Example of Organizational culture: case of Digital Equipment Corp.

Digital Equipment Corp. (DEC) is a major case running throughout this book because it not only illustrates aspects of how to describe and analyze organizational culture, but it also reveals some important cultural dynamics that explain both DEC ’s rise to the position of the number two computer company in the world and its rapid decline in the 1990s (Schein, 2003). I was a consultant to the founder, Ken Olsen, and to the various execu­tive committees and engineering groups that ran the company from 1966 to 1992; therefore, I had a unique opportunity to see cultural dynamics in action over a long period of time. DEC was the first major company to introduce interactive computing and became a very successful manufac­turer of what came to be called “mini computers.” It was located primarily in the northeastern part of the United States, with headquarters in an old mill in Maynard, Massachusetts, but it had branches throughout the world. At its peak, it employed more than 100,000 people, with sales of $14 billion; in the mid-1980s it became the second largest computer manufacturer in the world after IBM. The company ran into major financial difficul­ties in the 1990s and was eventually sold to the Compaq Corp. in 1998. Compaq was in turn acquired by Hewlett-Packard in 2001.

1. Artifacts: Encountering the Company

To gain entry into any of DEC ’s many buildings, you had to sign in with a guard who sat behind a counter where there were usually several people chatting, moving in and out, checking the badges of employees who were coming into the building, accepting mail, and answering phone calls. After signing in, you waited in a small, casually furnished lobby until the person you were visiting came personally or sent a secretary to escort you.

What I recall most vividly from my first encounters with this organiza­tion some forty plus years ago is the ubiquitous open office architecture, the extreme informality of dress and manners, a very dynamic environment in the sense of rapid pace, and a high rate of interaction among employ­ees, seemingly reflecting enthusiasm, intensity, energy, and impatience. As I would pass cubicles or conference rooms, I would get the impression of openness. There were very few doors. The company cafeteria spread out into a big open area where people sat at large tables, hopped from one table to another, and obviously were intensely involved in their work even at lunch. I also observed that there were many cubicles with coffee machines and refrigerators in them and that food seemed to be part of most meetings.

The physical layout and patterns of interaction made it very difficult to decipher who had what rank, and I was told that there were no status perquisites such as private dining rooms, special parking places, or offices with special views and the like. The furniture in the lobbies and offices was very inexpensive and functional, and the company was mostly headquar­tered in an old industrial building that had been converted for their use.

The informal clothing worn by most managers and employees reinforced this sense of economy and egalitarianism.

I had been brought into DEC to help the top management team improve communication and group effectiveness. As I began to attend the regular staff meetings of the senior management group, I was quite struck by the high level of interpersonal confrontation, argumentativeness, and conflict. Group members became highly emotional at the drop of a hat and seemed to get angry at each other, though it was also noticeable that such anger did not carry over outside the meeting.

With the exception of the president and founder, Ken Olsen, there were very few people who had visible status in terms of how people deferred to them. Olsen himself, through his informal behavior, implied that he did not take his position of power all that seriously. Group members argued as much with him as with each other and even interrupted him from time to time. His status did show up, however, in the occasional lectures he deliv­ered to the group when he felt that members did not understand something or were “wrong” about something. At such times, Olsen could become very emotionally excited in a way that other members of the group never did.

My own reactions to the company and these meetings also have to be considered as artifacts to be documented. It was exciting to be attending top management meetings—and surprising to observe so much behavior that seemed to me dysfunctional. The level of confrontation I observed made me quite nervous, and I had a sense of not knowing what this was all about, as I indicated in the example in Chapter One. I learned from further observation that this style of running meetings was typical and that meet­ings were very common, to the point where people would complain about all the time spent in committees. At the same time, they would argue that without these committees, they could not get their work done properly.

The company was organized as a matrix, one of the earliest versions of this type of organization, in terms of functional units and product lines, but there was a sense of perpetual reorganization and a search for a structure that would “work better.” Structure was viewed as something to tinker with until you got it right. There were many levels in the technical and mana­gerial hierarchy, but I sensed that the hierarchy was just a convenience, not something to be taken very seriously. On the other hand, the commu­nication structure was taken very seriously. There were many committees already in existence, and new ones were constantly being formed; the com­pany had an extensive e-mail network that functioned worldwide, engi­neers and managers traveled frequently and were in constant telephone communication with each other, and Olsen would get upset if he observed any evidence of under- communication or miscommunication. To make communication and contact easier, DEC had its own “air force” of several planes and helicopters. Ken Olsen was a licensed pilot and flew his own plane to a retreat in Maine for recreation.

