America's businesses are comprised of diverse individuals. However, these employees share most of the same basic cultural and societal influences. These influences strongly determine the qualities and type of leadership found within these organizations. This also includes a cultural acceptance, or resistance toward risk-taking and boldness. I will discuss and show some of the reasons that America's businesses increasingly find themselves incapable of embracing major change.

Historically, American corporate structure has reflected western values and a conservative approach to authority and decision-making. Its traditional mold and structure has been a strictly hierarchical approach. The roots for our present organization of work developed along family, craft or agricultural lines that remained basically unchanged for approximately 5,000 years, until the beginnings of mechanization and industrialization in the 18th century. Machines could justify their high cost only if a heavy and continuous demand existed maximizing their output. The presence of mechanization led to a "division of labor" between the entrepreneur who owned the machines and his employees. The owner supervised his workers, forcing them to work at the pace of the machine. This established a strong hierarchical and autocratic work ethic in both Britain and the United States. The system of manufacturing and producing many identical parts and their assembly into finished products even came to be called the "American System", because it achieved its fullest maturity in the United States. The entrepreneur or business owner who assumed most of the risk exercised a dominant influence in the business culture.

Today, a few individuals or a strategic leadership team still often dominate this influence. How does this occur? This influence will occur primarily through a combination of socialization tactics, myths, stories, rites, ceremonies, norms, values and organizational rewards. It is the organization’s top managers that primarily establish a lasting impression on the organization’s culture. As Charles Hill and Gareth Jones purport in their book Strategic Management, one major influence in the early formation of an organization is the strategic leadership provided by its founder and top managers. The founder and upper-level management "imprints" their management style and values on the organizational culture. If this influence is conservative and fears the consequences of error, it will inhibit risk-taking. Perhaps this is to be expected since most newer upstart companies are fragile and a major strategic error may prove to be fatal. However, this influence will permeate the organization long after the founders' departure.

The way corporate level managers design the organizational structure through delegation and task division can also impact the organization’s culture toward more or less risk orientation. Traditionally American companies have been very conservative and have what are called ”inert” cultures. Decision-making has been a formal process determined through a centralized hierarchical process. Often times the managers at all levels are required to follow established procedures for approval of major decisions and projects. The norms and values of most companies emphasize consensus and compliance, which in turn provides a sense of security for the organizations managers. These managers have traditionally been rewarded and promoted for enthusiastically supporting the existing organizational structure and corporate hierarchy. To not do so, one would be considered disloyal and a "loose cannon" rather than a team player. This structure has tended to demand conformity and to punish risk-taking. Again, the traditional American company is an "inert" culture. This internal culture is very slow to accept change or adapt to sudden situations.

When an organization has an "inert culture", it is conservative, cautious and risk adverse. This culture tends to limit or impede the organization's ability to change or to meet a sudden competitive threat. In contrast, an organization that has an “adaptive culture” can more effectively allow change in the company’s strategy to survive in a shifting environment. In an adaptive cultureinitiative is rewarded and innovation is encouraged among middle and lower level managers. Employees are encouraged to be innovative and reasonable risk-taking is considered acceptable.

Even when individual corporate leaders have the skills and personal characteristics to accept risk, they often find a strategic process that resists and hampers their serious efforts. For example, the strategic reward system of an organization will greatly affect how often managers are willing to take risks. Hill and Jones comment that most companies "attempt to control employee's behavior by linking reward systems to their control systems".  When strategic reward systems award conformity and the traditional aversion toward risk taking, few managers will have the incentive to take risks.

American businesses will continue to resist change as long as their corporate culture and structure punishes risk, and rewards conventionality. Author Gary Yukl reminds us that it is more difficult for managers to "make changes in strategy that are incompatible with the existing culture than it is to make changes that build on its existing values and assumptions".

The last few decades have seen the establishment of many new organizations that embrace risk taking and boldness. One obvious example is Microsoft. Its founder has attempted to keep his company as decentralized and as flat as possible. Authority has been given to various teams that have decentralized control of all the resources they need to complete any project. Managers are encouraged to experiment and take risks. Few would question the astounding success of Microsoft. In spite of this example and others, why do America's businesses find themselves increasingly incapable of embracing major change? Our rapidly evolving technological environment is changing far more quickly than American business culture. Our digital technology is “ahead of the curve” as our existingchange-adverse culture lags behind placing us at risk! As Don Tapscott comments about today's business environment, "time is collapsed, facts are quickly checked, the loss of credibility can be instantaneous, second chances are rare and harder to effect, grandstand plays had better be perfect, and the playing of one audience against another is far easier to detect”. The time needed to react and make effective bold decisions is shorter today than in the past. At the same time, aside from technological advances American business and its traditional culture are changing at a glacial pace in comparison.

