate, capture the essence of an organization’s culture as detailed below.
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Table 2.1: Dimensions of Organizational Culture Dimension Explanation Innovation and Risk taking This is the degree to which employees are encouraged to be innovative and take risks
Attention to Detail This is the degree to which employees are expected to exhibit precision, analysis and
attention to detail
Outcome orientation This is the degree to which managers focus on results or outcomes rather than
on the techniques and processes used to achieve these outcomes.
Team orientation This is the degree to which work activities are organized around teams rather than
individuals
Aggressiveness The degree to which organizational activities emphasize maintaining the status quo in contrast to growth
Stability This is the degree to which organizational activities emphasize maintaining the status quo in contrast to growth
Source: Johnson (2004)
2.4 ELEMENTS OF CORPORATE CULTURE
According to Lynch (2001) there are four elements of corporate culture namely, the environment; cultural factors specific to the organization; identification of the basis cultural style of the organization and finally analysis of the strategic implications. Every
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organization is unique since the combination of personalities and events –both past and present – will have produced a unique balance of factors that is organizational culture.
Environment
i. People
ii. Corporate cultures
iii. Labour policies
iv. International issues and culture
Cultural factors specific to the organization
i. History and ownership
ii. Size
iii. Technology
iv. Leadership and mission
Identification of the basic cultural style of the organization
i. Power
ii. Role
iii. Task
iv. Personal
Analysis of the strategic implications
i. Prescriptive or emergent
ii. Competitive advantage
iii. Strategic change
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A. ENVIRONMENTAL INFLUENCES ON CORPORATE CULTURE
According to Lynch (2001) outside the organization itself, there will be a whole series of influences on the organizational culture of the organization. Finlay (2000) noted that the more dynamic an organization’s environment, the more its culture needs to be one that supports flexibility. The more complex an organization’s environment, the more decentralized its structure is likely to be, with a consequent development of cultural diversity.
1. People – Adler (2004) noted that the concern is with the impact on the organization of people in the environment; such people will include customers and suppliers, along with government and professional advisors. The main areas are as follows:-
a) Age profile – as the population grows older, so tastes change, recruitment changes and those in employment must pay more from their remuneration for those already in retirement. The company burden will also increase.
b) Socioeconomic group – As people become richer, their needs and aspirations increase : Maslow’s hierarchy of needs is useful in suggesting how these alter from basic survival to broader tastes. Strategy will need to be sensitive to such variations and be devised accordingly.
c) Language and communication – Variations within and between countries represent real differences that need to be accommodated in strategy both to control strategy better and to motivate those involved in the strategy process better.
d) Religion and Beliefs – Strongly held beliefs must be respected and reflected in strategy development
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e) Government policy – Policy on education, training, social welfare provisions, health and pensions provisions will have a significant influence on people development inside the organization.
2. Corporate Cultures – According to Frankema (2001) corporate cultural environment covers the links that the organization has with other similar organizations.
3. Labour Policies – According to Klein (2003) in some industrialized countries, trade unionism forms part of the environment that needs to be considered.
4. International Issues – International cultures may have a significant impact on corporate culture (Adler 2004).
B. CULTURAL FACTORS SPECIFIC TO THE ORGANIZATION
According to Lynch (2001) to understand the culture of an organization, it is useful to consider the factors that have influenced its development.
1. History and ownership – A young company may have been founded by one individual or a small group who will continue to influence its development for some years (Holbeche 2005). Family firms and owner-dominated firms will have clearly recognizable cultures.
2. Size – As firms expand, they may lose the tight ownership and control and therefore allow others to influence their style and culture (Ansoff 1999). According to Bauman (2004) even if ownership remains tight, larger companies are more difficult to control from the centre. More typically, as organizations grow, they need to introduce more control mechanisms and engage in more formal control procedures (Stoner 1992). All this will lead to a new and more formal culture with less flexibility and more rigid reporting structures.
3. Technology – This will influence the culture of the company but its effects are not always predictable (Lynch 2001). According to Shachaf (2005) those technologies that require economies of scale or involve high-cost and expensive 37
machinery usually require a formal and well-structured culture for success. In fast changing technologies a more flexible culture may be required. According to Finlay (2000) technology used in a firm can have a profound effect on work patterns and thus on culture.
4. Leadership and mission – individuals and their values will reflect and change the culture of the organization over time, especially the chief executive officer and immediate colleagues (Shellenbarger 2000). According to Huse (1999) leadership and power in an organization have a considerable impact on the organizational culture, and a particularly powerful force is the make-up of the senior management team. In Germany, engineers and lawyers are well represented on the boards of companies; in the United Kingdom, while engineers do make it to the top, economists and historians are well to the fore (Kanter 2002).
5. Cultural web – The cultural Web is a useful method of bringing together the basic elements that are helpful in analyzing the culture of an organization. Diagrammatically, the cultural web is shown below.
Stories Control Systems Rituals & Paradigm Routines Organizational Power Structures structures
Symbols
Figure 2.1: Cultural Web
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Elements of the Cultural Web
The Cultural Web identifies six interrelated elements that help to make up what Johnson (2004) call the "paradigm" – the pattern or model – of the work environment. By analyzing the factors in each, you can begin to see the bigger picture of your culture: what is working, what isn't working, and what needs to be changed. The six elements are:
i. Stories – The past events people talked about, inside and outside the company (Johnson 2004). Who and what the company chooses to immortalize says a great deal about what it values, and perceives as great behavior (Thompson (2005).
ii. Rituals and Routines – The daily behavior and actions of people that signal acceptable behavior. This determines what is expected to happen in given situations and what is valued by management (Huse 2001).
iii. Symbols – The visual representations of the company including logos, how plush the offices are and the formal or informal dress codes (Hill 1997).
iv. Organizational Structure - This includes both the structure defined by the organization chart, and the unwritten lines of power and influence that indicate whose contributions are most valued (Johnson 2004).
v. Control Systems - The ways that the organization is controlled. According to Andrews (1998) these include financial systems, quality systems, and rewards (including the way they are measured and distributed within the organization.)
vi. Power Structures - The pockets of real power in the company. This may involve one or two key senior executives, a whole group of executives, or even a department (Andrews 2000). The key is that these people have the
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greatest amount of influence on decisions, operations, and strategic direction.
These elements are represented graphically as six semi-overlapping circles which together influence the cultural paradigm.
According to Stoykov (1995) the cultural web is a representation of the taken-for- granted assumptions, or paradigm, of an organization and the physical manifestations of organizational culture. Culture can be analyzed by observing the way in which the organization actually behaves, the cultural artifacts (Smith 2002).
Thomason (2001) gave an outline of some of the questions that might help build up an understanding of culture through the elements of the cultural web. According to Finlay (2000) the web of behaviours is concerned with the manifestations of culture, the behaviours in the organization.
Stories
i. What core beliefs do stories reflect?
ii. How pervasive are these beliefs?
iii. Do stories relate to : strengths or weaknesses; successes or failures; conformity or mavericks?
iv. Who are the heroes and villains?
v. What norms do the mavericks deviate from?
According to Kotter (1992) the stories told by members of the organization to each other, to outsiders, to new recruits and so on, embed the present in its organizational history and also flag up important events and personalities. They typically have to do with successes, disasters, heroes, villains and mavericks who deviate from the norm (Thompson 2003). According to Wilson (2001) they distill the essence of an organization’s past, legitimise types of behaviour and are devices for telling people what is important in the organization. According to Cray (1997) the stories that members of 40
an organization tell about the past can provide a good view on what people feel is important.
Routines and rituals
i. Which routines are emphasized?
ii. Which would look odd if changed?
iii. What behaviour do routines encourage?
iv. What are the key rituals?
v. What core beliefs do they reflect?
vi. What do training programmes emphasize?
vii. How easy are rituals/routines to change?
According to Moore (1997) the routine ways that members of the organization behave towards each other, and towards those outside the organization, make up ‘the way we do things around here’. At its best, this lubricates the working of the organization, and may provide a distinctive and beneficial organizational competence (Woodward 2003). However it can also represent a taken-for-grantedness about how things should happen which is extremely difficult to change and protective of core assumptions in the paradigm (Goffee 1998).
Examples of a ritual can include relatively formal organizational processes –training programmes, interview panels, promotion and assessment procedures, sales conferences, among others (Macmillan 2000). However rituals can also be thought of as relatively informal processes such as drinks in the pub after work or gossiping around photocopying machines (Woodcock 2003). According to Wood (2006) rituals are systems of rites.
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According to Wilson (2001) all organizations must have routine behaviours or working together would be very difficult as you would never be sure of what anyone would do.
Organizational structures
i. How mechanistic/organistic are the structures?
ii. How flat/hierarchichal are the structures?
iii. How formal/informal are the structures?
iv. Do structures encourage collaboration or competition?
v. What types of power structure do they support?
According to Wheelen (2006) the organizational structure is likely to reflect power structures and, again, delineate important relationships and emphasize what is important in the organization. Formal hierarchical, mechanistic structures may emphasize that strategy is the province of top managers and everyone else is ‘working to orders’ (Wilkins 2001). Highly devolved structures may signify that collaboration is less important than competition. According to Tripathi (2005) organizational structures may not truly represent the way people work in an organization, but they can reflect hierarchical thinking.
Control systems
i. What is most closely monitored/controlled?
ii. Is emphasis on reward or punishment?
iii. Are controls related to history or current strategies?
iv. Are there many/few controls?
According to Thompson (2003) the control systems, measurements and reward systems emphasize what is important to monitor in the organization and to focus attention and activity upon. Reward systems are important influences on behaviours ,
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but can also prove to be a barrier to success of new strategies (Thompson (2002). According to Sadri (2001) control systems are the sets of procedures to constrain activities and to ensure conformance. On the other hand Robbins (2005) noted that reward systems are the carrots and sticks so that those in power can foster their view of how the organization should develop. A reward system geared very closely to results and to individuals will produce a different out come from one that is more relaxed about short – term objectives and that links reward to group success (Singh 2004).
Power structures
i. What are the core beliefs of the leadership?
ii. How strongly held are these beliefs (idealistic or pragmatists)?
iii. How is power distributed in the organization?
iv. Where are the main blockages to change?
According to Johnson (2007) power structures are also likely to be associated with the key assumptions. The paradigm is, in some respects, the ‘formula for success’, which is taken for granted and likely to have grown up over years (Huse 2001). According to Hill (2001) the most powerful groupings within the organization are likely to be closely associated with this set of core assumptions and beliefs. According to Liao (2005) the dominant coalition is the obvious source of power in an organization and this is generally, but not always, formed by the board or by a section of it.
Symbols
i. What language and jargon are used?
ii. How internal or accessible are they?
iii. What aspects of strategy are highlighted in publicity?
iv. What status symbols are there?
v. Are there particular symbols which denote the organization? 43
According to Johnson (2004) symbols such as logos, offices, cars and titles or the language and terminology used, become a shorthand representation of the nature of the organization. For example, in long-established or conservative organizations it is likely that there will be many symbols of hierarchy to do with formal office layout, differences in privileges between levels of management or the way in which people address each other (Greenberg 2000). According to George (2001) the form of language used in an organization can also be particularly revealing, especially with regard to customers or clients. A symbol is someone or something that represents a particular quality or idea (Holbeche 2005). Another author Hatch (2000) defines a cultural symbol as any object, act or event that serves to transmit cultural meaning.
The Paradigm
According to Johnson (2007) the paradigm of the organization encapsulates and reinforces the behaviours observed in the other elements of the cultural web.
Overall
i. What is the dominant culture?
ii. How easy is this to change?
According to Hofstede (2000) the cultural web is a useful concept for understanding the underlying assumptions linked to political, symbolic and structural aspects of an organization.
2.5 CHARACTERISING AN ORGANIZATION’S CULTURE
According to Lynch (2001) as adapted from Handy (1993) although each organization has its own unique culture, there are four main types. Handy (1993) characterized culture in terms of the relationship between the organization and individuals and also the importance of power and hierarchy. Different cultures will behave differently. Each of
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the four cultures shown below would approach a strategy such as product development in a different way.
i. The Power Culture – The organization revolves around and is dominated by one individual or a small group (Lynch 2001). All decisions refer back to the centre and so do beliefs and work styles (Singh 2004). Experts are either overvalued or treated with suspicion and disdain. As the organization grows in size, it becomes increasingly difficult for the centre to keep control. Either the organization changes or it spawns a new subgroup with its own leader who, in turn, reports back to the original centre (Hill 1997). The corporate plan, if it exists at all, reflects the individual at the top, her or his whims, interest and passions. Strategic change is fast or slow depending on the management style of the leader (Holbeche 2005). According to Hill (2005) power culture would support the strategy by the chief executive officer personally and actively issuing out instructions indicating who does what and by when. According to Cummings (2001) in this form of culture power is all that matters and instructions emanate from the top of the organization. Power cultures are associated with inequitable reward systems, in that salary and other benefits are often awarded on the basis of personal preference in return for demonstrated loyalty, perceived favours or long service as much as ability (Cartwright 2001).
ii. The Role Culture – This organization relies on committees, structures, logic and analysis (Hofstede 2000). There is a small group of senior managers who make the final decisions, but they rely on procedures, systems and clearly defined rules of communication (Thompson 2005). According to Johnson (2004) it might even be regarded as bureaucratic but has a thoroughness and solidity that make it a reliable and fair employer. Expert opinions are treated with caution as they represent outsiders to the organization. As long as the outside environment is stable, the organization can handle difficult situations. However, senior managers often do not see the changes that are coming and, even if they do, they do not know how to manage them (Likert 2001). Change in such a culture comes
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through a new set of managers being appointed. Strategic planning in a formal way would characterize such a culture. Strategic change is likely to be slow and methodical. According to Mann (2000) role culture would have well-sorted arrangements for interdepartmental meetings and a schedule of tasks against time-scales to ensure the development and launch goes smoothly. iii. The task culture – According to Chatman (2003) the organization is geared to tackle identified projects or tasks. Work is undertaken in teams that are flexible and tackle identified issues (Black 2003). Power rests with the team, which may contain some experts to facilitate group decisions (Kanter 2002). The culture is flexible and sensitive to change, but it works best on small-team issues (Denison (2001). Control relies largely on the efficiency of the team with top management having to allow the group considerable day-to-day autonomy (Cummings 2005). According to The Financial Times (2000) strategic planning is both flexible and task-oriented but will focus largely on the task in hand. Strategic change will depend on the circumstances but may be fast where this is needed. According to David (2005) a task culture may prefer to create an ad hoc project team to see the ‘project’ through. According to Cartwright (2001) the salient feature of a task culture is the emphasis which it places on accomplishing the task, and the energy which it directs toward securing the necessary task-related resources and skills. iv. The Personal Culture – According to Robbins (2001) the individual works and exists purely for himself. The organization is tolerated as the way to structure and order the environment for certain useful purposes, but the prime area of interest is the individual (Hill 2005). According to Hawkins (2001) such organizations exist infrequently in business, but may exist in non-profit institutions. Such individuals are not easy to manage and feel little loyalty to the organization (Goffee 1996). Changes are coped with easily or with difficulty depending on the inclination of the individual. Strategic planning is largely meaningless except in a very personal sense (Eden 1998). Strategic change can be instant, where the individual
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decides that it is in his or her interests to make such a move. According to Northcraft (1990) a personal culture would rely on the personal motivation and inventiveness of individuals. According to Schroeder (2000) personal culture revolves around individuals who come together in an organization only because it furthers their own ambitions; the organization provides the medium in which they can thrive. According to Robbins (1999) the main characteristic of the personal culture is egalitarianism where the organization is subordinate to the individual for its existence.
