What Regulators Need to Know About Organizational Culture Jennifer Howard-Grenville University of Oregon Lundquist College of Business University of Cambridge Judge School of Business Stephanie Bertels Simon Fraser University Beedie School of Business Brooke Boren University of Oregon Lundquist College of Business Research Paper Prepared for the Penn Program on Regulation’s Best-in-Class Regulator Initiative June, 2015 What Regulators Need to Know About Organizational Culture Jennifer Howard-Grenville University of Oregon Lundquist College of Business University of Cambridge Judge School of Business Stephanie Bertels Simon Fraser University Beedie School of Business Brooke Boren University of Oregon Lundquist College of Business Table of Contents Executive Summary ........................................................................................................................ ii I. Defining Organizational Culture ................................................................................................. 1 II. Three Perspectives on Organizational Culture ........................................................................... 4 A. Culture as Shared Values ....................................................................................................... 4 B. Culture as Frame ..................................................................................................................... 6 C. Culture as Repertoire .............................................................................................................. 7 D. Which Perspective is Right?................................................................................................... 9 III. Additional Cultural Considerations ........................................................................................ 11 A. Integrated, Differentiated, and Fragmented Cultures ........................................................... 11 B. Merging Dissimilar Cultures ................................................................................................ 14 IV. Cultural Assessment and Guidance ........................................................................................ 15 A. Tools for Evaluating and Guiding Culture ........................................................................... 15 B. Cultural Typologies .............................................................................................................. 16 C. Cultural Assessment Tools ................................................................................................... 18 D. Cultural Pulse Taking ........................................................................................................... 22 V. The Organizational Culture of Regulatory Authorities............................................................ 26 A. Differences in the Control over Goal Setting ....................................................................... 26 B. Contending with Strong Professional Subcultures ............................................................... 26 C. Regulatory Culture also Influences the Cultures of the Regulated ...................................... 26 D. The Boundary between the Regulator and the Regulated is a Hurdle to be Overcome ....... 27 Conclusion: Lessons for Guiding or Changing Culture ................................................................ 27 References ..................................................................................................................................... 31 Acknowledgments......................................................................................................................... 38 About the Authors ......................................................................................................................... 38 i What Regulators Need to Know About Organizational Culture Jennifer Howard-Grenville University of Oregon Lundquist College of Business University of Cambridge Judge School of Business Stephanie Bertels Simon Fraser University Beedie School of Business Brooke Boren University of Oregon Lundquist College of Business Executive Summary Organizational culture, often thought of as “the way we do things around here,” is both a highly valued and poorly understood characteristic of organizational life. Managers and employees recognize and value the importance of organizational culture to the effectiveness, productivity, and satisfaction of employees, and their achievement of organizational goals. Cultures that are mindfully managed can set organizations apart from their peers in their ability to attract and retain talent, and enable organizational adaptation. Yet, organizational scholars caution that creating a culture to attain these outcomes is a complex and subtle task, requiring sustained effort because organizational cultures are typically “deep, pervasive, [and] complex” (Schein, 2010: 53). Our aim in this paper is to explain the various ways in which organizational culture has been conceptualized and its influences understood, so that we can offer suggestions for how regulators can responsibly evaluate and manage the culture of their own organizations in the pursuit of regulatory excellence. Perhaps the single most important, and disarmingly simple, lesson from this paper is that organizational culture, like any other aspect of organizing, needs explicit, mindful tending. Organizational culture has been conceptualized and explained in different ways. According to three main perspectives, culture can be understood as: 1) shared values; 2) cognitive frames through which people see the world; and, 3) repertoires of actions that people use in patterned ways. Each of these perspectives provide distinct – but complementary – lenses through which to understand culture and guide organizational decisions. We offer a composite definition of culture that draws from elements of each perspective: Organizational culture comprises sets of beliefs held by an organization’s members, as well as associated actions that are guided by and sustain these beliefs. Beliefs are shared conceptions held by organizational members of what is important or what is valued within the organization and between an organization and its constituents. Actions are essential to understanding culture for these are where beliefs are put into motion. People at all levels must “walk the talk” for an effective, coherent culture to exist. Skillful managers and employees can put culture to work by ii revising which actions are associated with core beliefs, or by reframing how people see certain issues, enabling gradual adaptation of culture over time. Organizational cultures are not necessarily unified, even within the same organization. In fact, almost any organization will to some degree exhibit multiple cultures, or subcultures; organizational culture rarely reflects the unified ideal often represented in lay accounts. This is especially true in organizations following mergers or acquisitions, but it can also arise with organizations populated with individuals from different professional or occupational backgrounds. As a result of such factors, cultures can vary in their degree of integration or differentiation. Some organizations may be entirely fragmented, as when the organization exhibits very little consensus on values, beliefs, and actions. To be most effective, the degree of differentiation in an organization’s culture should ideally be aligned with and support organizational goals. For some organizations, the most effective culture will be one that is highly unified and generates consistent patterns of action across units and among employees; for other organizations a culture that is differentiated around several goals, or constituents, will be more suitable; or, for others still, a culture that is adaptive (a “learning organization”) and in flux will be best. The degree of differentiation holds implications for organizational change and performance. Some recent research, for example, suggests that at least in competitive business environments highly adaptable cultures tend to perform better. A number of tools have been developed and used for assessing and guiding culture. For example, surveys and checklists can be useful for gaining an overall understanding of an organizational culture, comparing it with that of other organizations, categorizing it, and gaining insight into employee satisfaction with culture. But such tools are limited and there exists no single formulaic tool for measuring, maintaining, or changing organizational culture. A more nuanced understanding of culture must be pursued, one that demands several forms of assessment that can tap into employees across an organization, comparing their cultural knowledge or practices, and which likely will involve data collection via a combination of surveys, interviews, focus groups, and observation. Several promising tools for “cultural pulse taking” exist to help managers assess their organization’s culture and their employees’ readiness for change. The cultures of regulatory organizations possess distinct features that pose special challenges for organizational management. These challenges include the limited control regulatory organizations have over their goals, the presence of strong professional subcultures, and the nature of the interaction between the regulator’s organizational culture and those of the regulated organizations. One key task of a regulator is to influence and shape the cultures of regulated organizations