I would like to offer a few suggestions to change the traditional American aversion toward risk taking. When the organization's culture has been resistant toward risk-taking due to a conservative orientation, a new management team may be able to effectively change the deeply held culture. They can do this by setting a new and positive approach to innovation and encouraging others to do so.  Another approach is to alter the strategic rewards system to reward risk-taking and minimize the fear of making mistakes. Recent studies have confirmed the importance of adaptive cultures, which allow for innovation and reward initiative for lower and middle-level managers. This can result in a greater ability to exploit new opportunities. The leader or management team can reshape the company’s culture by linking reward systems to encourage employee behavior toward risk.  Remember, an organization’s incentive system motivates and reinforces desired behaviors.

As an individual, a leader can encourage a culture that accepts risk taking by "deliberately cultivating values" that tell subordinates they should perform their jobs in creative and innovative ways. An individual leader can have a powerful personal impact in reshaping an organization's culture. Transformational leadership can also help to reshape the corporate structure. Robert Taylor and William Rosenbach gallantly state that overcoming fear and boldly stepping beyond the existing boundaries of one’s culture is a "special need for a leader".

Another approach is to establish "collective problem-solving" in team-based groups. This will typically also encourage greater risk-taking and bold solutions. Groups tend to take more risks because of the input and confidence of the collective group members. A group may also feel that individual accountability is muted because of the entire group’s participation in the decision making process. Groups tend to devise riskier solutions to problems than do individuals acting alone.

In summary, America's businesses were developed and influenced by the beginnings of mechanization and industrialization in the 18th century. Business became simply the reflection of a class-conscious society, and thus became strictly hierarchical in structure. The owner, entrepreneur or upper managers were authoritative and responsible for all decision-making. The owners’ influence dominated the company's structure, values, culture and reward system. Decision-making was conservative and risk was considered a threat to sound business practices. Ambiguity was considered to be an undesirable and negative environment. The organization often excelled with a rigid structure controlled by a few decision-makers. But, the last half of the Twentieth century witnessed a dramatic change in competition due to rapidly changing technologies, global markets and changing societal values. American businesses have been changing, but not rapidly enough to keep in pace with swiftly evolving competitive and societal pressures. The greatest natural resource in any organization is its people! This resource will remain untapped if we don’t use their skills and experience in the decision-making process! As a leader, you can drive a change in your organizations culture, create a more productive organization and tap into this great natural resource.

Comments to: editor@leadingtoday.org   

About the Author:

Frederick Weiss has over 20 years of management experience including 14 years at an executive level.  Mr. Weiss is the Vice President of Finance & Administration at Vita-Mix Corporation, a privately owned manufacturing company.  He has been a driving force in changing the culture of Vita-Mix from a small-family-leadership style to a professionally managed company during its growth from $5 million to over $60 million.

References:

Hill, C. & Jones, G. (1998). Strategic Management. (4^th Ed.) Boston: Houghton Mifflin.

Taylor, R. & Rosenbach, W. (1994). Military Leadership. (3^rd Ed.) Boulder, CO: Westview Press.

Tapscott, D. (1995) The Digital Economy. New York: McGraw-Hill.

Yukl, G. (1998) Leadership in Organizations. Upper Saddle River, NJ: Prentice Hall.

Big plans are already underway for next year’s festivities and celebration! Many believe that next February 2^nd will not be a routine February 2^nd. Why? It is 2/2/02! All those two’s certainly must signify that next February 2^nd will be a very special occasion!

If you haven’t figured it out yet, here is a hint. It has to do with predicting the weather. Yes, that’s right! February 2^nd is Groundhog Day! It is the day the groundhog, also called the woodchuck, is supposed to come out of its burrow after a long winter sleep and look for its shadow. Groundhog Day has been a tradition in the United States since 1886, when it was first reported in The Punxsutawney Spirit newspaper. (www.groundhog.org/history/tradition.shtml)

The origins of this tradition are clouded, but it appears that it originated in Rome and was passed on to the Teutons, or Germans. The original European tradition taught that if the hedgehog casts a shadow on Candlemas Day, which occurs on February 2^nd, there would be six more weeks of bad weather.

Over the years the legend of Groundhog Day has been growing. Much credit is due to the Punxsutawney Groundhog Club of Punxsutawney, Pennsylvania. As many as 30,000 people now gather at Gobbler’s Knob in Punxsutawney, PA to observe the most famous groundhog in the world—Punxsutawney Phil. Over the years Phil has not only predicted the weather, but has also met the President of the United States and appeared on the Oprah Winfrey show! The Club even has its own web site (www.groundhog.org).