According to Schein (1992) in understanding the influence of culture on organizational purposes, it is important to be able to characterize culture. It is in this way that judgements can be made about the ease or difficulty the organization would experience in pursuing different kinds of strategy. The same author came up with the following ways of characterizing culture.
i. The graphic descriptor – The essence of an organization’s culture can be captured in a simple graphic descriptor. At times this can be done to define the dominant culture of different strategic groups within a sector (Hatch 2000). The importance of this is in getting people to understand that culture drives strategies.
ii. Miles and Snow – Miles and Snow as cited by Johnson (2004) categorized organizations into three basic types in terms of how they behave strategically. According to Finlay (2000) Miles and Snow put forward organizational types, categorized by their approach to innovation and risk.
A defender organization will behave quite differently from a prospector organization. It can be noted that defender cultures find change threatening and have bureaucratic approaches to management. A prospector culture thrives on change applying strategies of product and market development. On the other hand an analyser culture entails desirability to match new ventures to present shape of the business. An analyser culture is complicated since it entails intensive planning. Scholes (2004) noted that the adoption
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of strategies must be supported by efforts to shift culture. Miles and Snow’s cultural framework is detailed below in table 2.2.
Table 2.2 Characterising Culture by Miles and Snow Type or Culture Dominant Preferred Strategies Planning and Objectives Control Systems Defender Desire for a secure Specialization, cost- Centralized, and stable niche in efficient production; detailed control; market marketing emphasis on cost emphasizes price efficiency, extensive and service to use of formal defend current planning business; tendency to vertical integration Prospector Location and Growth through Emphasis on exploitation of new product and market flexibility, product and market development; decentralized opportunities constant monitoring control; use of ad of environmental hoc measurements change; multiple technologies Analyser Desire to match Steady growth Very complicated; new ventures to through market coordinating roles present shape of penetration; between functions business exploitation of e.g. product applied research, managers; intensive followers in the planning market
Source: Adapted from Johnson (2004) 48
Therefore according to Johnson (2004) prospective organizations are innovative in nature and they always look for new opportunities in the market. They tend to have a developmental culture that values creativity, risk-taking and adaptability. Employees in such organizations follow a less routine-based approach and are always encouraged to come up with new ideas (Kotter 1999).
Companies that operate in relatively narrower and clearly defined market segments are defenders (Pugh 1998). They achieve growth through development of unique technology and market penetration. Such businesses tend to have hierarchical culture in which routines and standardization are valued and technical knowledge is given more preference (Schein 1999).
Analyzers are the companies that operate in two market environments; one is relatively dynamic and the other stable (Schwartz 2000). They operate effectively in the stable environment. In turbulent domains they critically scrutinize the competitors' ideas and opt for the one that seems most promising. Rational culture is best suited for companies with this strategy (Smith 2002). Decisions are taken based on facts and observed evidences.
A reactor strategy is the dynamic one. They do not form a specific corporate strategy and deal with the situations as they occur (Simmons 2001). This is why they do not have a unique culture. Sometimes they are innovative, sometimes defender, and sometimes both (Singh 2004).
2.5.1 DEAL AND KENNEDY’S CLASSIFICATION
According to Deal and Kennedy (1982) as cited by Rollinson (2002) organizational cultures are characterized according to two factors, that is, the degree of risk associated with the organization’s activities and the speed with which the organization and its employees get feedback on whether their actions were successful or not. Deal and Kennedy (1982) believe that employees in a strong company culture have a clearer idea of what they should be doing and that this sense of mission results in huge productivity increases. Furthermore, individuals within a strong company culture know what is
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expected of them, how to act and react when confronted with an unfamiliar situation. They also have a frame of reference within which they can pattern their response (Sadri 2001). Conversely, those in a weak culture spend a great deal of time deciding what they should do and how they should do it. From these two dimensions, the two authors recognize four types of cultures:-
i. The tough-guy, macho culture – In this culture individuals regularly take high risks and get quick feedback on whether their own actions are right or wrong (Rollinson 2002). Fortunes can be made overnight. Venture capatalists, currency dealers and many young internet entrepreneurs would seem to fit into this category as well (Wheelen 2006). Inside the organization the pressures will be intense, with every meeting becoming a trial of wills between the tough guys, resulting in early ‘burn-out’ for the survivors and high staff turnover as the losers leave (Johnson 2007).
ii. The work hard, play hard culture – Employees in this culture live in an environment of small risks, quick feedback and a high level of activity (Wilkins 2001). Sales representatives and retailers would seem to live completely in this world. Factory workers are often in this culture as they are making a series of small decisions throughout the day; the risks are small since they work within well-defined procedures and controls. According to Wood (2006) such organizations are centered on customers and they will satisfy their needs through team activities. Team working will be encouraged through team playing. This culture is appropriate for action driven people who thrive on quick, tangible feedback (Brown 2003).
iii. The Bet-your-company culture – Organizations with this culture experience high risk but with slow feedback (Chan 2002). Examples will be those organizations that invest large sums in research and development projects with a long timescale, such as pharmaceutical companies and aero engine manufacturers. With such long timescales and the inherent risks, the handling of significant issues will be a very deliberate process by the most senior members
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of the organization. This culture leads to high-quality inventions and major scientific breakthroughs.
iv. The process culture – Organizations such as retail banks, insurance companies and utilities and much of government are examples of the process culture, characterized by low risk and slow feedback (Chatman 2003). Employees find it difficult to measure their output and so they concentrate on how they do their work-on the process. Procedures become an end in themselves and people tend to develop a ‘cover your back’ mentality, where memos are sent about everything. Process cultures are appropriate where there is a need for consistency of treatment (Bloisi 2003).
2.5.2 TOXIC CORPORATE CULTURES
According to Hill (2005) the following corporate cultures are described as toxic because they are dysfunctioning in terms of relationships and adjustment to changing times. They undermine the social/spiritual capital, poison the work climate and contribute to organizational decline (Cartwright 2001).
i. Authoritarian-hierarchical culture - The big boss alone makes all the major decisions behind closed doors. Even when the decisions are harmful to the company, no one dares to challenge the boss. The standard mode of operandum is command and control, with no regard to the well-being of employees or the future of the company (Denison 2000).
According to Goffee (1998) in this kind of culture, employees are to be controlled, manipulated and occasionally pacified like little children. Workers are motivated by fear rather than love for the company or passion for the work (Thompson 2005). They are expected to do what they are told without questioning. The main criterion for promotion is loyalty to the boss, rather than competence and commitment. As a result, star performers who dare to question some of the administration's decisions are sidelined or let go, while those who obey the boss blindly and who are willing be hatchet men get the nod for promotion (Child 2003).
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According to Sathe (1985) hierarchies are not necessarily bad in and of themselves. Some sort of hierarchy in terms of decision-making and responsibility is always inevitable. However, when hierarchies are used to control and abuse workers, problems inevitably occur (Cray 1997). Hierarchies without accountability tend to have a corrupting influence on ambitious, autocratic leaders (David 2005). When the boss is dysfunctional and has the power to impose his selfish, irrational decisions on others, the entire company suffers.
ii. Competing-conflictive culture - There is always some sort of power struggle going on. Leaders are plotting against each other and stabbing each other on the back (Cummings 2001). Different units and even different individuals within a unit are undercutting, backstabbing each other to gain some competitive advantage. There is a lack of trust and cooperation. People often hide important information from each other and even sabotage each other's efforts to ensure that only they will come up on top (Donaldson 1998).
iii. Laissez faire culture - There is a vacuum at the top, either because the leader is incompetent and ignorant, or because he is too preoccupied with his personal affairs to pay much attention to the company (Greenberg 2000). Consequently, there is an absence of directions, standards and expectations. When there is an absence of effective leadership, each department, in fact, each individual does whatever they want. The leadership void will also tempt ambitious individuals to seize power to benefit themselves (Hofer 1997). Chaos and confusion are the order of the day. No one has a clear sense where the company is going. Often, employees receive conflicting directions and signals. Decisions are made in the morning only to be nullified in the afternoon. Given the lack of direction, oversight and accountability all across-the-board, productivity declines. According to Linstead (1992) in this kind of culture, the company either disintegrates or becomes an easy target for a hostile takeover.
iv. Dishonest-corrupt culture - In this culture, greed is good and money is God (Louis 1999). There is little regard for ethics or the law. Such attitudes permeate
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the whole company from the top down to individual workers. Bribery, cheating, and fraudulent practices are widespread. According to Likert (2001) creative accounting and misleading profit reports are a matter of routine. Denial, rationalization and reputation management enable them carry on their unethical and often illegal activities until they are caught red-handed or exposed by correcting forces of the market (Korth 2000). When management is blinded by greed and ambition, their judgment becomes distorted and their decisions become seriously flawed; as a result, they often cross the line without being aware of it (Lasley 1999).
v. Rigid-traditional culture - There is a strong resistance to any kind of change (Magala (2005). The leadership clings to out-dated methods and traditions, unwilling to adapt to the changes in the market place. They live in past glory and any change poses a threat to their deeply entrenched values and their sense of security. According to Nguyen (2003) workers are discouraged or even reprimanded for suggesting innovative ideas. Their accounting, marketing and delivery systems are no longer competitive with the fast-paced technology-driven market place. Their products and services have not responded to changing market demands.
The above five types of toxic cultures are not mutually exclusive (Hill 2005). For example, a corporation may be both authoritarian and traditional. Similarly, a corporation can be both authoritarian and corrupt. When a company suffers from a multiple of diseases, drastic operations are needed to save it from demise.
2.5.3 HEALTHY CORPORATE CULTURES
i. Progressive-adaptive culture – According to Handy (1985) there is openness to new ideas and a willingness to take risk and adopt innovations. It is a culture that adjusts quickly to shifting market conditions. It does not value the certainty of remaining the same; the only certainty it values is that the company is future-
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oriented and innovative (Northcraft 1990). It is confident in catching and riding the waves of change.
ii. Purpose-driven culture - The leadership articulates and crystallizes the purpose of the company effectively, so that there is a common purpose, a shared vision for all the workers (O’Donovan 2006). Everyone knows what the core values and priorities are and everyone knows where the company is going. Workers are highly motivated, because they are committed to the same set of core values.
iii. Community-oriented culture - There is a strong emphasis on collectivity and cooperation. The leadership attempts to build a community, in which people respect, support each other, and enjoy working together (McGuire 2003).
iv. People-centred culture - There is a genuine caring for each worker in the organization. Everyone is valued and validated, regardless of their positions in the company. The organization cares for the whole person, body, soul and mind in terms of recognizing workers' basic needs for learning and growth, for belonging and being connected, as well as the need for meaning and spirituality (Morgan 2000). Each worker is encouraged to develop his or her full potentials, personally and professionally. Such a culture will create a climate of mutual respect and genuine civility.
The above four cultures are positive, because they create a positive work climate, which is conducive to productivity and job satisfaction. They contribute to high-performance without explicitly linking reward to performance. The ideal company should possess the attributes of all four types of healthy corporate cultures (Hofstede 2000).
Hofstede (1991), a respected Dutch organizational studies professor, published with three of his colleagues an important analysis of organizational practices. First published in 1991, the work focused on what the authors called the six dimensions that separate and define organizational cultures:
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i. Process oriented versus results oriented . Process cultures emphasize low risk and repeating known methods, whereas results orientations place a premium on taking risks and finding new methods.
ii. Employee oriented versus job oriented . This is the personal/impersonal workplace distinction. Employee cultures make members of the organization feel personally valued, but job cultures are more concerned with simply having an effective person to do the necessary work. iii. Parochial versus professional . In parochial cultures, employees identify strongly with their company as the basis for their employment and perhaps even social status. Participants in professional cultures identify with their skill-set and occupation more so than with the particular company they exercise those skills at. iv. Open system versus closed system . This dimension considers communication and seniority-based favoritism. In an open system, new employees are acclimated quickly into the communications and social fabric of the company. However, in closed systems, there is greater secrecy and exclusion of certain members of the organization, particularly newcomers.
v. Loose versus tight control . Loose control cultures are informal ones in which employees and management tend to be laid back about the work, scheduling, and even costs. Tightly controlled cultures emphasize formality, adherence to standards, punctuality, and so on. vi. Normative versus pragmatic . Finally, normative cultures are concerned with doing things properly from an ethical or procedural perspective (similar to process orientation above), while pragmatic cultures are more competitive, market-driven, and results-oriented.
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2.5.4 STRONG VERSUS WEAK CULTURES
According to Thompson (2005) corporate cultures vary widely in the degree to which they are embedded in company practices and behavioural norms. Strongly embedded cultures go directly to a company’s heart and soul, while those with shallow roots provide little in the way of a definable corporate character (Schein 1992).
Strong Culture Companies
According to Thompson (2005) a company’s culture can be strong and cohesive in the sense that the company conducts its business according to a clear and explicit set of principles and values, has managers who devote considerable time to communicating these principles and values to the organization’s members and explaining how they relate to its business environment and has values shared by senior executives and rank-and-file employees alike. Strong cultures are intended to foster commitment, dedication and devotion, enthusiasm, passion and even love in employees (Linstead 2009). Stoykov (1995) further notes that strong culture companies have a well-defined corporate character, typically underpinned by a creed or values statement. Mis-matches between strategy and culture in a strong culture company tend to occur when a company’s business environment undergoes significant change, prompting a drastic strategy revision that clashes with the entrenched culture (Cummings 2005).
Three factors contribute to the development of strong cultures (Thompson 2005).
i. A founder or other strong leader who establishes values, principles and practices that are consistent and sensible in light of customer needs, competitive conditions and strategic requirements.
ii. A sincere, long standing company commitment to operating the business according to these established traditions, thereby creating an internal environment that supports decision making and strategies based on cultural norms.
