The final area of consensus crucial for external adaptation concerns what to do if a change in course is required and how to make that change. If information surfaces that the group is not on target—sales are off, market share is down, profits are down, product introductions are late, key customers complain about product quality, key staff people or managers leave, or the like—by what process is the problem diagnosed and remedied?
For example, the 2009 major recall of Toyota vehicles illustrates how corporate and macrocultural forces interact to create first a propensity to deny that there is a problem because of the implied loss of face, then an effort to minimize the cost to the organization of fixing the problem, then a series of apologies, and finally an acceptance of the full costs of analyzing and fixing what was really wrong in the cars. There was clearly consensus on the need to protect the company’s face but evidently lack of consensus on how to remedy the problem in the cars.
Effective remedial action requires consensus on how to gather external information, how to get that information to the right parts of the organization that can act on it, and how to alter the internal production processes to take the new information into account. Organizations can become ineffective if there is lack of consensus on any part of this information gathering and utilization cycle (Schein, 1980). For example, in General Foods, the product managers used market research to determine whether or not the product they were managing was meeting sales and quality goals. At the same time, sales managers who were out in the supermarkets were getting information on how store managers were reacting to different products by giving them better or worse positions on the shelves. It was well established that shelf position was strongly correlated with sales. Sales managers consistently attempted to get this information to the product managers, who refused to consider it relative to their more “scientifically conducted” market research, thus unwittingly undermining their own performance. In the same vein, in the early days at DEC, the person who knew the most about what competitors were doing was the purchasing manager because he had to buy parts from competitor companies. Yet his knowledge was often ignored because engineers trusted their own judgment more than his information.
If information gets to the right place, where it is understood and acted upon, there is still the matter of reaching consensus on what kind of action to take. For example, if a product fails in the marketplace, does the organization fire the product manager, reexamine the marketing strategy, reassess the quality of the research and development process, convene a diagnostic team from many functions to see what can be learned from the failure, or brush the failure under the rug and quietly move people into different jobs?
At DEC, both the diagnosis and the proposed remedy were likely to result from widespread open discussion and debate among members at all levels of the organization, but more weight was consistently given to the technical people over the financial, marketing, or purchasing people. After the discussion and debate, self-corrective action was often taken locally because people now recognized problems about which they could do something. Thus, by the time top management ratified a course of action and announced it, most of the problem had already been dealt with. However, if the discussion led to proposals that violated some of Ken Olsen’s assumptions or intuitions, he would step into the debate and attempt to influence thinking. If that did not work, he sometimes empowered different groups to proceed along different paths in order to “play it safe,” to stimulate internal competition, and to “let the market decide.” Though this process was at times haphazard, it was well understood and consensually agreed to as the way to get things done in the kind of dynamic marketplace that DEC found itself in.
In Ciba-Geigy, remedial action was taken locally, if possible, to minimize the upward delegation of bad news. However, if problems surfaced that were company-wide, top management went through a formal period of diagnosis, often with the help of task forces and other specific processes. After a diagnosis had been made and remedial action decided on, the decision was formally disseminated through systematic meetings, memoranda, phone calls, and other formal means.
In General Foods, one of the most difficult remedial actions was for the product development function to stop working on a product that was not successful. If market test data showed that customers would not buy a particular product, they rationalized that they had tested the wrong population or that a minor change in the product would cure the problem. No matter what the data showed, the development team would rationalize them away and assume that sooner or later the product would sell. Management had to develop tough rules and time limits that, in effect, forced the abandonment of projects over the objections of the development team.
“Corrective” processes are not limited to problem areas. If a company is getting signals of success, it may decide to grow faster, or develop a careful strategy of controlled growth, or take a quick profit and risk staying small. Consensus on these matters becomes crucial to effectiveness, and the kind of consensus achieved is one of the determinants of the “style” of the company. Organizations that have not had periodic survival problems may not have a “style” of responding to such problems. However, organizations that have had survival crises often discovered in their responses to such crises what some of their deeper assumptions really were. In this sense, an important piece of an organization’s culture can be genuinely latent. No one really knows what response it will make to a severe crisis, yet the nature of that response will reveal deep elements of the culture.
For example, many organizations about to go out of business have discovered, to their surprise, high levels of motivation and commitment among their employees. One also hears the opposite kinds of stories, often from wartime, of military units that were counting on high levels of commitment only to find individuals losing their will to fight, seeking excuses to get out of combat, and even shooting their own officers in the back. Crisis situations reveal whether worker subcultures have developed around restriction of output and hiding ideas for improvement from management, or whether these subcultures support productivity goals.
After remedial or corrective action has been taken, new information must be gathered to determine whether results have improved or not. Sensing changes in the environment, getting the information to the right place, digesting it, and developing appropriate responses are parts of a perpetual learning cycle that will ultimately characterize how a given organization maintains its effectiveness.
Source: Schein Edgar H. (2010), Organizational Culture and Leadership, Jossey-Bass; 4th edition.