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3.0 from 64 votes

How Culture Affects Productivity

Date: July 1 2005


The lunch-hour lecture may be a great idea, but it is not what we have in mind when we say that culture influences productivity. Mozart in the morning does not necessarily mean that five extra tonnes of ore will be produced per employee per shift.

When we speak of the culture of an organization, we refer to the behaviour patterns and standards that bind it together. Some organizational cultures encourage productivity; many do not.

Culture should not be confused with climate. Climate is the short-term mood of an organization. Unlike culture, it is fragile and subject to change.

How Beliefs Affect Culture

An organization''s culture encompasses everything it does and everything it makes. That is, it not only affects the manner in which managers manage (and consequently shape employee behaviour), but it also affects the way in which the organization processes its product and provides services to its customers.

Culture is influenced by an organization''s beliefs. For example, if we believe, as many managers still do, that the blue-collar worker is capable only of operating a machine, and this belief permeates the company, then the organization is overlooking the possibilities of collaborative goal setting, positive feedback, open dialogue and innovation. A navigator who believes the world is flat will refuse to explore the far horizon for fear of falling off the edge. So too these tradition-bound managers resist exploring new ways to manage. They have been thrust into an authoritarian style of management.

Actions Speak Louder That Words

A company''s culture tells the people who work for it what is right and wrong, what to believe, what not to believe, how to react and how to feel. And its actions speak louder than its words.

For example, many companies cite quality as their main goal. But when the production and quality control managers make arrangements to increase the speed of the manufacturing line while reducing the quality tolerance level, what message does this convey to the employees? And if these employees challenge their managers on the sacrifice of quality in favour of quantity, and the managers reply, "You do your work and I''ll do the thinking," what are these employees likely to believe the company values most? If there is a logical reason for the change, such as the customer having indicated a preference for lesser quality at a lower price, then why not explain this to the employees? They will understand that the customer can and should dictate to the organization and not the organization to the customer.

Generally, behaviour patterns are most strongly influenced by the leaders of the organization. The words and actions of the quality control and production managers reflect the values and beliefs of senior management.

How Culture Affects Productivity

Organizational culture and productivity are closely related. Simply stated, productivity is the art of getting the company''s products and/or services to the customer at the lowest possible cost. But it is more than that - it is related to quality, to customer needs and to labour relations. In other words, productivity and good management are inseparable.

Productivity is a result of motivation, and motivation thrives in a good climate. If management is to transform this fragile good climate into a long-lasting culture for success, it will have to focus on the following seven areas of improvement:

1. Organizational Clarity

The degree to which the goals and plans of the organization are clearly perceived by its members rises in proportion to the employees'' feelings of involvement in the goal-setting and planning procedures. Fostering this feeling of involvement and direction is more important than presenting lists of objectives and detailed plans. To promote organizational clarity, involve all members of the organization in the goal-setting and planning process.

2. Decision-Making Structure

We tend to forget that the main purpose of structure is to facilitate decision making, not to develop new organizational charts and lines of authority. In some organizations, especially high technology, ambiguity or looseness of structure may be preferable. Make sure that there is a free flow of information for decision making throughout the organization, and that the structure for disseminating that information allows positive outcomes.

3. Organizational Integration

Determine how much cooperation exists among various units of the organization. Do they communicate effectively to help achieve the organization''s objectives. Cut through red tape by forming temporary task forces, made up of people from various disciplines, which sidestep hierarchial structures.

4. Relationship of Management Style to Culture

The use of an authoritarian style in a democratic culture is disastrous: resistance is inevitable. Similarly, democratic management in an authoritarian culture leads to the chickens-without-heads syndrome. People who have worked in an authoritarian climate will have been discouraged from using their own initiative in doing their jobs. They have not felt free to question constraints, and have not sensed that top management will support them if they have made poor decisions. They have not been allowed to develop entrepreneurial traits that enhance innovation and ultimately productivity. Ensure that the management style suits the culture.

5. Organizational Vitality

Organizational vitality is measured by the boldness of its goals and its responsiveness to changing conditions. This requires that employees be allowed to make mistakes. Develop a system that encourages employees to take risks for the betterment of the organization without the threat of punishment and find ways of helping them learn from their mistakes.

6. Compensation

The compensation system should reinforce a success orientation without being too positive. If too positive, employees comes to expect ever-increasing rewards. If too negative, employees may retaliate by, for example, working to rule. Develop a system of compensation that is equitable, competitive and related to long- and short-term performance.