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iii. A genuine concern for the well-being of the organization’s three biggest constituencies, that is, customers, employees and shareholders.
Weak Culture Companies
According to Donaldson (1998) weak-culture companies are fragmented in the sense that no one set of values is consistently preached or widely shared, few behavioural norms are evident in operating practices and few traditions are widely revered or proudly nurtured by company personnel. Thompson (2005) further notes that because top executives don’t repeatedly espouse any particular business philosophy or exhibit long-standing commitment to particular values or extol particular operating practices and behavioural norms, organization members at weak-culture companies typically lack any deeply felt sense of corporate identity. As a consequence weak cultures provide little or no strategy-implementing assistance because there are no traditions, beliefs, values, common bonds, or behavioural norms that management can use as levers to mobilize commitment to execute the chosen strategy (Thompson 2003).
2.5.5 Professional and Production Cultures
According to George (2001) there are professional and production cultures, i. Professional cultures – organizations that invest in their employees develop a professional culture, which reflect the desire to increase the value of human resources to promote long term effectiveness. ii. Production cultures – some organizations develop cultures with values that do not include protecting and increasing the worth of their human resources as a major goal. These organizations have a production culture and their employment practices are based on short-term employment according to the needs of the organization and on minimal investment in employees who perform simple, routine tasks.
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2.6 SUBCULTURES AND COUNTERCULTURES
2.6.1 Subcultures
According to Wood (2006) subcultures represent groups of individuals with a unique pattern of values and philosophy that are not necessarily inconsistent with the organization’s dominant values and philosophy. Bauman (2004) notes that strong subcultures are often found in high performance task forces, teams and special project groups in organizations. Another author Chan (2002) states that subculture formation has also been linked to educational background, professional identity and distinctive work paradigms.
The culture emerges to bind individuals working intensely together, organizational values and assumptions are shared, but actions can be influenced differently by distinct occupational tasks (Chatman 2003).
2.6.2 Countercultures
Brewis (2007) defines countercultures as the patterns of values and philosophies that outwardly reject those of the larger organization or social system. According to Child (2003) countercultures have a pattern of values and a philosophy that reject the surrounding culture. Within an organization, mergers and acquisitions may produce countercultures as employers and managers of an acquired organization may hold values and assumptions that are quite inconsistent with those of the acquiring organization (Wood 2006).
However, according to Cray (1997) not all mergers and acquisitions cause cultural clashes. Cooke (2000) highlighted that understanding the importance of culture can help a company to absorb or accommodate the cultures within the organizations that are acquired or merged, or to manage the complex interplays in alliances, company formations and employment relations. According to Hatch (2000) subculture formation may be different according to where the organization is located, for example, in Japan, subcultures may be formed on the basis of date of graduation from university. Hill (2001) noted that in Europe, subcultures may exist on the basis of language and in 58
North America on locational similarities. Hawkins (2001) states that other subculture formation may be influenced by ethnicity, gender, generational differences, socioeconomic status, place within the organization, political and religious beliefs, among other issues.
2.7 ROLE OF CULTURE IN ORGANIZATIONS
According to Alvesson (2007) organizational culture is highly relevant for understanding the things that characterize organizations, including financial and other forms of performance. On the other hand, Blunt (1992) noted that there is a widespread acceptance of the idea that national and organizational cultures have a major impact on the structure and functioning of organizations, as well as on their performance and problems.
According to Denison (1990) when considering corporate culture, it is helpful to consider actual companies that have demonstrated the positive effects that a corporate culture can have.
2.7.1 Wal-Mart
Wal-Mart’s founder, Sam Walton, showed concern and respect for his employees from the company’s inception (Discount Store News, 1999). This created an environment of trust that persists to this day. Walton also modeled the behavior that he desired from his employees, especially customer service (both to internal and external customers), by visiting his stores, meeting customers, and greeting employees by their first names. Walton also embraced and encouraged change in order to remain competitive, and developed employees by having them work in a variety of positions (Discount Store News, 1999). Wal-Mart considers its culture the key to its success, and to this day employees continue to think about “how Sam would have done it” when making decisions.
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2.7.2 Southwest Airlines
According to Thompson (2003) another good example of a positive corporate culture is Southwest Airlines. The company’s relaxed culture can be traced directly to its CEO and co-founder Herb Kelleher. Kelleher encourages employees to be very informal and have fun at their jobs. This is evident to anyone who has flown on Southwest and heard the jokes that the stewardesses tell. Kelleher fosters this type of culture by engaging in unusual acts, such as arriving at shareholder meetings on a motorcycle wearing jeans and a t-shirt, or holding a 2 a.m. barbeque for the company’s mechanics who work the night shift . He even challenged another company’s CEO to an arm-wrestle to settle a dispute over the use of a slogan. Kelleher also strives to value Southwest’s employees, acknowledging births, deaths, marriages, and other events in their lives by sending a note or card. Employees are encouraged to pitch in where needed, a fact that is evident in airports where pilots are often seen checking passengers, for example. This has allowed Southwest to have a turnaround time at airport terminals that is less than half the industry average. In order to maintain the culture, prospective employees are carefully screened to make certain that they will fit in.
2.7.3 Hewlett Packard
According to Thomason (2001) Hewlett Packard is an example of a company that has been successful in improving its culture. A few years ago, employees at the company’s Great Lakes division had begun to feel the stress and pressure of their jobs. Attrition rose to 20 per cent and over 50 per cent of employees surveyed reported feeling “excessive pressure” on the job. This led the company to make some unusual changes in order to improve the culture. Employees are now required to formulate three business and three personal goals each year. Employees are encouraged to cheer on fellow employees who achieve personal goals, such as spending time with their children or getting away for a round of golf. Only two years into the program, the company reported no loss in productivity despite the reduced hours employees now work and has seen an
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increase in its retention rate. This success is attributed to the fact that managers strongly supported the program and modeled it in their own personal lives (Cole 1999).
2.7.4 Functions of Corporate Culture
Bloisi (2003) came up with five functions of corporate culture,
i. Culture complements rational managerial tools. Culture epitomizes the expressive character of organizations; it is communicated less through objective realism and more through symbolism.
ii. Culture supports strategic changes. Culture serves as a rudder to keep the firm’s strategy on course. Corporate culture can make or break a strategy.
iii. Culture helps socialize new members. Socialisation is the process by which new members are indoctrinated in the expectations of the organization and its cultural norms, or unwritten codes of behaviour.
iv. Culture promotes expected behaviours. Although the expressive character of organizational culture gives it the appearance of being a weak factor in managing organizations, cultures work best when strong. Culture works best when people forget why they are doing certain things, but keep on doing them.
v. Subcultures facilitate organizational diversity. Subcultures can serve to enhance the dominant culture. They promote an independence from the dominant culture and function as countercultures when they are at odds with it (Wood 2006).
2.8 TEN PARAMETERS OF GOOD CORPORATE CULTURE
According to Andrews (1998) listed below are the ten parameters of good corporate culture:
1. Pride of the organization - Employees defend their company against unjustified critique and they say that they like working for their company;
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2. Orientation towards (top) achievements - 'In our company, everybody tries to do a better job' and 'our company is number one and that should stay so';
3. Teamwork and communication - Employees listen well and try to understand the ideas/opinions of others and employees and managers really try to help each other;
4. Supervision and leadership -Managers are really interested in the problems of others and it is customary to ask help when needed;
5. Profit orientation and cost awareness - All expenditures are evaluated if they are effective or not and all members are strongly thinking about profit;
6. Employee relationships - Employees are not trying to better themselves from the mistakes of other employees and new employees are accepted quickly;
7. Client and consumer relations - Everything is oriented towards a better service
8. Honesty and safety - Safety rules are strictly implemented
9. Education and development - Everybody supports education and training programs and the company really tries to develop its employees
10. Innovation - Systems and procedures are constantly being pursued and new ideas are always welcome.
2.9 IMPACT OF CULTURE ON CORPORATE PERFORMANCE
Peters and Waterman (1982) pointed out that without exception, the dominance and coherence of culture proved to be an essential quality of the excellent companies. The two authors also stated that the stronger the culture, the more it was directed towards the market place, the less the need there was for policy manuals, organization charts or detailed procedures and rules.
According to Alvesson (2007) there are four views on the relationship between organizational culture on performance as follows:-
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i. Strong-culture thesis . A distinct organizational culture contributes to performance through facilitating goal alignment. A common culture makes it easier to agree upon goals as well as appropriate means for attaining them (Hill 2005).
ii. Reverse relationship . Alvesson (2007) noted that there is also a reverse relationship between culture and performance. High performance leads to the creation of a ‘strong’ corporate culture. Success brings about a common set of orientations, beliefs and values.
iii. Prevailing Conditions . Under certain conditions a particular type of culture is appropriate and contributes to efficiency. Wilkins (2001) considers culture as an important regulatory mechanism in organizational settings too complex and ambiguous to be controlled by traditional means (bureaucracy and the market).
iv. Adaptive Cultures . Shachaf (2005) stated that adaptive cultures are the key to good performance. These are cultures that are able to respond to changes in the environment. Such cultures are characterized by people willing to take risk, trust each other, are proactive, work together to identify problems and opportunities. According to Bloisi (2003) in adaptive cultures, there is a spirit of doing what is necessary to ensure long term organizational success provided the behaviours and operating practices that management is calling for are seen as legitimate and consistent with the core values and business principles underpinning the culture.
2.10 CULTURE CHANGE AND CULTURE MANAGEMENT
According to Rollinson (2002) culture change refers to modification of an existing culture while culture management refers to maintaining or making slight modifications to fine- tune an existing culture. Therefore influencing culture by management is done through culture change or culture management. However other theorists like Ogbonna (1993) highlighted that because culture is so deep-rooted, it is highly resistant to manipulation. An even stronger position is taken by Morgan (2000) who argues that one of the main
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functions of a culture may well be to enable people to resist change. Indeed Ireland (1992) argues that many attempts at cultural change are so badly conducted that they result in degradation of the workforce and raise questions about the ethics of these initiatives.
Almost all culture change models are derived from the four-step process suggested by Schein (2005) which are summarized below,
i. Step 1: Analyse existing culture. This usually consists of an extensive survey of organizational members to establish specific objectives for cultural change.
ii. Step 2: Experiencing the culture. Organizational members are given the opportunity to examine the existing culture, identify its dysfunctions and participate in identifying the culture that is required.
iii. Step 3: System Installation. This is where the actual process occurs, usually by making use of group discussion workshops.
iv. Step 4: Ongoing Evaluation. Here the degree of actual change is assessed as necessary; other methods are used to bring about or reinforce the desired changes.
2.11 CRITICISM OF ORGANISATIONAL CULTURE
Some experts have expressed an amount of scepticism regarding the functionalist and unitarist views of corporate culture put forward by mainstream management analysts. According to Woodward (2003) it would be incredibly short sighted to accept the belief that a single, unified culture must exist within all organisations, or that cultural change will eventually reflect the interests of all parties within an organisation.
According to Wood (2006) the strongest and most widely accepted criticism of modern theories of organisational culture, is that in effect, it is culture that drives the organisation and not the organisation that drives the culture. According to Wilkins (2001) a large company may benefit from proactively monitoring and changing its organisational culture to maintain maximum health and growth. Every possible 64
precaution should be taken to ensure that no lasting damage is caused to the underlying culture that originally formed the basis of the company (Chatman 2003).
2.12 CORPORATE CULTURE AND STRATEGY
According to Weick (2001) culture as well as strategy guide expression and interpretation in that they concern acts of judging, creating, justifying, affirming and sanctioning. Culture and strategy are more or less synonymous (Simmons 2001). The notion of a culture-strategy fit holds for a strategy to be successful in a strong culture, as it must be formulated in accordance with the existing culture. A strategy, regardless of its strengths, will not be successfully accepted, if it is outside the bounds of the culture (Sadri 2001). On the other hand, if the culture is weak, it can easily adapt to any type of strategy, with success in this case depending solely on the strength of the strategy.
2.12.1 Strategy Defined
Thompson (2005) define strategy as the competitive moves and business approaches that managers employ to attract and please customers, compete successfully, grow the business, conduct operations and achieve targeted objectives. On the other hand Andrews (1998) defined strategy as a pattern of decisions in a company that determines and reveals its objectives, purposes, goals, produces the principal policies and plans for achieving those goals and defines the range of business the company is to pursue, the kind of economic and human organization it is, or intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers and communities.
According Cummings (1993) as cited by Macmillan (2000) strategy is knowing the business you propose to carry out. This definition stresses that strategy requires knowledge of the business, an intention for the future and an orientation towards action.
According to Mohan (1993) strategy is the direction and scope of an organization over the long term, which achieves advantage for the organization through its configuration
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of resources within a changing environment and to fulfill stakeholder expectations. Stoner (1992) defined strategies as being the principles that show how an organization’s major objectives or goals are to be achieved over a defined time period. According to Johnson (2007) strategy is also seen as building on or ‘stretching’ an organization’s resources and competencies to create opportunities or to capitalize on them. Corporate strategy can be described as an organization’s sense of purpose and plans or actions needing to be developed to put the purpose into practice (Porter 1985). According to the Financial Times (2000) business strategy is concerned with the match between the internal capabilities of the company and its external environment.
An effective strategy is an integrated array of distinctive choices about which markets a company serves, what unique value proposition it offers to the customers, and how it arranges its functions to deliver that value (Deal 1982). An organization’s strategy consists of the pattern of moves an approaches devised by management to produce successful organizational performance (Thompson 1989).
2.12.2 Aspects of strategy
Macmillan (2000) came up with the following aspects of strategy:- i. Strategy as a statement of ends, purpose and intent – The role of strategy is to determine, clarify or refine purpose. This may require creating new visions of the future to inspire the organization to greater efforts or wider scope. ii. Strategy as a high level plan – strategy is also concerned with the means by which intent or purpose will be achieved. The strategy will define such means in broad and general terms. iii. Strategy as the means of beating the competition – one aim of strategy is to win and this means beating the enemy or the competition in a game which may be won or lost. Strategies are therefore required to keep ahead of the competitors as a bunch.
