CREATING A CULTURE THAT DEMANDS CREATING

VALUE AND EFFECTIVENESS

Jakovac, Ivan

Master's thesis / Specijalistički diplomski stručni

2020

Degree Grantor / Ustanova koja je dodijelila akademski / stručni stupanj: Algebra

University College / Visoko učilište Algebra

Permanent link / Trajna poveznica: https://urn.nsk.hr/urn:nbn:hr:225:285756

Rights / Prava: In copyright

Download date / Datum preuzimanja: 2020-10-12

Repository / Repozitorij:

Algebra Univerity College - Repository of Algebra

Univerity College
 VISOKO UČILIŠTE ALGEBRA

ZAVRŠNI RAD

CREATING A CULTURE THAT DEMANDS

CREATING VALUE AND EFFECTIVENESS
Ivan Jakovac

Zagreb, December 2019.

Student vlastoručno potpisuje Završni rad na prvoj stranici ispred Predgovora s
datumom i oznakom mjesta završetka rada te naznakom:

„Pod punom odgovornošću pismeno potvrđujem da je ovo moj autorski rad čiji niti
jedan dio nije nastao kopiranjem ili plagiranjem tuđeg sadržaja. Prilikom izrade rada
koristio sam tuđe materijale navedene u popisu literature, ali nisam kopirao niti jedan
njihov dio, osim citata za koje sam naveo autora i izvor, te ih jasno označio znakovima
navodnika. U slučaju da se u bilo kojem trenutku dokaže suprotno, spreman sam
snositi sve posljedice uključivo i poništenje javne isprave stečene dijelom i na temelju
ovoga rada“.

U Zagrebu, 15.2.2019.

Ivan Jakovac
Predgovor

I would like to thank my mentor Keith GeLarden Dayton, PhD for unconditional
support and advice along this journey of writing this paper. Thanks to all my colleges
at the Algebra e-leadership MBA program, including Ivana Conjar and Goran
Radman for great support they gave us.

Finally, the biggest thanks to my wonderful wife Sanja who supported me all along
the way.
Prilikom uvezivanja rada, Umjesto ove stranice ne zaboravite umetnuti original
potvrde o prihvaćanju teme završnog rada kojeg ste preuzeli u studentskoj
referadi
Sažetak/Summary

U magistarskom radu istražuje se utjecaj korporativne tj. organizacijske kulture na efikasnost

i stvaranje vrijednosti unutar organizacije. U prvom dijelu rad se bavi teorijom
organizacijske kulture, modelima i vrstama te njihovim razlikama. Također, obrazlaže i
povezanost organizacijske kulture s uspješnošću organizacije te kako vodstvo organizacije
može utjecati na promjenu organizacijske culture kako bi povećao konkurentnost i efikasnost
organizacije.

Kasnije se teorije kulture analiziraju kroz primjer velikog poduzeća u obliku poslovnog
slučaja. Kroz rad i primjere pokušava se naći koje su to ključne dimenzije u organizacijskoj
kulturi koje dodaju vrijednost i efikasnost u organizaciji.

Nakon toga analiziraju se teorije vodstva, stvaranja vrijednosti te može li promjena kulture
utjecati na stvaranje vrijednosti u organizaciji.

Zadnji korak je istraživanje organizacijske kulture i mjerenje u kojem se definira rezultat

istraživanja tj. zaključak istraživanja. U ovom radu cilj je ukazati vlasnicima i menađmentu
organizacije što im je činiti žele li poboljšati poslovanje svojih organizacija te kako je
moguće promjeniti organizacijsku kulturu

Ključne riječi: organizacijska kultura, efikasnost, stvaranje vrijednosti, liderstvo,

organizacijska promjena
Content

1. Intro ............................................................................................................................... 1

1.1. Theory of organizational culture ........................................................................... 2

1.2. Organisational culture defined............................................................................... 2

1.3. Dimensions of organizational culture .................................................................... 4

1.4. Levels of organizational culture ............................................................................ 6

1.5. Role and meaning of organizational culture .......................................................... 9

1.5. Types of organizational culture ........................................................................... 11

1.6. Trends in organizational culture .......................................................................... 18

2. Organizational culture in creating value and effectiveness…………………………..20

2.1. Organizational culture as a function in business effectivness………………….21

2.2. Organizational culture in business strategy implementation……………………22

2.3. The impact of management on organizational culture of business systems……26

2.4. Impact of organization culture on organization effectiveness and success…….28

3. Leadership that creates value.................................................................................…...26

3.1. Leadership theory …………………………………...…………………………….28

3.2. Contemporary approaches to leadership...…………………………………………30

3.3 Impact of leadership on culture..……………………………………………………32

3.4 Competing Values Framework……………………………………………………..35

3.5. How leadership uses culture and CVF to create value....…………………………...38

3.5.1. Meaning of value creation……………………………………………………….38

3.5.2. Organizational leadership and effectiveness…………………………………….40

4. Organizational change………………………………………………………………….42

4.1. Defining change……………………………………………………………………43

1
 4.2. Development of organizational change……………………………………………46

4.3 Measuring and changing organizational culture…………………….……………..47

4.5. Organizational culture assessment instrument (OCAI)……………………………50

4.6. Key steps for organizational change……………………………………………….51

4.7. Using the CVF to diagnose and change organizational culture……………………55

5. Diagnose and change organizational culture in retail industry (Maras d.o.o. ) and key
cultural dimensions that creates value and effectiveness

5.1. Measuring the culture…………………………………………………………………55

5.2. Objective and purpose…………………………………………………………………56

5.3. Method of research…………………………………………………………………….57

5.4. Results………………………………………………………………………………...58

Conclusion…………………………………………………………………………………61

List of abbreviations ................................................................................................................