7. Human Resource Development

Provide opportunities within the organization for people to develop to their full potential. How does the company deal with obsolescence? Are old or unneeded people fired? Does management give credit to those outgoing people for their career contributions? Or is the prevailing attitude, "what have you do for me lately?" How honourably the company acts in these situations will do much to determine whether or not it has a culture of success.

The Psychology of Success

Concerning the relationship between culture and productivity, behavioural scientists have identified a number of human characteristics that tend to fly in the face of many currently favoured management practices:

  • People are not rational ¾ professional mind-watchers have been telling us that human beings are the ultimate study in conflict and paradox.
  • All of us are self-centred, seek praise and recognition, think of ourselves as winners and not losers.
  • We operate as much by gut feelings as we do by logical, rational thinking.
  • We are creatures of our environment, sensitive and responsive to external rewards and punishment, but we are also strongly motivated by internal pressures.
  • We are looking for meaning in our lives and will make great sacrifices for those employers who will provide us with meaning. At the same time, we need to feel that we are in charge of our own destinies.

For example, how does Company X handle the seemingly irrational employee, the person seeking recognition or the one whose ideas are based on emotion rather than logic? They are ostracized, disciplined or criticized. Many (possibly most) organizations do not know how to handle behaviour that is, after all, only human. So what do they do? They set up systems and procedures that assume most employees are lazy, disinterested in their work or their company and cheat with abandon. These rules and regulations are designed to not only punish deviant behaviour but also encourage productive performance. What they''ve really produced, however, is a climate and ultimately a culture that works against productivity.

Rising or Sinking to the Occasion

Employee behaviour is influenced by the organization''s expectations of how employees act. If the company creates rules and regulations to apprehend offending employees, employees will be caught and disciplined. The cycle repeats and repeats ... if a manager believes employees are lazy, his belief is confirmed when an offending employee is caught. Furthermore, if the only way an employee can get recognition is by breaking the rules, then he or she will break the rules because negative recognition is preferable to none at all.

Behavioural scientists, such as McGregor and Likert, based their management theories on the belief that man is by nature an experimenter, a thrill-seeker and an inventor. They indicated that management should provide meaningful work and equitable compensation, that jobs should be whole and exciting work modules. Given this, the average employee would be happy to contribute, add new ideas and boost productivity.

Mind-Set for Improving Corporate Cultures

For companies that find themselves in this counter-productive merry-go-round, there is a way out. They can improve their corporate cultures by recognizing that:

  • Corporate culture emanates from the top. It is top management''s responsibility to recruit, train, teach and coach managers so well that they in turn provide desirable role models for the employees in their charge. In other words, the way these managers behave, the way they lead and the way they think, sets a climate and ultimately a culture for success.

  • Executives, from the top down, must realize that people are unique and that they are frequently irrational and always complex.

  • The organization should establish procedures that take into account the duality in human nature. It should provide both meaningful work and direction, while satisfying in some measure the employees'' need to feel independent.

Values and Beliefs Behind Success

No matter how much effort goes into improving the above areas, if the combination of capital, creativity and human resource management that comprises the organization''s culture is not success oriented then the outcome will be failure.

The overriding cultural values that influence a company''s productivity level include the intention to produce quality products and to provide quality service. Its production practices and its products will reflect creativeness and innovation. Informality will be the preferred communication practice. The company will appreciate that customers are the reason for its corporate existence, and treat them accordingly.

The company will recognize that its people should be treated with the dignity and respect it affords its customers. The culture will not support the notion that workers work and only managers manage.

Successful companies have in common the following basic values and beliefs:

  1. Generally, the drive to provide a top quality product or service affects virtually every function of these organizations and they hold tenaciously to the belief that it is possible to achieve excellence.

  2. They focus on the marketplace and are responsive to the needs of the consumer.

  3. Regardless of the "economy of scale" argument that says large companies are more efficient, many of the most successful organizations appreciate that small is good.

  4. They accept that work should be intrinsically satisfying, that employees can handle autonomy and that increased efficiency will result, and they act on these beliefs.

  5. Their personnel policies are established with the realization that the only true discipline is self-discipline. Guidelines are established to provide regular and positive feedback, praise and coaching by the supervisors.

  6. Employees see that the organization values the individual and his or her integrity, and that discipline provides a framework. It give employees confidence to experiment, their confidence stemming from knowing what really counts in the organization.

  7. The successful organization thrives on internal competition, a value quite consistent with our North American way of life. We compete for school grades, we believe in the free enterprise system.

  8. These companies are often characterized by open, frequent and intense communications, a feeling of informality and a go-with-the-flow attitude. Internal politics are a minor consideration.

©Performance House Ltd.

(519) 746-2690

A version of this article originally appeared in The Canadian Manager, Journal of The Canadian Institute of Management


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