Many other artifacts from this organization will be described later, but for the present, this will suffice to give a flavor of what I encountered at DEC. The question now is, what does any of it mean? I knew what my emotional reactions were, but I did not really understand why these things were happening and what significance they had for members of the com­pany. To gain some understanding, I had to get to the next level: the level of espoused beliefs and values.

2. Espoused Beliefs and Values

As I talked to people at DEC about my observations, especially those things that puzzled and scared me, I began to elicit some of the espoused beliefs and values by which the company ran. Many of these were embodied in slogans or in parables that Olsen wrote from time to time and circulated throughout the company. For example, a high value was placed on per­sonal responsibility. If someone made a proposal to do something and it was approved, that person had a clear obligation to do it or, if it was not possible to do, to come back and renegotiate. The phrase “He who proposes, does” was frequently heard around the organization.

Employees at all levels were responsible for thinking about what they were doing and were enjoined at all times to “do the right thing,” which, in many instances, meant being insubordinate. If the boss asked you to do something that you considered wrong or stupid, you were supposed to “push back” and attempt to change the boss’s mind. If the boss insisted, and you still felt that it was not right, then you were supposed to not do it and take your chances on your own judgment. If you were wrong, you would get your wrist slapped but would gain respect for having stood up for your own con­victions. Because bosses knew these rules, they were, of course, less likely to issue arbitrary orders, more likely to listen to you if you pushed back, and more likely to renegotiate the decision. So actual insubordination was rarely necessary, but the principle of thinking for yourself and doing the right thing was very strongly reinforced.

It was also a rule that you should not do things without getting “buy- in” from others who had to implement the decision, who had to provide needed services, or who would be influenced by it. Employees had to be very individualistic and, at the same time, very willing to be team players; hence, the simultaneous feeling that committees were a big drain on time but they could not do without them. To reach a decision and to get buy- in, the individual had to convince others of the validity of his or her idea and be able to defend it against every conceivable argument, which caused the high levels of confrontation and fighting that I observed in groups. However, after an idea had stood up to this level of debate and survived, it could then be moved forward and implemented because everyone was now convinced that it was the right thing to do. This took longer to achieve, but led to more consistent and rapid action. If somewhere down the hierar­chy the decision “failed to stick” because someone was not convinced that it was “the right thing to do,” that person had to push back, her arguments had to be heard, and either she had to be convinced or the decision had to be renegotiated up the hierarchy.

In asking people about their jobs, I discovered another strong value: each person should figure out what the essence of his or her job is and get very clear about it. Asking the boss what was expected was considered a sign of weakness. If your own job definition was out of line with what the group or department required, you would hear about it soon enough. The role of the boss was to set broad targets, but subordinates were expected to take initiative in figuring out how best to achieve them. This value required a lot of discussion and negotiation, which often led to complaints about time wasting, but, at the same time, everyone defended the value of doing things in this way and continued to defend it even though it created difficulties later in DEC’s life.

I also found out that people could fight bitterly in group meetings, yet be very good friends. There was a feeling of being a tight-knit group, a kind of extended family under a strong father figure, Ken Olsen, which led to the norm that fighting does not mean that people dislike or disrespect each other. This norm seemed to extend even to “bad-mouthing” each other: People would call each other “stupid” behind each others’ backs or say that someone was a real “turkey” or “jerk,” yet they would respect each other in work situations. Olsen often criticized people in public, which made them feel embarrassed, but it was explained to me that this only meant that the person should work on improving his area of operations, not that he was really in disfavor. In fact, people quipped that it was bet­ter to have Ken criticize you than not to notice you. Even if someone fell into disfavor, he or she was viewed merely as being in the “penalty box”; stories were told of managers or engineers who had been in this kind of disfavor for long periods of time and then rebounded to become heroes in some other context.

When managers talked about their products, they emphasized quality and elegance. The company was founded by engineers and was dominated by an engineering mentality in that the value of a proposed new product was generally judged by whether the engineers themselves liked it and used it, not by external market surveys or test markets. In fact, customers were talked about in a rather disparaging way, especially those who might not be technically sophisticated enough to appreciate the elegance of the product that had been designed.

Olsen emphasized absolute integrity in designing, manufacturing, and selling. He viewed the company as highly ethical, and he strongly empha­sized the work values associated with the Protestant work ethic—honesty, hard work, high standards of personal morality, professionalism, personal responsibility, integrity, and honesty. Especially important was being hon­est and truthful in their relations with each other and with customers. As this company grew and matured, it put many of these values into formal statements and taught them to new employees. They viewed their culture as a great asset and felt that the culture itself had to be taught to all new employees (Kunda, 1992).