In 1993, Columbia Pictures released the humorous movie Groundhog Day starring Bill Murray and Andie MacDowell. Bill Murray plays a grouchy weatherman, also named Phil, who has been assigned to cover the Punxsutawney Phil groundhog event with his producer, Rita.

After covering the event, the weatherman gets caught in a traffic jam and decides to spend the night in Punxsutawney. He wakes up at 6:00am to his alarm clock playing the exact same song from the day before. In fact everything is exactly the same. It is Groundhog Day all over again! Everything he does begins to repeat itself. Somehow, only Phil, the weatherman, remembers anything about what has to happen from the previous cycle of the day. No matter what he does, every day is a repeat of Groundhog Day! After going through many cycles of the same Groundhog Day, Phil begins to tire of living. He tries ending his life by jumping off a building, but to no avail. He wakes up the next day at 6:00 to the very same song on the radio! Nothing stops the repetitions of Groundhog Day!

The movie reminded me of a dark side to life within some organizations. Such organizations exhibit what I will call Punxsutawney leadership. No matter who is in charge, everything remains the same! Leaders come and leaders go, but nothing really changes. Phil’s repetition of Groundhog Day is like the daily grind most of us experience within modern organizations. The leadership may change over time but the underlying culture remains the same. There are the same old situations with little variation. We keep repeating the same old things hoping for different results. Just as this weatherman was about to go crazy with the repetition, so many within these organizations feel like going crazy over the lack of new and better ideas. The leadership in these organizations is like the constant repetition of an old 78 rpm record that is scratched—constantly going over and over the same groove. The messages from Punxsutawney leaders sound like a “broken record”.

In the movie theater, when Phil’s alarm clock goes off at 6:00am for about the twentieth time, the audience groans, hoping that somehow Phil can escape from the daily grind of Groundhog Day. So it is within many organizations. As a new leader appears, you can hear the groan of employees hoping that the “groundhog day” cycle can be broken. However, it is a rare occurrence to break the Punxsutawney leadership cycle. That is because culture and leadership are two sides of the same coin. When an organization’s culture is formed, based on certain assumptions, then the next generation of leadership is usually determined by the existing culture! This is especially true when times are good.

Once an organization’s culture is formed, it is usually the case that those who are considered for future leadership positions must support and conform to the existing culture. The culture survives by passing itself on to newcomers and by selecting the next generation of leadership. Organizational culture is the mechanism for social control, determining how current and future leaders will perceive, think, and feel.

Organizational culture is formed from assumptions. However, assumptions grow from experiences. When a solution to a problem seems to work repeatedly, it comes to be taken for granted. It becomes a shared assumption. It becomes the organization’s reality. Leaders within the organization will then find it inconceivable to see things in any other way than the way the culture dictates. Those who challenge the culture stir up challenges and defensive behavior. Cognitive defense mechanisms allow the organization to continue to function as it has in the past.

Edgar Schein, considered one of the founders of the field of organizational psychology, has this to say:

“Rather than tolerating such anxiety levels we tend to want to perceive the events around us as congruent with our assumptions, even if that means distorting, denying, projecting, or in other ways falsifying to ourselves what may be going on around us.” (Schein, 1992)

“It was Machiavelli who said, you know if you really want to see people at their worst just try to change the existing order of things.” (Nathan & Tyler, 1987)

An organizational culture does not form spontaneously from nothing. The original leader(s) of an organization creates it. Schein says that there is little doubt that the initial shaping force is the personality and belief system of the founder. (Schein, 1987) Leaders create a culture by articulating their assumptions about reality. Sometimes these assumptions are false or incomplete. Some may be based simply on fantasy or habit. (Kilmann, 1986) False assumptions may appear correct in the short run, or under certain conditions. However, false or incomplete assumptions can be very dangerous to the health of the organization in the long run.

Often the assumptions upon which a culture rests remain unstated and untested for years. For leaders to be truly effective, they must recognize their role in cultural modification and face the difficult challenges such action presents. It will require considerable humility and the exercise of personal listening skills. Often those most blind to incomplete or incorrect assumptions are those who have risen to the top of their organization. In fact, that is why they are at the top—because they have been so loyal to the current culture and its underlying assumptions!

Effective leaders must examine their own taken-for-granted assumptions, which can be a very painful process. However, this process is absolutely necessary if they are to make things happen that will move the organization forward and allow it to adapt to changing environmental conditions.

