Why Organizations Need Adaptive Cultures - Coursework Example

Adaptive Cultures: Student Name: Name of institution: Lecture; Date: Introduction Success in a business environment that is constantly changing depends on how adaptive the organization’s culture is. It is now widely accepted that successful business leaders have to build adaptive cultures to deal with the ever changing organizational environment. Culture is a distinguishing characteristic of an organization that makes it distinct from other organizations. Culture dictates the behavior and attitudes of employees in the organization (Tharp, 2009). Culture is an essential success factor and when aligned with strategy it plays a great role in guaranteeing success in an environment which is constantly in flux. An adaptive culture is essential in the ensuring the organization overcomes ongoing and future adaptive challenges that face contemporary organizations. What is success? Businesses are different in terms of operations, customers and the way they do thing. However, the most successful companies share a number of common characteristics (Collins and Porras, 2005). Some of the most successful companies have great leaders but the leadership has to spread throughout all the organizational levels. Most importantly, they recognize and harness leaders across all the levels of their organization. Successful organizations are also good at sharing knowledge and wisdom. Information sharing is optimized and the information is used across the whole organization to make informed decisions. Customer care knowledge and internal best practices are also shared across the organization’s functions (Collins and Porras, 2005).. The organization also makes sure that every employee knows their strategy and they replicate successful strategies in each part of the company. Successful companies are extremely good at communicating the organizational strategy to frontline employees (Smith, 2003). They ensure that every employee of the organization understands his or her role in the organization. Successful organizations are also good at optimizing their speed to reflect changes in the environment (Smith, 2003). They move very first to capture existing opportunities and can also slow down in response to outside indicators. Finally, they are able to find opportunities for making money where other organizations don’t care to look. By possessing these characteristic top businesses are market leaders in their industry; they produce the most innovative products in the market (Smith, 2003). Successful organizations are also profitable and make massive revenue and in many instances are way ahead of industry competitors in terms of profitability, revenues and return on investment (Collins and Porras, 2005). They also show the lowest employee turnover as they are able to engage and satisfy their employees. Customers of successful companies are also a happy lot as the organization strives to ensure their needs are met. Why organizations need adaptive cultures? Failure of bureaucracy It is clear that the bureaucratic organizational culture characterized by inflexible procedures and policies is no longer working in contemporary organizational management. No longer can it be assumed that management can create predictable and inflexible policies and maintain control over employees (Kotter, 2008). Today’s environment of hyper-change calls for a highly adaptive way of running organizations. Today’s workforces are resistant to the dictatorial way of doing things that characterize bureaucracy. Rules and policies are no longer effective in reinforcing positive behavior among employees. Unfortunately, many organizations maintain volumes of rules that dictate what employee can or cannot do. These controls are unnecessarily restrictive on employee thinking and innovation. Emergence of new ideas and norms is therefore limited by bureaucratic rules and procedures. Employees cannot innovate beyond the rulebook. According to Kotter (2008), bureaucracy only leads to failure as most bureaucratic organizations perform poorly. Organizations that hope to flourish in a dynamic environment need to avoid bureaucracy. Although some policies and rules for repetitive tasks need to be retained, having an inflexible, standard way of doing things is counterproductive (Reeves and Deimler, 2011). Every contemporary organization will be confronted by change. Sources of change include new products by competitors, economic forces and customer expectations. Bureaucracy is least suited for decision making in this environment where flexibility, creativity and risk-taking are vital for success. Adaptive cultures offer flexible attitudes and behaviors which are vital in confronting the waves of change that confront contemporary organizations (Schneider and Somers, 2006). Strong leadership focused on creating adaptive cultures is needed to ensure success and survival. Environment of Change We live in a volatile environment where many aspects of the business environment keep changing. New technologies, globalization and the greater need for transparency make the business environment