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iv. Strategy as an element of leadership – strategy is one of the responsibilities of leaders. Nobody can lead an enterprise if he or she does not agree with its strategy. If the strategy needs to change, it may be necessary to appoint a new leader v. Strategy as positioning for the future – strategy may be seen as preparation for the uncertainty of the future. Some trends may be apparent but other changes may occur which may contradict the general direction of the trend. One purpose of strategy is therefore to position the enterprise for the future so as to be prepared for this uncertainty. vi. Strategy as building capability –certain capabilities may be seen as improving the chances of future success so that strategy may relate to building these capabilities. The capabilities of an enterprise may be exceptional or even unique. Strategic building of capabilities can exploit this uniqueness. vii. Strategy as fit between capabilities and opportunities – one aim of strategy is to achieve survival and future success. Success results from a good match between the capabilities of the enterprise and the opportunities to serve the needs of customers better than competitors. One aspect of strategy is to improve the fit between capabilities and the opportunities available and thereby to make the business more successful. viii. Strategy as a pattern of behavior resulting from embedded culture - every enterprise has its own culture. The culture is easy to observe but hard to change. The strategies that an enterprise is able to adopt are partly determined by this culture. Those within the enterprise see the outside world through their own conditioned perspective and this influences everything they do and permeates their strategy even though they may be unaware of this.
2.13 STRATEGY IMPLEMENTATION
In order to achieve its objectives, an organization must not only formulate but also implement its strategies effectively (Kotter 1992). According to Thompson (1989) strategy implementation refers to acting on what has to be done internally to put the chosen strategy into place and to actually achieve the targeted results. Strategy 67
implementation is the process of allocating resources to support the chosen strategies (Shellenbarger 2000). This process includes the various management activities that are necessary to put strategy in motion, institute strategic controls that monitor progress, and ultimately achieve organizational goals (Tvorik 1997). Therefore the implementation process covers the entire managerial activities including such matters as motivation, compensation, management appraisal, and control processes. As Andrews (2000) pointed out, almost all the management functions, planning, controlling, organizing, motivating, leading, directing, integrating, communicating, and innovation, are in some degree applied in the implementation process.
Ansoff (1999) says that to effectively direct and control the use of the firm's resources, mechanisms such as organizational structure, information systems, leadership styles, assignment of key managers, budgeting, rewards, and control systems are essential strategy implementation ingredients.
Strategy implementation is primarily an administrative task that involves figuring out workable approaches to executing the strategy and then, during the course of the day- to-day operations, getting people to accomplish their jobs in a strategy supportive and results-achieving fashion (Woodcock 2003). The cornerstones of strategy implementation are building an organization capable of carrying out the strategy successfully, steering adequate resources into those internal activities critical to strategic success, instituting a strategy-supportive set of policies and procedures, creating a strategy-supportive working environment, tying the reward structure tightly to achievement of target objectives, inducing people to redirect their energies and modify their work habits to meet the needs of strategic change, and then personally leading the implementation-execution of strategy as it applies to one’s own area of managerial responsibility (Trist 1998).
Simply put the strategy-implementing function consists of seeing what it will take to make the strategy work and then getting it done in a manner that produces the targeted performance on schedule.
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Likert (2001) proposed a five-stage model of the strategy implementation process:
i. Determining how much the organization will have to change in order to implement the strategy under consideration;
ii. Analyzing the formal and informal structures of the organization;
iii. Analyzing the "culture" of the organization;
iv. Selecting an appropriate approach to implementing the strategy;
v. Implementing the strategy and evaluating the results
According to Hofer (1997) there are six principal administrative tasks that shape a manager's action agenda for implementing strategy. The specific components of each of the six strategy-implementation tasks are as follows,
i. Building an organization capable of executing the strategy . The organization must have the structure necessary to turn the strategy into reality. Furthermore, the firm's personnel must possess the skill needed to execute the strategy successfully. Related to this is the need to assign the responsibility for accomplishing key implementation tasks to the right individuals or groups.
ii. Establishing a strategy-supportive budget . If the firm is to accomplish strategic objectives, top management must provide the people, equipment, facilities, and other resources to carry out its part of the strategic plan.
iii. Installing internal administrative support systems . Internal systems are policies and procedures to establish desired types of behavior, information systems to provide strategy-critical information on a timely basis, and whatever inventory, materials management, customer service, cost accounting, and other administrative systems are needed to give the organization important strategy- executing capability.
iv. Devising rewards and incentives that are tightly linked to objectives and strategy . People and departments of the firm must be influenced, through 69
incentives, constraints, control, standards, and rewards, to accomplish the strategy.
v. Shaping the corporate culture to fit the strategy . A strategy-supportive corporate culture causes the organization to work hard (and intelligently) toward the accomplishment of the strategy.
vi. Exercising strategic leadership . Strategic leadership consists of obtaining commitment to the strategy and its accomplishment. It also involves the constructive use of power and politics, and politics in building a consensus to support the strategy (Blunt 1992).
2.13.1 Problems of Successful Strategy Implementation Problems of successful implementation center around how well or badly the existing organization responds and how adequate it’s reporting proves to be (Korth 2000). According to Child (2003) in practice there are four problem areas associated with the successful implementation of strategies
i. The first problem is that, although strategies need to be developed around the business units (SBUs), of the corporation, these units often do not correspond to parts of the organization’s structure ii. Traditional management reports are not sensitive enough to monitor the implementation strategies, thus the strategic manager not fully aware of what is happening. iii. Implementing strategy involves change, which in turn involves uncertainty and risk. Therefore, motivating managers to make changes is a key determinant. iv. Management systems (such as compensation schemes, management development, communications systems) are often in place as a result of past strategies; they are rarely tuned or revised to meet the needs of new ones.
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Pugh (1998) adds additional factors that are also significant,
i. The failure to predict the time and problems which implementation will involve
ii. Other activities and commitments that distract attention and possibly cause resources to be diverted
iii. That the bases upon which the strategies were formulated change, or were forecast poorly and insufficient flexibility has been built in.
To counter these problems Hawkins (2001) suggests the following:
i. Allocating clear responsibility and accountability for the success of the overall strategy project
ii. limiting the number of strategies pursued at any one time
iii. identifying actions to be taken to achieve the strategic objective, allocating detailed responsibilities for actions - and getting agreement for them
iv. identifying key performance measures to be monitored throughout the life of the strategy project, and creating an information system to record progress
2.14 IMPORTANCE OF CORPORATE STRATEGY
According to Lynch (2001) there are six important factors of strategy to an organization as follows:-
i. Corporate strategy involves the whole organization – it covers all areas and functions of the business. It borrows best practice from each part and combines these, thus creating more than just the sum.
ii. Corporate strategy concerns itself with the survival of the business as a minimum objective and the creation of value added as a maximum objective.
iii. Corporate strategy covers the range and depth of the organization’s activities. 71
iv. Corporate strategy directs the changing and evolving relationship of the organization with its environment
v. Corporate strategy is central to the development of distinctiveness
vi. Corporate strategy development is crucial to adding value, rather than sales, profitability, market share, earnings per share or other indicators.
2.15 A CULTURAL APPROACH TO STRATEGY
Alvesson (2007) noted that culture and strategy are intertwined and a cultural understanding of strategy is productive. Brown (2003) points at the following ways in which culture directly affects or guides strategy formulation, that is, culture acts as a perception filter, affects the interpretation of information, sets moral and ethical standards, provides rules, norms and heuristics for action and influences how power and authority are wielded in reaching decisions regarding what action to pursue. Woodward (2003) further notes that the formulated strategy is a cultural artifact which helps employees understand their role in the organization, is a focus for identification and loyalty, encourages motivation, and provides a framework for ideas that enables individuals to comprehend their environment and the place of their organization within it.
2.16 CREATING A FIT BEWEEN STRATEGY AND CULTURE
According to Thompson (1989) anything so fundamental as implementing and executing the chosen strategic plan involves moving the whole organizational culture into alignment with strategy. It is the strategy- maker’s responsibility to choose a strategy that is compatible with the ‘sacred’ or unchangeable parts of the prevailing corporate culture. According to Porter (2000) it is the strategy maker’s responsibility to select a strategy compatible with the sacred or unchangeable parts of the organization’s prevailing corporate culture. Thompson (1989) came up with five steps which enable the creation of a fit between strategy and culture.
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i. Step 1: is to diagnose which facets of the present culture are in line with strategy and which are not.
ii. Step 2 : is to develop ways to make the needed changes in culture and to recognize how long it will take for the new culture, once culture changing actions are initiated, to take hold.
iii. Step 3: is to use the available opportunities to make incremental changes that improve the alignment of culture and strategy. Such opportunities crop up regularly: new and vacant positions to be filled with people who are willing and able to refashion the old ways of doing things; the appearance of a new problem can pave the way for making a desirable policy change; those proposals of subordinates which have positive culture impacts can be strongly supported; individuals and sub-units that ‘get with program’ can be visibly rewarded and singled out for praise; and the annual budgetary process can be used as a vehicle to steer resources into activities and events that promote the desired culture
iv. Step 4: is to insist that subordinate managers take actions of their own to set an example and to do things which will further instill organizational values and reinforce culture.
v. Step 5: is to proactively build and nurture the emotional commitment that managers and employees have to the strategy, to produce a temperamental fit between culture and the overall strategic plan.
2.16.1 How Culture Alignment Stimulates Strategy Execution
According to Frost (1991) culture alignment can stimulate strategy in the following ways:-
i. Through Goal Alignment
Goal alignment focuses on ‘what is done’ in the organization on a day-to-day basis. It ensures that the task performed by each individual or group is focused on strategically 73
important areas. Organizational culture aligns goals with structures, processes, and employee interaction, for successful strategy execution and goal achievement (Robbins 1999).
ii. By Enhancing Productivity
When people in the organization act and interact in the same way, there is better mutual understanding among employees and they can work in a more efficient manner. According to a study by Kotter (1992) the organizations that aligned culture and strategy yielded a three times higher Return-On-Investment than those with a non-aligned culture and strategy.
iii. Mergers & Acquisitions
In this age of cut-throat competition, large corporations are hungry for mergers & acquisitions. However the success of mergers and acquisitions solely depends on the integration of cultural parameters in the acquisition plans (Hatch 2004).
According to McGuire (2003) misaligned organizational cultures mar the organization’s growth engines and prevent strategies from being achieved to their full potential. The strategic orientation of an organization is just another expression of its dominant cultural values (Pullen 2005).
2.16.2 Promoting Culture-Strategy Fit
According to Schein (1991) management needs to promote a culture-strategy fit through the following ways:-
i. Consistency
ii. Keep making small but valuable changes over time.
iii. Promote management groups and employees to come up with innovative ideas and practices.
iv. Use effective communication practices to concentrate on what is important.
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According to Thomason (2001) there are nine activities that change the culture to support strategy. i. Sell the new strategic intent. ii. Interpret the existing organizational culture. iii. Develop group decision making skills. iv. Introduce innovative mindsets that welcome change. v. Develop skills and knowledge base. vi. Encourage staff to feel secure. vii. Develop means of helping staff deliver consistent performance. viii. Enable accessibility to management during periods of change. ix. Encourage thinking that focuses on the outside world.
2.17 BUSINESS STRATEGIES
According to Kotler (2005) a competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. Following on from his work analysing the competitive forces in an industry, Michael Porter suggested four "generic" business strategies that could be adopted in order to gain competitive advantage. The four strategies relate to the extent to which the scope of business activities are narrow versus broad and the extent to which a business seeks to differentiate its products.
i. Low cost leadership strategy
A low cost leadership strategy is a pricing strategy in which a company offers a relatively low price to stimulate demand and gain market share (Johnson 2004). With 75
this strategy, the objective is to become the lowest-cost producer in the industry. Many (perhaps all) market segments in the industry are supplied with the emphasis placed on minimising costs (Plunkett (2001). If the achieved selling price can at least equal (or near) the average for the market, then the lowest-cost producer will (in theory) enjoy the best profits. According to Thompson (2005) this strategy is usually associated with large-scale businesses offering "standard" products with relatively little differentiation that are perfectly acceptable to the majority of customers. The major challenge with this strategy is that a low-cost provider’s product offering must always contain enough attributes to be attractive to prospective buyers, low price, by itself, is not always appealing to buyers (Kotler 2005).
ii. Differentiation strategy
This strategy involves selecting one or more criteria used by buyers in a market and then positioning the business uniquely to meet those criteria (Porter 2000). This strategy is usually associated with charging a premium price for the product, often to reflect the higher production costs and extra value-added features provided for the consumer. Differentiation is about charging a premium price that more than covers the additional production costs, and about giving customers clear reasons to prefer the product over other, less differentiated products (Singh 2004).
Differentiated goods and services satisfy the needs of customers through a sustainable competitive advantage (Robbins 1989). This allows companies to desensitize prices and focus on value that generates a comparatively higher price and a better margin. The benefits of differentiation require producers to segment markets in order to target goods and services at specific segments, generating a higher than average price (Simmons 2001). The major challenge with this strategy is that any diffentiating feature that works well is a magnet for imitators (Thompson 2005).
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2.18 CONCLUSION
The concepts of corporate culture and strategy implementation have been widely publicized in literature. This topic covered the major aspects contained in the research topic. The next chapter deals with the research methodology.
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CHAPTER 3
RESEARCH METHODOLOGY
3.0 INTRODUCTION
In this chapter the researcher highlights the research framework used and the research design.
The sampling techniques and procedures used during the study of Interfin Bank will also be discussed. According to Babbie (1990) the research methodology is the general approach the researcher takes in carrying out the research project; to some extent, this approach dictates the particular tools the researcher selects. The researcher used a combination of a qualitative and quantitative approach to assess the impact of corporate culture in strategy implementation at Interfin Bank.
3.1 METHODOLOGICAL CONVICTIONS
Methodological convictions are beliefs concerning the nature of social sciences and scientific research (Clark 1996). The methodical convictions that were applied to this research are stated below.
3.1.1 Ontological Dimension
The ontological dimension refers to the discussions and disputes on the various ways in which research domains can be defined and classified and defines the reality that is being measured (Clark 1996). This research focused on the measurement of the culture profile and strategy implementation of Interfin Bank.
3.1.2 Sociological Dimension
The sociological dimension emphasizes that scientists operate within a clearly defined scientific community and that they are linked in research networks which form the basis 78
for their further research. Within this dimension, research is classified as experimental, scientific and exact (Levin 1994). This research focused on the quantitative analysis of variables and made use of research networks through the analysis of various literature.
3.1.3 Epistemological Dimension
The epistemological dimension relates to the search for the truth (Fowler 1993). The aim of research is thus to generate valid findings which are as close to the truth as possible. This research sought to achieve this truth through a good research design.
3.1.4 Teleological Dimension
According to Caldwell (2006) the teleological dimension refers to the fact that social science is goal driven. Research objectives can be classified as theoretical and practical. Theoretical research is exploratory, descriptive and solves problems (Fowler 1993). The aim of this research was to analyse whether corporate culture has a bearing on strategy implementation.