Successful cultural changes are typically made incrementally. This is why it is so important that cultural changes be made in good times. This allows sufficient time to complete the evolution of the cultural change. “The journey of a thousand miles begins with a single step.” People who fear sweeping changes may exhibit sufficient courage to make one small change. Once the change has been successfully completed, be sure to celebrate it. Celebrate each small step. Don’t wait until your entire vision has been accomplished before celebrating.

Be aware of the tendency to allow things to just “rock along” during good times. The human tendency is to ignore those who challenge the culture and its underlying assumptions during good times. When new leadership positions open within an organization lead by Punxsutawney leaders, such positions are typically filled with more Punxsutawney leaders—those who will do things the same way as in the past—based on the same assumptions that the old leadership held. Punxsutawney leaders embrace the most deadly assumption of all—erroneous extrapolation. (Kilmann, 1986) They assume that by changing nothing, the good things that have happened to the organization in the past will continue to happen in the future! They react to cultural change like the groundhog seeing its shadow. They become scared and quickly scurry back into their corporate burrow for six more weeks of inactivity! By the time bad times arrive, it may be too late to change!

Too much change too fast will bring on the wrath of those who desire the status quo. Those attempting to change the status quo are almost always viewed as “troublemakers.” The more drastic the change, the more preparation needs to be made ahead of time to counteract the human tendency to counter change.

When accepting change means admitting that the way things were done in the past was wrong, people are certain to resist. People do not like to lose face or feel embarrassed. Therefore, to be effective, cultural change must be both incremental and presented in a way that shows that what was believed or done in the past was done under very different conditions—and therefore perfectly understandable. Those who are willing to change must be portrayed as strong, flexible, and exercising vision. Effective leaders will focus on the positive benefits of the future rather than what went wrong in the past.

To facilitate cultural change, pick out individuals who are “on-board,” and encourage them to be cheerleaders and coaches to the fence sitters. Change will require considerable effort and determination over time. It will not come automatically or over a weekend. Patience and determination are critical characteristics of change agents. Cultural change is never a “quick fix.”

When positive cultural change does occur, don’t forget to publicly support and compensate those who have helped you overcome the resistance. Cultural change is usually personally disruptive—and is never easy. Those who help you in your mission will certainly pay a personal price. If you ignore the sacrifices they have made you will weaken future change efforts.

Once change begins to take place within the culture, there will be a tendency to lapse back into the “old ways.” For change to be lasting, it must be made in such a way that it will be self-perpetuating. However, while blocking the tendency to relapse, one must never make the new way the “only way.” As an effective leader you must not allow a new generation ofPunxsutawney leaders to arise. The last thing that needs to happen is to start believing that the new culture is now the ultimate culture.

Effective leaders must always be reexamining their assumptions. They should always be diagnosing the present strengths and weaknesses of their organization. Such leaders set a positive example of humility, learning, and personal growth. They make it clear that there is “no going back,” but there is always” going forward!” Those following such leaders will not groan like the theater audience watching the twentieth cycle of the same Groundhog Day, hoping that the “groundhog day” cycle can be broken. Rather, they will be energized to challenge their own assumptions and think creatively. “Creativity breeds enthusiasm; and enthusiasm, correctly focused, breeds productivity.” (Smith, 1985)

Comments to J. Howard Baker: jhb001@juno.com

Biography:

Dr. J. Howard Baker is Assistant Professor of Computer Information Systems at the University of Louisiana at Monroe. Dr. Baker has been a Franklin Covey 7 Habits of Highly Effective People certified facilitator for eight years, and has served the University of Texas at Tyler as their facilitator for four years. During the summer he offers a graduate and undergraduate course at U. T. Tyler in personal and organizational leadership. He holds a B.S. in Management from Samford University, a Master of Accounting (MAcc) from the University of Southern California, and a Ph.D. in Information Systems from the University of Texas at Arlington.

References:

Kilmann, Ralph. “Beyond the Quick Fix: Five Tracks to Managing Organizational Success”. Executive Excellence. Executive Excellence Publishing, 1986.

Nathan, John & Tyler, Sam. “Entrepreneurs: Excellence in Action”. Executive Excellence. Executive Excellence Publishing, 1987.

Schein, Edgar. “Leadership as Managed Cultural Change”. Executive Excellence. Executive Excellence Publishing, 1987.

Schein, Edgar. Organizational Culture and Leadership. San Francisco: Jossey-Bass Publishers, 1992.

Smith, Hyrum. “How To Build Your Own Pyramid of Productivity”. Executive Excellence. Executive Excellence Publishing, 1985.