more volatile than ever before. This volatility has left many business leaders with a sense on unease and uncertainty (Reeves and Deimler, 2011). One of the biggest indicators of how volatile markets are is the change of business operating margins since the 1980s. Largely static business margins have doubled in the last three decades. Many successful market leaders have been overtaken and sometimes they have completely vanished from the scene. A wider gap between winning companies and losers has also opened in the last two decades. There is no guarantee that firms can maintain market leadership as new disruptive competitors rise every day. Since 2008, more than 14% per cent of companies fall from the top three rankings every year (Reeves and Deimler, 2011). Furthermore, market leadership is not a guarantee of business profitability. For example, Samsung Mobile sells more units per year than bitter rivals Apple, but Apple is the most profitable company in the world. According to Reeves and Deimler (2011), the probability that the market leader is the most profitable player in the market declined to 7% from 34% in the 1950s. In addition, most players are not limiting themselves to one industry. Executives now have a difficult task to identify which companies they are competing with. This volatility presents a tremendous challenge to strategists in firms. New approaches to deal with the change and uncertainty that confront contemporary firms are needed. The need for different approaches demands an adaptive organizational culture that can foster their creation and maintenance. What are the Characteristics of Adaptive cultures? One of the characteristic of adaptive firms is their ability to quickly read and react to signals of change. Flexible firms experiment economically, frequently and rapidly changing as fast as possible. They change their products, processes, strategies and business models with lightening speed. They are excellent at managing their complex multistakeholder systems in their business environment. They also value their employees greatly and have learnt how to motivate them to unleash their full potential. According to Schneider and Somers (2006), companies that are realizing competitive advantage through adaptive characteristics have three additional characteristics apart from the ability to read and react to change signals. Ability to sense and react to change signal Adaptive firms quickly sense change from their external environment that. They quickly decoded it and make changes that enable them to cope when the change comes full circle (Klein, 2011). They either change their business models, processes or even products.In order to adapt, a company must have its antennae tuned to signals of change from the external environment, decode them, and quickly act to refine or reinvent its business model and even reshape the information landscape of its industry. Unfortunately, varying change signals come to the firm simultaneously as the environment is information-saturated. Adaptive companies make use of sophisticated technology to ensure that they get hold of the most relevant information. Data mining is one of the technologies that enable companies to identify which change signals they should pay attention to. However, change signals are so hard to discern that leader’s intuitions are needed in identifying relevant information. Today’s adaptive firms are using such sophisticated technology like neural network to analyze customer data. Neural technology seems a far-fetched idea for organizations with non-adaptive culture. However, one firm was able to use them to successfully identify variables that were leading to customer loss. Signal reading and action at Google and Tesco Tesco UK has been able to use customer information analytics to increase the pace of decision making at the firm. The purchase behaviors of over 13 million loyalty-card holders are continually analyzed (Humby, Hunt and Phillips, 2004). This analysis helps Tesco customize its offering in every store and handle the needs of its various customers segments. Tesco is also able to note shifts in consumer behavior earlier than its rivals. Through the system, Tesco has been able to initiate and run a highly successful online business, a media and financial services wing. Tesco databases and analyzed information is also available to other enterprises for a fee, meaning Tesco’s adaptive strategy earns the retailer direct revenue (Humby, Hunt and Phillips, 2004). Google is one company that comes to mind when adaptive organizational cultures are mentioned. Renown for creativity and innovation, Google is home to one of the most adaptive organizational culture. Google uses complex algorithms to determine the position of an ad on a search page. By placing ads where they are most relevant Google are able to achieve a higher click-through rate and therefore they maximize their revenue. The Ability to Experiment Adaptive companies are increasingly abandoning costly and time-consuming approaches to experimentation (Romero, 2012). Organizations need to continually experiment in order to develop