3.2 RESEARCH DESIGN AND APPROACH
Wengraf (2001) defined research design as the plan and structure of investigation so conceived as to obtain answers to research questions. According to Bryman (2001) the research design provides the overall structure for the procedures the researcher follows, the data the researcher collects, and the data analyses the researcher conducts. In this study the researcher used both primary and secondary data. The researcher also used both qualitative and quantitative methods to collect data. The study aims to find out the answer to an inquiry through numerical evidence, which is, quantitative research design. Secondly the study aims to explain why a particular phenomenon exists, thereby using qualitative research.
The researcher let the two complement each other since the study aims to find out what the dominant human behavior at Interfin Bank is towards strategy implementation.
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In this study the researcher’s assumptions followed an objective approach on the philosophy of science, which states that the business world is real. Interfin Bank is an institution that exists and the researcher was able to undertake a study of the institution through the use of interviews and questionnaires.
Therefore the research approach may be categorized into two types, that is, qualitative and quantitative.
3.2.1 Qualitative Research
Qualitative Research generates non-numerical data (Coomber 1997). It focuses on gathering of mainly verbal data rather than measurements. Gathered information is then analyzed in an interpretative manner, subjective, impressionistic or even diagnostic (Crawshaw 1990).
Advantages of Qualitative Research design
According to Nueman (2000), qualitative techniques are extremely useful when a subject is too complex to be answered by a simple yes or no hypothesis. These types of designs are much easier to plan and carry out. They are also useful when budgetary decisions have to be taken into account (Hagan 2000).
The broader scope covered by these designs ensures that some useful data is always generated, whereas an unproved hypothesis in a quantitative experiment can mean that a lot of time has been wasted (Fowler (1993). Qualitative research methods are not as dependent upon sample sizes as quantitative methods; a case study, for example, can generate meaningful results with a small sample group (Converse 1986).
Disadvantages of Qualitative Research design
Whilst not as time or resource consuming as quantitative experiments, qualitative methods still require a lot of careful thought and planning, to ensure that the results obtained are as accurate as possible (Newbold 1995).
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Qualitative data cannot be mathematically analyzed in the same comprehensive way as quantitative results, so can only give a guide to general trends (Senese 1997). It is a lot more open to personal opinion and judgment, and so can only ever give observations rather than results. According to Silverman (2004) any qualitative research design is usually unique and cannot be exactly recreated, meaning that they do lack the ability to be replicated.
3.2.2 Quantitative Research
Quantitative research generates numerical data or information that can be converted into numbers (Voelker 1993). The question is always when to perform the quantitative research design. According to Sudman (2001) quantitative research is all about quantifying relationships between variables. Variables are things like weight, performance, time, and treatment. You measure variables on a sample of subjects, which can be tissues, cells, animals, or humans. You express the relationship between variable using effect statistics, such as correlations, relative frequencies, or differences between means.
Advantages of Quantitative Research
Quantitative research design is an excellent way of finalizing results and proving or disproving a hypothesis. The structure has not changed for centuries, so it is standard across many scientific fields and disciplines (Rossi 2002). After statistical analysis of the results, a comprehensive answer is reached and the results can be legitimately discussed and published (Rosenberg 1999). Quantitative experiments also filter out external factors, if properly designed and so the results gained can be seen as real and unbiased. Therefore quantitative experiments are useful for testing the results gained by a series of qualitative experiments, leading to a final answer, and a narrowing down of possible directions for follow up research to take (Hagan 2000).
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Disadvantages of Quantitative Research
Quantitative experiments can be difficult and expensive and require a lot of time to perform. They must be carefully planned to ensure that there is complete randomization and correct designation of control groups. According to Wegner (1993) quantitative studies usually require extensive statistical analysis, which can be difficult, due to most scientists not being statisticians. The field of statistical study is a whole scientific discipline and can be difficult for non-mathematicians (Wright 2001).
In addition, the requirements for the successful statistical confirmation of results are very stringent, with very few experiments comprehensively proving a hypothesis; there is usually some ambiguity, which requires retesting and refinement to the design (Tufte 1993). This means another investment of time and resources must be committed to fine-tune the results.
Quantitative research design also tends to generate only proved or unproven results, with there being very little room for grey areas and uncertainty (Voelker 1993). For the social sciences, education, anthropology and psychology, human nature is a lot more complex than just a simple yes or no response.
3.2.3 Point-By-Point Comparison between the Two Types of Research
According to Clark (1996) the following are the point-by-point comparisons of qualitative and quantitative research.
i. Goal or Aim of the Research -the primary aim of a qualitative research is to provide a complete, detailed description of the research topic. Quantitative research on the other hand focuses more in counting and classifying features and constructing statistical models and figures to explain what is observed (Rowntree 2003).
ii. Usage - qualitative research is ideal for earlier phases of research projects while for the latter part of the research project, quantitative research is highly recommended (Wegner 1993). Quantitative research provides the researcher
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with a clearer picture of what to expect in his research compared to qualitative research. iii. Data Gathering Instrument – According to Babbie (1990) the researcher serves as the primary data gathering instrument in qualitative research. Here, the researcher employs various data-gathering strategies, depending upon the thrust or approach of his research. Examples of data-gathering strategies used in qualitative research are individual in-depth interviews, structures and non- structured interviews, focus groups, narratives, content or documentary analysis, participant observation and archival research. On the other hand, quantitative research makes use of tools such as questionnaires, surveys and other equipment to collect numerical or measurable data (Cooper 1998). iv. Type of Data - the presentation of data in a qualitative research is in the form of words (from interviews) and images (videos) or objects, such as artifacts (Clark 1996). If you are conducting a qualitative research what will most likely appear in your discussion are figures in the form of graphs. However, if you are conducting a quantitative research, what will most likely appear in your discussion are tables containing data in the form of numbers and statistics (Gelman 2002).
v. Approach - qualitative research is primarily subjective in approach as it seeks to understand human behavior and reasons that govern such behavior (Hagan 2000). Researchers have the tendency to become subjectively immersed in the subject matter in this type of research method. In quantitative research, researchers tend to remain objectively separated from the subject matter (Kendall 2003). This is because quantitative research is objective in approach in the sense that it only seeks precise measurements and analysis of target concepts to answer his inquiry. vi. Role of researcher - another major difference between qualitative and quantitative research is the underlying assumptions about the role of the researcher. According to Levin (1994), in quantitative research, the researcher is
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ideally an objective observer that neither participates in nor influences what is being studied. In qualitative research, however, it is thought that the researcher can learn the most about a situation by participating and/or being immersed in it (Mann 2000).
Although there are clear differences between qualitative and quantitative approaches, some researchers maintain that the choice between using qualitative or quantitative approaches actually has less to do with methodologies than it does with positioning oneself within a particular discipline or research tradition (Miles 1994). The choice of which approach to use may reflect the interests of those conducting or benefitting from the research and the purposes for which the findings will be applied. Decisions about which kind of research method to use may also be based on the researcher's own experience and preference, the population being researched, the proposed audience for findings, time, money, and other resources available (Crawshaw 1990).
3.3 POPULATION AND SAMPLING
Kendall (2001) described a target population as a group of people from which a sample is to be chosen. The population includes all objects of interest. According to Gelman (2002) a population is a group of individual persons, objects, or items from which samples are taken for measurement, for example, a population of presidents or professors, books or students.
Sampling is an exercise where we pick some elements from a finite population using an appropriate method such that the sample elements are representative of the population characteristics (Reinard 2006). Sampling is that part of statistical practice concerned with the selection of individual observations intended to yield some knowledge about a population of concern, especially for the purposes of statistical inference (Wegner 1993). Each observation measures one or more properties of an observable entity enumerated to distinguish objects or individuals. Survey weights often need to be applied to the data to adjust for the sample design. Results from probability theory and statistical theory are employed to guide practice. Another author Moore (1999) defined a
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sample as a finite part of a statistical population whose properties are studied to gain information about the whole. When dealing with people, it can be defined as a set of respondents (people) selected from a larger population for the purpose of a survey (Rowntree 2003). The main objective in sampling is not to make statements about the sample but rather to draw conclusions about the population behavior (Nachmias 2001).
3.3.1 Stages in the Sampling Process
According to Caldwell (2006) the sampling process comprises several stages,
i. Defining the population of concern.
ii. Specifying a sampling frame, a set of items or events possible to measure.
iii. Specifying a sampling method for selecting items or events from the frame.
iv. Determining the sample size.
v. Implementing the sampling plan.
vi. Sampling and data collecting.
vii. Reviewing the sampling Sample design. According to Tufte (1993) the term sample design refers to the scheme used to select elements of the population for the sample. In order to ensure that inferences about the population made using the sample are valid, the sample should be representative of the population with respect to the characteristics of interest. More precisely, the probabilistic structure of the sample should depend on the population parameter of interest in a known way (Pedler 1996).
3.3.2 Advantages of sampling
i. Cost – a sample can provide reliable and useful information at a much lower cost.
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ii. Timeliness – a sample of smaller size makes it possible to collect the sample data more quickly than the census data. Faster collection, presentation and analysis make for more timely decision-making.
iii. Accuracy – a sample can often provide information that is even more accurate than a complete census because the errors can be controlled more effectively.
iv. Infinite populations – a sample is necessary when it becomes impossible to study all elements of the population, for example, a biological study of mosquitoes.
3.4 SOURCES OF ERRORS IN SURVEYS
According to Silverman (2004) there are two major groupings of the source of data errors.
i. Sampling errors – these arise due to the fact that a sample cannot capture the desired information in a population. Sampling error comprises the difference between the sample and the population that is caused by certain units that happen to be selected. According to Senese (1997) there are two basic types for the sampling error. The first one is chance, that is, the error that occurs due to bad luck and this may result in untypical choices. Secondly sampling error is caused by sampling bias, which is the tendency to favour the selection of units that have particular characteristics.
ii. Sampling bias is usually the result of a poor sampling plan (Wengraf 2001). The most notable is the bias of non-response when for some reason some units have no chance of appearing in the sample. Bias can be very costly and has to be guarded against as much as possible. An example of sample bias would be where you would like to know the average income of some community and you
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decide to use the telephone numbers to select a sample of the total population in a locality where only the rich and middle class households have telephone lines. You will end up with high average income which will lead to the wrong policy decisions.
iii. Non-Sampling errors - these have nothing to do with the sampling design. These may be caused by non-response errors when elements objectively picked to come into the sample fail to respond, this introduces bias in the data, particularly as elements with a special interest could be the ones responding (Wright 2001). Like sampling error, non-sampling error may either be produced by participants in the statistical study or be an innocent by product of the sampling plans and procedures (Clark 1996). Therefore a non-sampling error is an error that results solely from the manner in which the observations are made.
3.5 TYPES OF SAMPLING
i. Non-Probability Sampling - In this type of population sampling, members of the population do not have equal chance of being selected (Sudman 2001). Due to this, it is not safe to assume that the sample fully represents the target population. It is also possible that the researcher deliberately chose the individuals that will participate in the study. Non-probability population sampling method is useful for pilot studies, case studies, qualitative research, and for hypothesis development (Silverman (2004). This sampling method is usually employed in studies that are not interested in the parameters of the entire population. Some researchers prefer this sampling technique because it is cheap, quick and easy.
ii. Probability Sampling - In probability sampling, every individual in the population have equal chance of being selected as a subject for the research (Wegner 1993). This method guarantees that the selection process is completely
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randomized and without bias. The most basic example of probability sampling is listing all the names of the individuals in the population in separate pieces of paper, and then drawing a number of papers one by one from the complete collection of names. According to Levin (1994) the advantage of using probability sampling is the accuracy of the statistical methods after the experiment. It can also be used to estimate the population parameters since it is representative of the entire population. It is also a reliable method to eliminate sampling bias.
iii. Cluster sampling- can be used whenever the population is homogeneous but can be partitioned (Converse 1986). In many applications the partitioning is a result of physical distance. For instance, in the banking industry, there are small "clusters" of employees in branches scattered about the country. In such a case, a random sampling of employee work habits might not require travel to many of the "clusters" or field offices in order to get the data. Totally sampling each one of a small number of clusters chosen at random can eliminate much of the cost associated with the data requirements of management. Sometimes it is cheaper to 'cluster' the sample in some way, for example, by selecting respondents from certain areas only, or certain time-periods only. Nearly all samples are in some sense 'clustered' in time - although this is rarely taken into account in the analysis. Cluster sampling is an example of 'two-stage sampling' or 'multistage sampling': in the first stage a sample of areas is chosen; in the second stage a sample of respondent within those areas is selected (Coomber 1997).
iv. Stratified Random Sampling - can be used whenever the population can be partitioned into smaller sub-populations, each of which is homogeneous according to the particular characteristic of interest (Wright 2001). Therefore a stratified random sample is obtained by separating the population elements into non-overlapping groups of similar characteristics called strata and then selecting
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a simple random sample from each stratum (Andersen 2000). A stratified sample is obtained by taking samples from each stratum or sub group of a population. Stratification is critical because we are dealing with a highly heterogeneous population which a simple random sample may fail to capture the population characteristics. Where the population embraces a number of distinct categories, the frame can be organized by these categories into separate "strata." A sample is then selected from each "stratum" separately, producing a stratified sample. The two main reasons for using a stratified sampling design are firstly to ensure that particular groups within a population are adequately represented in the sample, and secondly to improve efficiency by gaining greater control on the composition of the sample (Render 2001). In the second case, major gains in efficiency (either lower sample sizes/survey cost or higher precision) can be achieved by varying the sampling fraction from stratum to stratum. The sample size is usually proportional to the relative size of the strata. However, if variances differ significantly across strata, sample sizes should be made proportional to the stratum standard deviation (Black 2004). According to Downing (2000) disproportionate stratification can provide better precision than proportionate stratification.