3. Basic Assumptions: The DEC Paradigm

To understand the implications of these values and to show how they relate to overt behavior, we must seek the underlying assumptions and premises on which this organization was based (see Figures 3.1 and 3.2).

The founding group, because of their engineering background, was intensely individualistic and pragmatic in its orientation. They developed a problem-solving and decision-making system that rested on five inter­locking assumptions:

1. The individual is ultimately the source of ideas and entrepreneurial spirit.
2. Individuals are capable of taking responsibility and doing the right thing.
3. No one individual is smart enough to evaluate his or her own ideas, so others should push back and get buy-in. (In effect, the group was say­ing that “truth” cannot be found without debate and that there is no arbitrary way of figuring out what is true unless one subjects every idea to the crucible of debate among strong and intelligent individuals, so individuals must get others to agree before taking action.)
4. The basic work of the company is technological innovation and such work is and always should be “fun.”

Without understanding these first four assumptions, we cannot deci­pher most of the behavior observed, particularly the seeming incongruity between intense individualism and intense commitment to group work and consensus. The fifth interlocking assumption helps to explain how there could be simultaneously (1) intense conflict with authority figures, insubor­dination, and bad-mouthing of bosses; and (2) intense loyalty to the orga­nization and personal affection across hierarchical boundaries.

5. We are one family whose members will take care of each other (imply­ing that no matter how much of a troublemaker an individual was in the decision process, the person was valued in the family and could not be kicked out of it).

Only by grasping these first five assumptions can we understand, for example, why my initial interventions of trying to get the group to be “nicer” to each other in the communication process were politely ignored. I was seeing the group’s “effectiveness” in terms of my values and assump­tions of how a “good” group should act. The DEC senior management com­mittee was trying to reach “truth” and make valid decisions in the only way they knew how and by a process that they believed in. The group was merely a means to an end; the real process going on in the group was a basic, deep search for solutions in which they could have confidence because they stood up even after intense debate.

After I shifted my focus to helping them in this search for valid solu­tions, I figured out what kinds of interventions would be more relevant, and I found that the group accepted them more readily. For example, I began to emphasize agenda setting, time management, clarifying some of the debate, summarizing, consensus testing after the debate was running dry, and a problem- s olving process. The interrupting, the emotional conflicts, and the other behavior I observed initially continued, but the group became more effective in its handling of information and in reaching consensus. It was in this context that I gradually developed the philosophy of being a “process consultant” instead of trying to be an expert on how groups should work (Schein, 1969, 1988, 1999a, 2003).

As I learned more about DEC, I also learned that the cultural DNA contained another five key assumptions, shown in Figure 3.2 . These five additional assumptions reflected some of the group’s beliefs and values per­taining to customers and marketing:

6. The only valid way to sell a product is to find out what the customer’s problem is and to solve that problem, even if that means selling less or recommending another company’s products.
7. People can and will take responsibility and continue to act responsibly no matter what.
8. The market is the best decision maker if there are several product contenders (internal competition was viewed as desirable throughout DEC’s history).
9. Even as the company gets very large and differentiated, it is desirable to keep some central control rather than divisionalizing.
10. DEC engineers “know best” what a good product is, based on whether or not they personally like working with that product.

These ten assumptions can be thought of as the DEC cultural paradigm—its cultural DNA. What is important in showing these interconnections is the fact that single elements of the paradigm could not explain how this organization was able to function. It was only by see­ing the combination of assumptions—around individual creativity, group conflict as the source of truth, individual responsibility, commitment to each other as a family, commitment to innovation and to solving customer problems, and belief in internal competition and central control—that the observable day-to-day behavior could be explained. It is this level of basic assumptions and their interconnections that defines some of the essence of the culture—the key genes of the cultural DNA.

How general was this paradigm in DEC? That is, if we were to study workers in the plants, salesmen in geographically remote units, engineers in technical enclaves, and so on, would we find the same assumptions operat­ing? One of the interesting aspects of the DEC story is that at least for its first twenty or so years, this paradigm would have been observed in opera­tion across all of its rank levels, functions, and geographies. But, as we will also see later, as DEC grew and evolved, some elements of the DEC culture began to change, and the paradigm no longer fit in some parts of the company.

Source: Schein Edgar H. (2010), Organizational Culture and Leadership, Jossey-Bass; 4^th edition.