and test new product. Adaptive organizations now use a wide array of technologies and approaches to make experimentation easier and less costly. Unfortunately, experimentation is not error-free and results in many failures. Companies with adaptive cultures are very tolerant of these failures. They make sure they learn from these failures and their employees are not admonished for failing (Romero, 2012). On the contrary, they celebrate their employee for trying and support them in making improvements or coming up with more successful adaptive approaches. Excellent management of Complex Multicompany Systems To be successful in contemporary business environment it is important to work closely and smartly with suppliers and customers. No longer can executives confine themselves to the firm as the unit of analysis when forming strategy (Daft, 2015). Organizational activities in contemporary organizations involve dealings with entities beyond the organizational environment. New organization activities that are beyond the organizational boundary include peer production, outsourcing, off shoring and value ecosystems. Organizational strategy is increasingly moving from the organization level to the ecosystem level. Many successful players operate as cooperating web of codependent companies (Schultz et al 2011). Instead of competing, each player handles a stage in the production of the final product. Thus, adaptive cultures demand system level strategies that are not reliant on strong control mechanisms. Apple is an organization in point that has been able to use system level strategies to gain competitive advantage. Apple was able to attack Nokia and later become the biggest player in the Smartphone market by using its web of suppliers, independent application developers and telecom partners (Lin and Ye, 2009). This ecosystem strategy was no match for Nokia which stood alone and had not adopted quickly to develop its own ecosystem. Mobilization ability Adaptive organizations develop environments that encourage diversity, autonomy, sharing, risk taking, diversity and flexibility (Sarros, Cooper and Santora, 2008). They are able to mobilize and motivate their employees to contribute to the realization of their strategy. These organizations replace permanent functions and silos with modular units that freely recombine and react in reaction to a situation in hand. How to create an adaptive culture? Organizations that want to develop adaptive organizational cultures should make sure their organizations have the four characteristics discussed above. In addition they can take the following steps to develop an adaptive organizational culture (Heifetz, Grashow and Linsky, 2009): 1. Make a list of assumptions, values, beliefs and norms that will guide employee attitudes and behavior. 2. Use selective hiring and promotion that prioritizes individuals who exhibit the desired culture. 3. Encourage ideas for improvement and problem solutions from all levels of the organization. 4. Be tolerant of mistakes made during experimentation or in the effort to react to change in the organization. 5. Ensure that the organization is composed of a diverse workforce in terms of age, education, nationality and experience. 6. Act before full information about a given business decision is available. 7. Analyze the organization to discover areas that need improvement. Conclusion The need to create adaptive organizational cultures in contemporary organizations is more critical than ever before. In a fast changing environment, organizations need to constantly change the way they do things. Nowadays, the very survival of an organization is dependent on how fast they adapt to changes in their business environment. In this report the importance of an adaptive culture for organizations is discussed. The report also describes the characteristic of adaptive organizations. Finally, the report recommends steps that can be taken to create and maintain adaptive cultures in contemporary organizations. References Chan, L. L., Shaffer, M. A., & Snape, E. 2004. In search of sustained competitive advantage: the impact of organizational culture, competitive strategy and human resource management practices on firm performance. The International Journal of Human Resource Management, 15(1), 17-35. Daft, R. 2015. Management. Cengage Learning. Heifetz, R. A., Grashow, A., & Linsky, M. 2009. The practice of adaptive leadership: Tools and tactics for changing your organization and the world. Harvard Business Press. Humby, C., Hunt, T., & Phillips, T 2004. Scoring points: How Tesco is winning customer loyalty. Kogan Page Publishers. Klein, A. 2011. Corporate culture: its value as a resource for competitive advantage. Journal of Business Strategy, 32(2), 21-28. Kotter, J.P 2008. Corporate culture and performance. Simon and Schuster. Lin, F., & Ye, W. 2009. 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In Intelligence in Next Generation Networks (ICIN), 2011 15th International Conference on (pp. 103-108). IEEE. Tharp, B. M. 2009. Four organizational culture types. Hawort. Organizational Culture White Papper. 3. Read More