Stratification also allows different sampling techniques to be used for different subpopulations (McGrave 2000). This may be desirable due to differences in frame data for example, units with missing data might be treated as a separate stratum, or operational considerations for example, a survey may employ clustering in areas where travel is expensive, but reduce clustering where interviewing expenses outweigh travel. v. Simple Random sampling - is probably the most popular sampling method used in decision making today. Many decisions are made, for instance, by choosing a number out of a hat or a numbered bead from a barrel, and both of these methods are attempts to achieve a random choice from a set of items. If a sample of size ‘n’ is drawn from a population of size ‘N’, in such a way that every
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possible sample of size ‘n’ has the same chance of being included in the sample under selection, then we are dealing with simple random sampling. Each individual is chosen entirely by chance and each member of the population has an equal chance of being included in the sample. But true random sampling must be achieved with the aid of a computer or a random number table whose values are generated by computer random number generators (Groebner 2005).
vi. Cross-Sectional Sampling - Cross-Sectional sampling study the observation of a defined population at a single point in time or time interval. Exposure and outcome are determined simultaneously (Thomas (1997).
vii. Quota sampling - is a method of sampling widely used in opinion polling and market research (Wisniewski 1996). Interviewers are each given a quota of subjects of specified type to attempt to recruit for example, an interviewer might be told to go out and select twenty adult men and twenty adult women, ten teenage girls and ten teenage boys so that they could interview them about their television viewing. Quota sampling is a non-probability sampling technique wherein the assembled sample has the same proportions of individuals as the entire population with respect to known characteristics, traits or focused phenomenon. viii. Systematic sampling – with systematic sampling elements are selected from the population at a uniform interval that is measured in time, order or space (Waller 2008). This technique is faster and covers the whole population. It is meant to improve the tedious process of getting a large random sample from a very large population. It secures a spread of the sample across the entire population, whereas simple random sampling could pick up elements from round the same section of the population (Kazmier 2009). According to Baker (2001) it can be biased if the first random elements selected coincide with some cycles in the data.
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ix. Convenience sampling is a non-probability sampling technique where subjects are selected because of their convenient accessibility and proximity to the researcher (Kemp 2004). The subjects are selected just because they are easiest to recruit for the study and the researcher did not consider selecting subjects that are representative of the entire population. The most obvious criticism about convenience sampling is sampling bias and that the sample is not representative of the entire population (Anderson 2000). This may be the biggest disadvantage when using a convenience sample because it leads to more problems and criticisms.
x. Snowball sampling - Snowball sampling is a non-probability sampling technique that is used by researchers to identify potential subjects in studies where subjects are hard to locate (Fleming 1996). Researchers use this sampling method if the sample for the study is very rare or is limited to a very small subgroup of the population. This type of sampling technique works like chain referral (Targett 1995). After observing the initial subject, the researcher asks for assistance from the subject to help identify people with a similar trait of interest. The process of snowball sampling is much like asking your subjects to nominate another person with the same trait as your next subject. The researcher then observes the nominated subjects and continues in the same way until the obtaining sufficient number of subjects.
Disadvantages of Snowball Sampling
• The researcher has little control over the sampling method. The subjects that the researcher can obtain rely mainly on the previous subjects that were observed. • Representativeness of the sample is not guaranteed. The researcher has no idea of the true distribution of the population and of the sample. • Sampling bias is also a fear of researchers when using this sampling technique. Initial subjects tend to nominate people that they know well. Because of this, it is 91
highly possible that the subjects share the same traits and characteristics, thus, it is possible that the sample that the researcher will obtain is only a small subgroup of the entire population.
The population of this study included all 105 Interfin Bank employees who are graded as being managerial employees, that is, excluding clerical and non-clerical employees. According to Stoker (1985) as cited by Kazmier (2009) the expected sample size from the 105 Interfin Bank employees is 45 participants. A list of managerial staff members was obtained by the researcher from the bank’s Human Resources department. Interfin Bank has a total of 208 employees of which 105 are graded as managers. From the 105 employees the researcher separated these into four categories depending on the level of management. These categories are executives, senior management, managers and supervisors. Therefore each category became a stratum. From each stratum simple random sampling was then used to come up with a representative sample. Therefore the researcher applied stratified random sampling in this study.
The reason for selecting stratified random sampling was that all levels of management had to be fairly represented and their opinions sought on the analysis of the impact of corporate culture on strategy implementation at Interfin Bank.
Table 3.1 Samples Chosen
Total Number of possible Type Respondents (N) Sample selected (n) Executives 8 4 Senior Management 13 6 Managers 30 13 Supervisors 54 22 Total 105 45
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3.6 NATURE OF THE INVESTIGATION
The study focused on an analysis of establishing whether corporate culture supports strategy execution at Interfin Bank. The study is essentially a case study that entailed the use of descriptive survey and qualitative research. Therefore the researcher used both the questionnaire and the interview method on the selected sample at Interfin Bank.
3.7 SURVEYS
According to Silverman (2004) survey research entails studying large and small population by selecting and studying samples chosen from the population to discover the relative incidence, distribution and interrelations of sociological and psychological variables. A sample survey is a study that obtains data from a subset of a population, in order to estimate population attributes (Downing 2000).
3.7.1 Advantages of Survey Research
i. Sample surveys are a cost-effective and efficient means of gathering information about a population.
ii. Survey sampling makes it possible to accurately estimate the characteristics of a target population without interviewing all members of the population. iii. Survey sampling is particularly useful when the population of interest is very large or dispersed across a large geographic area.
3.7.2 Disadvantages of Survey Research
i. Surveys do not allow researchers to develop an intimate understanding of individual circumstances or the local culture that may be the root cause of respondent behavior.
ii. Respondents often will not share sensitive information in the survey format. iii. A growing problem in survey research is the widespread decline in response rates.
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3.8 CASE STUDY
Voelker (1993) states that the case study is a method that usually combines both quantitative and qualitative data through participant observation, interviews and questionnaires. A case study is a detailed account of a company, industry, person, or project over a given amount of time. The content within a case study may include information about company objectives, strategies, challenges, results, recommendations, among others.
According to Neuman (2000) the advantages of using a case study include the capacity to explore processes as they unfold in organizations; understanding processes in their organizational context and exploring behavior that is little understood.
Interviews were conducted on senior management who guide the organization on a day to day basis. Their input was required since the questions they were asked where deliberately omitted from the questionnaire by the researcher. The lower level staff members of Interfin Bank were not expected to effectively answer the questions by the researcher. The main interview question was on the key features of Interfin bank’s culture.
Another author Gelman (2002) noted that a case study is an ideal methodology when a holistic, in-depth investigation is needed. Case studies are designed to bring out the details from the viewpoint of the participants by using multiple sources of data.
Basically, a case study is an in depth study of a particular situation rather than a sweeping statistical survey (Render 2001). It is a method used to narrow down a very broad field of research into one easily researchable topic. Whilst it will not answer a question completely, it will give some indications and allow further elaboration and hypothesis creation on a subject (Black 2004).
The case study research design is also useful for testing whether scientific theories and models actually work in the real world (Rosenberg 1999).
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3.9 THE INTERVIEW METHOD
Nachmias (2001) described this technique as a face-to-face questionnaire and further reiterated that it is a two-way conversation initiated by an interviewer to obtain information from a respondent. Although the collection of data could be done using various methods, the researcher decided that the interviews and questionnaire are more appropriate for this type of study. Interviews are among the most challenging and rewarding forms of measurement. They require a personal sensitivity and adaptability as well as the ability to stay within the bounds of the designed protocol (Sudman 2001).
Interviews are a far more personal form of research than questionnaires (Fleming 1996). In the personal interview, the interviewer works directly with the respondent. Unlike with mail surveys, the interviewer has the opportunity to probe or ask follow-up questions. Interviews are generally easier for the respondent, especially if what is sought is opinions or impressions. However interviews can be very time consuming and they are resource intensive. The interviewer is considered a part of the measurement instrument and interviewers have to be well trained in how to respond to any contingency.
The researcher being the interviewer and the senior Interfin Bank management being respondents, the researcher undertook face-to face interviews with the interviewees from the bank’s divisions. The interview technique was used because of the following reasons:
i. The data secured will be very detailed.
ii. Non-verbal behaviour is observed.
iii. The interviewer clarified doubts and ensured that the responses were being properly understood by repeating or rephrasing the questions.
iv. Questions regarded as sensitive were sandwiched between other questions.
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However, the interview technique had its own drawbacks, like, there could have been interview bias with the senior executives at Interfin Bank giving the researcher answers that just suit the interview. Interviews were also time-consuming, in setting up, interviewing, transcribing, analyzing, feedback and reporting. Some of the executives’ personal assistants took time to set up the appointments. However these drawbacks were overpowered by the advantages. The researcher overcame these weaknesses by backing the interviews with the questionnaire technique since this improves validity and reliability of the data to be collected.
The researcher will look at the various interview methods,
3.9.1 Personal Interviewing
This is a direct or face to face interview that the researcher used. The advantages are that people will usually respond when confronted in person. Secondly the interviewer can note specific reactions and then eliminate misunderstandings about the questions asked. The interviewer can collect non-verbal data, simultaneously has more control of the situation and the interviewer can also probe some more issues. Generally personal interviewing is considered to be more flexible. The disadvantages include the fact that it is a costly method in terms of money as interviewers travel to and from and it is time consuming. Interviewer bias is common.
3.9.2 Telephone Interviews
The respondent remains anonymous and hence can feel more comfortable giving more sensitive information. The sample can be more dispersed and hence more representative. The disadvantage is that the interviewer has no power to continue the interview, such that generally a telephone questionnaire must be short, that is, limited to short and simple questions. Another disadvantage with telephone interviews has to do with telephone sampling frame which may not contain the telephone population listing, as the telephone directory has many numbers that correspond to the given units and many units have no telephone numbers listed or have no telephones at all. The
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researcher did not use telephone interviews since all the senior management interviewed are based at Interfin Bank’s Harare head office.
Therefore the interview method was used a way of finding out the general perception of senior managers about the elements of Interfin Bank’s culture.
3.10 THE QUESTIONNAIRE INSTRUMENT
The researcher used a questionnaire. This is a preformatted written set of questions to which respondents record their answers, usually within rather closely defined alternatives (Wegner 1993). A questionnaire is relevant if no unnecessary information is collected and the information needed to solve the problem is obtained (Sudman 2001).
To avoid asking wrong and irrelevant questions, a pilot questionnaire was sent out to ten managers at Interfin Bank, randomly selected from the bank’s five divisions. Several questions were asked about instructional clarity, item clarity, relevance and the time needed to complete the questionnaire in an attempt to establish the reliability of the measures effectively. Additions and corrections suggested on the questions in the questionnaire were made thereafter. The questionnaire was administered through the bank’s internal e-mail to the selected participants. Generally the questions in the questionnaire were clear, simple, understandable and unbiased. After sending the questionnaire through e-mail, the researcher made appointments for face to face interviews with some of the respondents.
A questionnaire is therefore an efficient data-collection mechanism when the researcher knows exactly what is required and how to measure the variables of interest (Newbold 1995). A self-administered questionnaire was used and it made the researcher enjoy the most cost-effective method for securing feedback on the impacts of corporate culture on strategy implementation at Interfin Bank. The researcher used both open- ended and closed questions to gather data.
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3.10.1 Open-ended questions versus Close-ended Questions
Open-ended questions are those questions that allow the respondent to answer them in any way they choose and closed questions are those questions that ask the respondent to make choices among a set of alternatives given by the researcher (Wright 2001). This technique enabled the researcher to enjoy the following advantages:
i. Respondents fill in the questions at their own pace and convenience. ii. Anonymity of respondents is retained resulting in answers that are more reliable iii. Questionnaire eliminates interview bias, because the questions are predetermined and manageable. iv. The responses are gathered in a standardised way, so questionnaires become more objective than interviews. v. Generally it is relatively quick to collect information using a questionnaire. vi. Potential information is collected from a large portion of a group. vii. Because of the size of the population the questionnaire allows comparability when different people from different divisions answer similar questions from the same questionnaire.
However the questionnaire has its own disadvantages such as:
i. The response rate may be low resulting in delays in the compilation and analysis of the data gathered. ii. Delays in the distribution of questionnaires iii. Questionnaires, like many evaluation methods occur after the event, so participants may forget important issues. iv. Questionnaires are standardised so it is not possible to explain any points in the questions that participants might misinterpret. This however was solved by piloting the questions on a small group of Interfin Bank employees. v. Open-ended questions can generate large amounts of data that can take a long time to process and analyse. However to overcome this researcher limited open- ended questions to just one such question on the questionnaire.
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vi. Respondents may answer superficially especially if the questionnaire takes a long time to complete. However to overcome this structured questions were used by the researcher. vii. The interviewees might not be willing to answer the questions. They might not wish to reveal the information or they might think that they will not benefit from responding perhaps even be penalised by giving their real opinion. However to overcome this, the interviewer fully explained to the respondents why the information was being collected and how the results will be beneficial to the interviewee. The respondents were asked to reply honestly and were informed that if their response is negative this was just as useful as a more positive opinion. Respondents were also informed that the questionnaires were also anonymous.
3.11 MEASUREMENT SCALE FOR THE QUESTIONNAIRE
The 5 -point Likert scale was chosen because this research is mainly about assessing a practice and expressing an opinion. The five point Likert scale was also chosen since research has shown that increasing the scales beyond five does not result in any improvements in the quality of data (McGrave 1997). The scale was as follows:-
1 : Strongly disagree
2 : Disagree
3 : Not sure
4 : Agree
5 : Strongly agree
3.12 REPORT ON COLLECTION OF DATA
The questionnaires were all sent by internal e-mail to the recipients. The respondents were asked to complete the questionnaires and e-mail them back to the researcher
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using the institution’s internal e-mail. In order to push for responses, the researcher set reminders on all the recipients’ e-mail inboxes which would alert the recipient about the need to send back the completed questionnaire to the researcher. This alert system was installed with the assistance of Interfin Bank’s information technology department experts. The alert message was set to pop out after every forty eight hours from date of receipt of the questionnaire and it would go away as soon as the questionnaire was e- mailed back to the researcher. In this study a response rate of 80% was achieved. Interviews were done by the researcher to senior management at Interfin Bank after liaising with the senior management’s personal assistants. The interviews were very fruitful since senior management cooperated well with the researcher.
3.13 DATA ANALYSIS TECHNIQUES
Data analysis is an integral part of any research process and without an appropriate analytical procedure it is not possible to come up with meaningful findings. For this study the researcher used tables and graphical presentations in order to calculate percentages of categorized data. Frequencies were converted to percentages for comparison purposes. The use of figures makes analysis of data clearer.
3.14 LIMITATIONS OF THE STUDY
The major limitation was the hesitation by staff members to complete the questionnaires. Due to the merger of CFX Bank and Interfin Merchant Bank, the respondents had some hesitation about the study and the researcher had to explain in detail the objectives of the study. This was uncertainty emanating from the respondents.
3.15 CONCLUSION
This chapter looked at the methodology adopted by the researcher during the study. The following chapter looks at the research findings and analysis of the data.
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CHAPTER 4
4.0 RESEARCH FINDINGS AND ANALYSIS
4.1 INTRODUCTION
This chapter details the research findings and the analysis. The analysis of the findings will be made in reference to literature on corporate culture and business strategy. The analysis will be based on the objectives of this study and will focus on the following broad areas,
i. Culture features of Interfin bank.
ii. Culture change at Interfin Bank.
iii. Strategic options at Interfin Bank.
iv. Competitive advantage of Interfin Bank.
4.2 RESPONSE RATE
The questionnaires were sent to the selected sample comprising executive management, senior management, heads of department, managers and supervisors. The researcher sent the questionnaires to the recipients through the bank’s internal e- mail. The statistics of the responses from the different managerial categories were as shown below in table 4.1.
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Table 4.1 Summary of responses received
Type Questionnaires sent Questionnaires Response rate (%) out received
Executives 4 4 100
Senior management 6 6 100
Managers 13 8 62
Supervisors 22 18 82
Total 45 36 80
The response rate was very high at 80%. All the executives and senior management had a 100% response rate which was encouraging. This was attributable to the understanding by the senior management of the importance of the study considering the merger that took place between CFX Bank and Interfin Merchant Bank in the year 2010. The 80% response rate allowed for a fair assessment of the issues under study at Interfin Bank. The high response rate is also attributable to the way the questionnaire was structured. All questions except one were close-ended questions which enabled respondents to answer the questions in the shortest possible time. The close-ended questions also made the research work lighter for the researcher. According to Babbie (2000) the major advantage with close-ended questions is that the researcher avoids gathering irrelevant information.
There was also a fair representation of the respondents as the entire bank’s divisions were covered as shown in figure 4.1 below,
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25%
20% 20% 17%
15%
10% 10% 10% 10% 9% 7% 7% 7%
5% 3%
0%
Figure 4.1: The percentage response rate per division
Figure 4.1 shows that the responses were fairly spread out which gives credit to he type of responses received. There was no concentration in one or two single divisions of the bank. This was because of the stratified random sampling technique used by the researcher. According to Hagan (2000) stratification is critical because when dealing with a highly heterogeneous population a small simple random sample may fail to capture the population characteristics very well.
The sample consisted of staff members who used to work for Interfin Merchant Bank and those who were with CFX Bank Limited. Figure 4.2 below shows the spread of the responses from these two groups of staff members.
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37%
Interfin Merchant Bank 63% CFX Bank Ltd
Figure 4.2: Responses based on former employer
The proportions shown in figure 4.2 show that 63% of respondents were former Interfin Merchant Bank employees while 33% were former CFX Bank staff members. Considering the fact that Interfin Merchant bank took over CFX Bank and most of the current staff member s are from Interfin Bank, the responses give a fair representation of staff members’ backgrounds. However the fact that there were more responses from former Interfin Merchant Bank employees, according to Levin (2000) this may be construed to mean a non-sa mpling error caused by non-response errors when elements objectively picked to come into the sample fail to respond and this introduces some bias in the data.
4.3 CORPORATE CULTURE
In analyzing the corporate culture at Interfin Bank the following areas wer e examined,
i. Features of Interfin Bank’s culture
ii. The subcultures at Interfin Bank
iii. Importance of culture
iv. Changing the culture at Interfin Bank 104
4.3.1 KEY FEATURES OF INTERFIN BANK’S CULTURE
43% 45%
40%
35% 30% 30% 23% 25%
20%
15%
10% 3% 5% 1%
0% Strongly Disagree Not Sure Agree Strongly Disagree Agree
Figure 4.3: Responses on views on Interfin Bank’s key cultural feat ures
From the evidence shown in Figure 4.3 above, 43% of the respondents disagreed and 30% strongly disagreed with the notion that the bank espoused shared values, processes, routines, interests and beliefs. Only 1% strongly agreed while 23% agreed and jus t 3% were not sure. The results showed that a total of 73% of the respondents disagreed with this notion. The 1% of respondents that strongly agreed came from the bank’s senior executives. According to Thompson (2005) the taproot of corporate culture is th e organization’s beliefs and philosophy about how its affairs ought to be conducted. However the views of the respondents show that the values, beliefs and practices that undergird Interfin Bank’s culture have not yet effectively come from the bank’s hiera rchy. According to Cartwright (2001) key elements of a company’s culture often originate with a founder or other strong leader who articulated them as a set of business principles or company policies.
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According to O’Donovan (2006) unique, shared values can provide a strong corporate identity; enhance collective commitment; provide a stable social system and reduce the need for formal and bureaucratic controls.
4.3.2 DEVELOPMENT OF UNIQUE AND SHARED CULTURE
50%
45%
40%
35%
30%
25% 47% 20% 33% 15%
10% 20%
5%
0% 0% 0% Strongly Disagree Not Sure Agree Strongly Agree Disagree
Figure 4.4: Responses on whether Interfin Bank developed its unique and shared culture
With reference to figure 4.4 above, the question was asking respondents whether Interfin Bank has developed its own unique culture since the merger of the two banks. The results show that 47% of the respondents disagreed and 33% of the respondents strongly disagreed leaving just 20% of the respondents agreeing with this notion. Therefore the results show that the majority of the respondents feel that the bank is yet to develop its own unique and shared culture. This has something to do with the fact that the two merged banks had their own cultures which now need to be blended into one. According to Macmillan (2000) weak culture companies are fragmented in the sense that no one set of values is consistently preached or widely shared, few 106
behavioural norms are evident in operating practices and few traditions are widely revered or proudly nurtured by company personnel. Another author Black (2003) further noted that weak cultures provide little or no strategy – implementin g assistance because there are no traditions, beliefs, values, common bonds or behavioural norms that management can use as levers to mobilize commitment to executing the chosen strategy. Bloisi (2003) noted that a weak culture prevails when there is the a bsence of common assumptions and norms, which means people, are unsure of what is expected of them or how the organization believes it will succeed. Linstead (2009) noted that organizational culture still relates in many ways to a system of shared meaning held by members that distinguishes the organization from other organizations. The results in figure 4.4 are in contrast to what this author wrote. Child (2003) noted that mergers and acquisitions may produce countercultures which have a pattern of values a nd a philosophy that reject the surrounding culture.
4.3.3 TEAM SPIRIT
50% 45% 40% 35% 30% 25% 47% 20% 15% 27% 10% 20% 5% 2% 4% 0% Strongly Disagree Not Sure Agree Strongly Disagree Agree
Figure 4.5: Responses on whether Interfin Bank has an effective team spirit 107
The above figure 4.5 shows that 47% of the respondents disagreed that Interfin Bank has an effective team spirit in place. Another 27% of the respondents strongly disagreed while 20% of the respondents agreed that there is an effective team spirit in place. The results indicate that the majority of the respondents feel that the staff members are not pulling in one direction and staff members in different divisions are pursuing their own agenda which is different from the rest of the bank employees. This is attributable to the coming together of two institutions. According to Chatman (2003) culture helps socialize members in the organization whereby socialization is a process by which new members are indoctrinated into the expectations and rituals of the organization, its norms or unwritten codes of behaviour. This creates team spirit. According to Rollinson (2002) the roots of an organization’s culture can often be located in an organization’s history but culture is usually sustained and replicated by socialization of new organization’s members and resocialisation of people as culture adjusts to changing circumstances. According to Smith (2002) strong cultures and shared values and beliefs characterize an organizational setting in which people are committed to one another and to an overriding sense of mission.
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4.3.4 RESOLVING ISSUES THROUGH TEAMS
40% 40% 33% 35%
30%
25%
20% 17%
15%
10% 7% 3% 5%
0% Strongly Disagree Not Sure Agree Strongly Agree Disagree
Figure 4.6: Responses on the view that Interfin Bank resolves issues through teams
The results shown in figure 4.6 show that a total of 73% of the respondents disagree with the notion that the bank resolves issues through teams. A mere 3% strongly agree and just 17% agree that the institution is resolving conflicts through teams. This means the respondents were of the view that senior management at I nterfin Bank resolve issues on their own without involving the rest of the team members. According to George (2001) culture is the customary and traditional way of doing things, which is shared to a greater or lesser degree by all members and which the new members must learn and at least partially accept in order to be accepted into the services of the firm.
4.4 CHANGING INTERFIN BANK’S CULTURE
An analysis was into the respondents’ views on changing the culture at Interfin Bank.
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50%
45%
40%
35%
30%
25% 43% 20% 37% 15%
10% 20%
5%
0% 0% 0% Strongly Disagree Disagree Not Sure Agree Strongly Agree
Figure 4.7: Responses on whether Interfin Bank’s culture and shared values promote creativity
The above figure 4.7 shows the results on the respondents’ views on whether the bank’s culture and shared values promote creativity. Creativity is essential in a financial institution so that you guard against competition. A total of 80% of the respondents disagreed with this view showing that Interfin Bank’s culture does not promote creativity. According to Eden (1998) culture serves as a rudder to keep the firm’s strategy on course. Another author Cooke (2000) noted that while corporate strategy may control a firm’s successes or failure, corporate culture can make or break the strategy. According to Wood (2006) shared values lie at the heart of organizational culture. Hill (1997) noted that shared values help turn routine activities into valuable, important actions. According to Likert (2001) shared values tie the corporation to the important values of society. Shared values may provide a very distinctive source of competitive advantage (Klein 2003).
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4.5 SUB-CULTURES AT INTERFIN BANK
An analysis was made to gather the respondents’ views on the subcultures at Interfin Bank.
4.5.1 SUBCULTURES SUPPORTING DEPARTMENTAL STRATEGIES
3%
17% 27%
0% Strongly Disagree Disagree Not Sure Agree Strongly Agree
53%
Figure 4.8: Responses on sub-cultures at Interfin Bank supporting strategies at departmental level
From the responses shown in figure 4.8 above, a total of 80% of the respondents disagreed that the sub-cultures at Interfin Bank are supportive of strategies at departmental level. A mere 17% agreed with the view that the sub-cultures do support strategies at departmental level. According to Stoykov (2005) sub-cultures are localized subsystems of values and assumptions that give meaning to the common interests of smaller clusters of people within the overall organization. Richard (2005) pointed out that subcultures have three possible impacts on the organization, that is, they can serve 111
to enhance the dominant culture; they promote an independence from it and thirdly they function as countercultures when they are at odds with it. Thompson (2005) noted that a company’s subcultures can clash if they embrace conflicting business philosophies or operating approaches, or if key executives employ different approaches to people management. Hawkins (2001) states that subcu lture formation may be influenced by ethnicity, gender, generational differences, socioeconomic status, place within the organization, political and religious beliefs, among other issues.
4.5.2 SUBCULTURES BOND ING THE VARIOUS DEPARTMENTS TOGETHER.
50% 45% 40% 35% 30%
25% 47% 20% 15% 30% 10% 20% 5% 3% 0% 0% Strongly Disagree Not Sure Agree Strongly Disagree Agree
Figure 4.9: Responses on whether the subcultures bond the departments together
From what is depicted in figure 4.9, 30% of the respondents strongly disagreed and 47% disagreed with the view that the bank’s subcultures bond together the various divisions and depa rtments in the financial institution. Just 3% of the respondents were not sure and 20% agreed with the notion. According to Phegan (2000) the explicit social products produced by subcultures within organizations can be widely diverse and even
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result in countercultures. Parker (2000) highlighted that leaders have a better chance of creating or transforming an organizational culture if they accept and foster productive organizational subcultures and consistently communicate how employees must perform in order for the organization to achieve its objectives. According to Wood (2006) subcultures represent groups of individuals with a unique pattern of values and philosophy that are not necessarily inconsistent with the organization’s dominant values and philosophy. Cooke (2000) highlighted that understanding the importance of culture can help a company to absorb or accommodate the cultures within the organizations that are acquired or merge, or to manage the complex interplays in alliances, company formations and employment relations.
4.6 IMPORTANCE OF CULTURE
The researcher will now analyse the results to do with the importance of culture at Interfin Bank.
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4.6.1 THE INTERFIN BANK CULTURE AS AN ASSET THAT EASES COMMUNICATION WITHIN THE BANK
45%
40%
35%
30%
25%
20% 40% 33% 15%
10% 20%
5% 4% 3% 0% Strongly Disagree Not Sure Agree Strongly Agree Disagree
Figure 4.10: Responses on whether culture is an asset at Interfin Bank
Figure 4.10 above shows the same trend where a combined total of 73% of the respondents disagreed with the view that culture is an asset that eases communication at Interfin Bank. Only 23% of the respondents agreed with this view while 4% were not decided. Hill (2001) stated that every component of the corporate culture needs to underpin what is required from all stakeholders in order to realize the strategic goals and there must be a reinforcing stream of communications. All the actions in the organization need to translate into the cultural realities. Schein (1992) highlighted that organizations must use effective communication practices to concentrate on what is important so that culture becomes an asset.
4.7 MANAGEMENT APPROACH AT INTERFIN BANK
Since the merger there is a type of management approach that is in place. This question sought to find out the views of the respondents on the type of approach they 114
feel is in place at Interfin Bank. The tw o options made available by the researcher were either the new management at the bank is seen as being aggressive or as being conciliative and figure 4.11 below details the findings.
70%
60%
50%
40% 63% 30% 37% 20%
10%
0% Aggressive Conciliative
Figure 4.11: Responses on the type of management approach
Figure 4.11 above, shows that 63% of the respondents view the new management as being aggressive, that is, radical and conflict centered. On the other hand , 37% of the respondents view the new management as being conciliative, that is, desire a win -win approach and inv olve groups in problem solving. According to Linstead (2009) organizations with aggressive cultures encourage or require members to appear competent, controlled, and superior. Members who seek assistance, admit shortcomings, or concede their position are v iewed as incompetent or weak. Kaplan (2001) further notes that these organizations emphasize finding errors, weeding out “mistakes,” and encouraging members to compete against each other rather than competitors. The short-term gains associated with these s trategies are often at the expense of long-term growth.
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4.8 CULTURE SUPPORTS STRATEGY AT INTERFIN BANK
One of the major objectives of this study is to determine whether the culture at Interfin Bank supports strategy.
4.8.1 INVOLVEMENT OF STAFF IN STRATEGY FORMULATION.
50% 45% 40% 35% 30% 25% 47% 20% 15% 23% 10% 17% 5% 9% 4% 0% Strongly Disagree Not Sure Agree Strongly Agree Disagree
Figure 4.12: Views on whether the bank involves staff in strategy formulation
The results in figure 4.12, show that 47% of the respondents disagree that the bank involves its staff in strategy formulation. The results also show that 23% of the respondents strongly disagree with this view while only 17% agree and 9% strongly agree that all staff members are being involved in strategy formulation. Thompson (2005) noted that among all the things managers do, nothing affects a company’s ultimate success or failure more fundamentally than how well its management team charts the company’s direction, develops competitively effective strategic moves and business approaches. Cole (1999) further notes that the tasks of crafting and executing company strategies are the heart and soul of managing a business enterprise and winning in the market place. Robbins (1999) noted that effectively communicating the strategic vision down the line to lower-level managers and employees is as important as 116
the strategic soundness of the journey and destination for which top management has opted. Johnson (2004) agreed with this view by acknowledging that if company personnel do not know what management’s vision is and do not buy into the rationale for the direction management wants the company to head, they are unlikely to wholeheartedly commit themselves to making the vision a reality.
4.8.2 A RELEVANT CULTURE THAT ENHANCES PERFORMANCE AND PRODUCTIVITY .
45%
40%
35%
30%
25%
20% 40% 37% 15% 23% 10%
5%
0% 0% 0% Strongly Disagree Not Sure Agree Strongly Agree Disagree
Figure 4.13: Responses on whether Interfin Bank has a relevant culture which supports performance and productivity
Figure 4.13 above, shows that only 23% of the respondents agreed that the bank’s culture supports performance and productivity. A total of 77% disagreed with this view showing that the majority of the respondents do not feel that the current culture is aiding in improving the performance of the bank. David (2005) pointed out that the managerial purpose of setting objectives is to convert the strategic vision into specific targets and then use these objectives as yardsticks for tracking the company’s progress and performance. According to Hatch (2000), management’s interest in culture is less likely 117
to be prompted by curiosity about why this happ ens than by its possible bottom -line effects, for example whether culture has an impact on the commercial or financial performance of the organization.
4.8.3 INTERFIN BANK’S CORPORATE CULTURE SUPPORTS STRATEGY IMPLEMENTATION.
47% 50% 45% 40% 35% 30% 30% 25% 20% 20% 15% 10% 3% 5% 0% 0% Strongly Disagree Not Sure Agree Strongly Disagree Agree
Figure 4.14: Views on whethe r culture supports strategy implementation
This question sought to bring out respondents’ view on the main subject under study. According to figure 4.14 , 47% of the respondents strongly disagreed and 30% disagreed. A total of 23% of the respondents agreed and the researcher attributes the 3% that strongly agreed to views from the senior executives of the bank. This shows that the majority of the respondents are of the view that the prevailing culture at Interfin Bank is not supporting strategy implementatio n. Finlay (2000) noted that a culture grounded in strategy-supportive values, practices and behavioural norms adds significantly to the power and effectiveness of a company’s strategy execution effort. Kotter (1992) further noted that a culture that encou rages actions supportive of good execution not only provides company personnel with clear guidance regarding what behaviours and results constitute good performance but also produces significant peer pressure from co-workers to conform to culturally accept able norms. Another author Mulling (1999) highlighted that a culture imbedded with values and behaviours that 118
facilitate strategy execution promotes strong employee identification and commitment to the company’s vision, performance targets and strategy.
4.9 STRATEGIC PLANNING WORKSHOPS
The researcher sought to gather views on how often the respondents hold strategy planning workshops in their various divisions and departments.
70% 66%
60%
50%
40%
30% 22% 20%
11% 10%
0% 1% 0% 0% Daily Weekly Monthly Quarterly Half yearly Annually
Figure 4.15: Views on frequency of strategic planning workshops
The results in figure 4.15 above, show that 66% of respondents hold strategic planning workshops each quarter of the year while 22% of the respondents hold them monthly. Just 11% of the respondents hold the strategic planning workshops weekly. Authors like Wilkins (2001) pointed out that managing the implementation and execution of strategy is an operations-oriented, make-things-happen activity aimed at shaping the performance of core business activities in a strategy supportive manner. According to Adler (2004) crafting strategy is concerned principally with forming responses to changes under way in the external environment, devising competitive moves and
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market approaches aimed at producing sustainable competitive advantage. Tvorik (1997) noted that with decentralized decision making becoming common at companies of all stripes, it is now typical for key pieces of a company’s strategy to originate in a company’s middle and lower ranks. Hence it is the researcher’s view that strategic planning workshops must be held by I nterfin bank’s management on a weekly basis.
4.10 INTERFIN BANK’S COMPETITIVE ADVANTAGE
The researcher sought views from respondents on how competitive the bank is and the strategic options the respondents feel the bank is pursuing.
4.10.1 THE BANK IS BEI NG A LOW COST LEADER.
45% 42% 40% 33% 35% 30% 25%
20% 15% 15% 10% 7% 3% 5% 0% Strongly Disagree Not Sure Agree Strongly Disagree Agree
Figure 4.16: Responses on whether Interfin Bank is being a low cost leader
The responses in the above figure 4.16 show that a total of 75% of the respondents agree that the bank is pursuing a strategy of being a low cost leader in t he market. Only 7% of the respondents strongly disagreed followed by 15% who disagreed. A mere 3% were not sure of the strategic option the bank is pursuing. Thompson (2005) referred to
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a competitive strategy as the specifics of management’s game plan for competing successfully and achieving a competitive edge over rivals. The same author noted that a low-cost leader’s basis for competitive advantage is lower overall costs than competitors. Goffee (1998) stressed that to achieve a cost advantage; a firm must make sure that its cumulative costs across its overall value chain are lower than competitors’ cumulative cost. Financial Times (2000) highlighted that this is achieved through out managing rivals in the efficiency with which value chain activities are performed and in controlling the factors that drive the costs of value chain activities. However according to Kotler (2005) a low cost provider’s product must always contain enough attributes to be attractive to prospective buyers, that is, low price by itself, is not always appealing to buyers.
4.10.2 PRODUCT DIFFERENTIATION.
An analysis was made on whether the bank is practicing product differentiation in its chosen markets.
70%
60%
50%
40%
30% 60%
20%
10% 19% 17% 4% 0% 0% Strongly Disagree Not Sure Agree Strongly Agree Disagree
Figure 4.17: Views on product differentiation at Interfin Bank
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As shown in figure 4.17, the majority of the respondents were of the view that the bank is not practising product differentiation as a strategy. It shows that 60% disagreed while 19% strongly disagreed. A small proportion of a combined total of 21% agreed with this view. Thompson (2005) highlighted that the essence of broad differentiation strategy is to be unique in ways that are valuable to a wide range of customers. In the banking sector we already note that differentiation strategies are attractive since buyers’ needs are too diverse to be fully satisfied by a standardized product. Finlay (2000) noted that successful differentiation allows a firm to command a premium price for its product; to increase unit sales and lastly to gain buyer loyalty to its brand. Denison (1990) emphasized that easy to copy differentiating features cannot produce sustainable competitive advantage. On the other hand Hill (2001) stressed that a differentiator’s basis for competitive advantage is either a product or service offering whose attributes differ significantly from the offerings of rivals or a set of capabilities for delivering customer value that rivals don’t have.
4.11 CONCLUSION
This chapter focused on the research findings. The next chapter looks at the conclusion and recommendations.
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CHAPTER 5
5.0 CONCLUSIONS AND RECOMMENDATIONS
5.1 INTRODUCTION
The chapter outlines the conclusions drawn from the research on Interfin Bank as well as the recommendations to the study on corporate culture and strategy execution. The conclusions and recommendations will be drawn from the discussions from Chapter four of this study.
5.2 CONCLUSIONS
The list below details the conclusions that were arrived at by the researcher based on the on the research findings and results,
i. Interfin Bank does not have distinct features of culture.
ii. The bank is yet to develop a unique culture.
iii. Cooperation among departments still lacks within the bank.
iv. The bank’s executives did not create a buy-in of the new bank’s vision and mission by staff members.
v. Interfin Bank’s management does not involve staff members in decision making, strategy formulation and implementation.
vi. The bank’s management does not welcome creative ideas from all staff members.
vii. There is lack of goal congruency at Interfin Bank. viii. The bank is experiencing internal communication challenges.
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ix. The institution’s culture is not aiding in gaining competiveness in the financial services sector.
x. Interfin bank’s sub-cultures do not support departmental strategies.
xi. Culture at Interfin Bank does not support strategy formulation and implementation.
xii. The bank’s staff members view the senior management as being aggressive. xiii. The bank’s culture does not support organizational performance and productivity. xiv. Interfin bank is pursuing low cost leadership strategy.
xv. The bank is not pursuing product differentiation as a strategy.
It is the conclusion of this research that corporate culture at Interfin Bank does not support strategy implementation.
5.3 RESEARCH PROPOSITION TESTING
The research proposition was that corporate culture at Interfin Bank does support strategy execution. However after undertaking this study, corporate culture at Interfin Bank does not support strategy execution.
5.4 RECOMMENDATIONS
The following recommendations were derived from the research,
i. Interfin Bank needs to develop its own unique culture to cater for the merged entity through team building initiatives.
ii. Management needs to clearly articulate the new bank’s vision, mission, goals and strategic direction to the staff members through staff meetings so as to cater for the different backgrounds the staff members came from.
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iii. Interfin Bank has to develop an intranet for policies, in-house journals and internal communication so as to improve the internal communication.
iv. Teamwork needs to start from the top executives and be cascaded down to lower level staff members. This will filter down and instill confidence within the workforce.
v. The bank’s management needs to have a conciliative approach so as to gain the support of staff members.
vi. The bank has to embark on product differentiation so as to gain competitive advantage in the market.
vii. Culture features need to be shared across the entire bank through the participation of employees at all levels. viii. The bank needs to develop and implement a robust change management strategy plan as well as develop and implement a robust induction programme for new employees.
ix. Strong Leadership is required - The leaders, at all levels, need to know what the required culture is and then determine ways of establishing practices and procedures in all operations that will closely reflect the desired culture. They also need to role model the very behaviours they wish exhibited by everyone in the bank and provide the necessary support to others that will enable them to function accordingly as well.
5.5 FURTHER AREA OF STUDY
This research recommends a study into the impact of cooperative strategies on competitive advantage to local financial institutions.
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5.6 CONCLUSION
Interfin Bank needs to urgently define its own culture so as to successfully implement its strategy and be competitive in the financial services sector. Its competitiveness will ensure a return on investment to the bank’s shareholders.
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APPENDIX 1
UNIVERSITY OF ZIMBABWE
Research Title: An analysis of the impact of corporate culture on the execution of strategy at Interfin Bank (2010-2011) Student Name: Joshua Gocha
Dear Respondent
I am a final year student with the Graduate School of Management at the University of Zimbabwe. I am interested in learning more about corporate culture and strategy execution at Interfin Bank. My objective is to expand the body of knowledge about this important area in strategic management.
Please take a few minutes to answer the attached questionnaire. Responses provided will be treated in strict confidence and will be used for academic purposes only. May you send your responses through by 30 June 2011 to my contact details shown below.
Let me take this opportunity to thank you in advance for taking your time to fill in this questionnaire.
Regards Joshua Gocha International Banking Division, Interfin Bank, Block 4 Tendeseka Office Park, Eastlea E-mail: [email protected] ; Tel : 04-251034; Cell: 0772 351972
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SECTION A : GENERAL INFORMATION
1. Your position in Interfin Bank Executive Director Managing Director Company Secretary Divisional Director Head of Department Manager Supervisor
2. Your Division Retail Banking Corporate Banking International Banking Finance Treasury Risk and Audit Marketing Operations Executive Human Resources
3. For how long have you been with Interfin Bank Under 6 months 6 – 12 months 13 -18 months
4. Which institution were you working for before the Interfin / CFX merger Interfin Merchant Bank CFX Bank Limited
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5. For how long were you with your previous institution before the Interfin / CFX merger Under 1 year 1-2 years 3 – 4 years 4 – 5 years Over 5 years
6. Did your grade/position change after the merger Yes No
7. If your grade/position changed, was it an upgrade or downgrade Upgrade Downgrade No Change
SECTION B: CORPORATE CULTURE Corporate culture is a set of important understandings, that is, norms, values, attitudes and beliefs shared by the organization’s members .
The ratings are as follows:-
Strongly Disagree (SD) = 1 Disagree (D) = 2 Not sure (NS) = 3 Agree (A) = 4 Strongly Agree (SA) = 5
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1. In your view: 1 2 3 4 5 SD D NS A SA The bank espouses shared values, processes, routines, interests and beliefs The bank’s executives clearly stated the new bank’s vision, mission The bank’s executives make every effort to collectively resolve challenges The bank has an effective team spirit in place Interfin Bank resolves issues through teams The bank enables free contribution of ideas by all staff members The bank’s business is conducted in a creative environment Interfin Bank’s shared values and culture promotes creativity Both sets of workers ex-CFX bank and ex-Interfin Merchant Bank are working towards a common goal The Interfin Bank culture is an asset that eases communication within the bank At Interfin Bank the culture drives towards competitive advantage Since the merger the bank has developed its own unique and shared culture Interfin Bank’s subcultures in different divisions support strategies at departmental level in terms of profitability and cost cutting The bank’s subcultures bond the various departments together
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2. With reference to the new management at Interfin Bank, how best would you describe it Aggressive (radical, win-lose, conflict centred) Conciliative (win-win, group problem solving)
SECTION C: BUSINESS STRATEGY FORMULATION AND IMPLEMENTATION Strategy is the broad programme for defining and achieving an organization’s objectives and its response to its environment over time .
1. In your view: 1 2 3 4 5 SD D NS A SA Interfin Bank involves all its staff in strategy formulation The bank’s staff are involved in the implementation of the bank’s plans The bank’s core values are in line with the departmental strategic plans and targets The bank’s balanced scorecard has been merged with the business and operational plans The bank has a strategically relevant culture to enhance organization performance and productivity The bank’s culture is in line with the banking environment prevailing in the country The bank’s staff are fully aware of the bank’s corporate balanced scorecard Corporate culture at Interfin Bank influences the degree to which strategic planning is integrated and implemented As the bank’s strategy is that of being a low cost leader, the bank is sensitive to increases in transaction costs for customers
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Since the merger the bank has practiced product differentiation in view of competition Interfin Bank’s corporate culture supports strategy implementation
2. In your division/department how often do you hold strategic planning and implementation workshops Daily Weekly Monthly Quarterly Half-yearly Annually
3. Do you have any comments you may wish to make regarding the proposition that culture supports strategy execution at Interfin Bank. ……………………………………………………………………………………………………… ……………………………………………………………………………………………………… ……………………………………………………………………………………………………… ……………………………………………………………………………………………………… ………
Thank you for your time.
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APPENDIX 2
An analysis of the impact of corporate culture on the execution of strategy at Interfin Bank (2010-2011):
INTERVIEW SCHEDULE
i. What are the key culture features at Interfin Bank
ii. Are we able to describe the Interfin values as shared
iii. In your view is there a fit between culture and strategy at Interfin Bank
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