List of tables ............................................................................................................................

Literature ............................................................................................................................. 65

2
1. Intro

One of the key business factors in development of business organization is its organizational
culture. Organizational culture is very important in creating value and effectiveness in
business organizations. All business organizations are developing their own specific culture
which can determine long-term success of the company.

Culture is characteristic of organization in which their members have to adapt. It is a

multicultural concept that express itself in many different views of organizational life and
behavior.

The organizational culture is effecting the business or other organization on many levels.

Considering that this emphasizes the culture of the organization, observing the creation and
the development of individual organizations, it is easy to see that the working atmosphere
differs significantly from one organization to another. Each organization is specific and
special for itself and with its action, work and dedication, and each organization creates and
develops its own culture. Business atmosphere that directs and forms employees within the
organization is a product of the culture that is accepted as fundamental. From this it can be
seen that the culture is accompanied by a large number of different definitions that strive to
contribute to the most accurate understanding of the same.

In creating organizational culture leadership plays crucial role.

1
1. Theory of Organizational Culture

Culture, in short, is "how things are done in an organization". In the organization people are
the ones that perform the tasks. If culture is helpful to the people, the things will be done
effectively and efficiently. Organizational culture is the most difficult attribute to change: it
outlives founders, leaders, managers, products, services.

Culture of the organization is something that could bring business true competitive
advantage. Organizational culture is a complex phenomenon and is formed in variety of
ways. It may originate from the challenges and obstacles that organization face, it could be
a deliberate creation of the management or the people working in the organization that can
have strong input in forming a culture. Culture dictates how people and groups communicate
and behave in the micro and macro environment. High performance business use culture as
source of competitive advantage.

1.1. Organizational Culture

Organizational culture encompasses values and behaviors that contribute to the unique social
and psychological environment of a business. It influences the way people interact, the
context in which knowledge is created, the resistance they will have towards certain changes,
and ultimately, the way they share (or the way they do not share) knowledge. Organizational
culture represents the collective values, beliefs and principles of organizational members and
is a product of factors such as history, product, market, technology, strategy, type of
employees, management style, and national culture. Culture also includes the organization's
vision, values, norms, systems, symbols, language, assumptions, environment, location,
beliefs and habits.

2
Ravasi and Schultz (2006) characterize organizational culture as a set of shared assumptions
that guide behaviors.1 It is also the pattern of such collective behaviors and assumptions that
are taught to new organizational members as a way of perceiving and, even thinking and
feeling. Thus, organizational culture affects the way people and groups interact with each
other, with clients, and with stakeholders. In addition, organizational culture may affect how
much employees identify with an organization. 2

Schein (1992), Deal and Kennedy (2000) and Kotter (1992) advanced the idea that
organizations often have very differing cultures as well as subcultures. Although a company
may have its "own unique culture," in larger organizations there are sometimes co-existing
or conflicting subcultures because each subculture is linked to a different management team.3
Flamholtz and Randle (2011) suggest that one can view organizational culture as "corporate
personality." They define it as it consisting of the values, beliefs, and norms that influence
the behavior of people as members of an organization.4

Cultures comprises of everything from attitudes, experiences, beliefs to the values that
prevail in the organization. All of these control the ways in which organization works within
and how it interacts with people and groups outside.5

Strong Culture and Weak Culture

Culture varies in the organizations more than anything, Culture of the organization is deemed
strong if employees respond strong to business goals because of their alignment with it. It is
also weak where there is little alignment, and control is exercised with administrative orders.

Knowledge Culture

If any organization is to succeed and thrive, a knowledge culture must develop to help it
deal with its external environment. A knowledge culture is one where people share their

1
Ravasi, D.; Schultz, M. (2006). "Responding to organizational identity threats: Exploring the role of
organizational culture". Academy of Management Journal. 49 (3): 433–458.
2
Schrodt, P (2002). "The relationship between organizational identification and organizational culture:
Employee perceptions of culture and identification in a retail sales organization". Communication Studies. 53
(2): 189–202.
3
Selart, Marcus; Schei, Vidar (2011): "Organizational Culture". In: Mark A. Runco and Steven R. Pritzker
(eds.): Encyclopedia of Creativity, 2nd edition, vol. 2. San Diego: Academic Press, pp. 193–196.
4
https://en.wikipedia.org/wiki/Organizational_culture
5
http://www.mnestudies.com/human-resource/defining-and-changing-organizational-culture

3
experiences, mistakes are opportunity to learn, where focus is on personal development
that acts as a catalyst for organizational development.

Changing Organizational Culture

Culture gets into the root of the business. It is hard to change. It requires time, effort and
dedication. Staff needs time to get used to new ways of organizing. Defensive routines
pollute the system, more often than not unwittingly, and undermine it. Culture change shall
be considered an evolutionary process at individual, group, organizational, and
interorganizational levels, to be facilitated by psychologically attentive leaders who do not
underestimate the value of selection, socialization, and leadership.

Organizational Learning for Change

This is a strong culture of learning. There is a correlation between the orientation of

organizational culture and organizational learning. The inability to change organizational
behavior is repeatedly cited as the biggest hindrance to knowledge management. A
learning culture is an organizational environment that enables, encourages, values,
rewards, and uses the learning of its members, both individually and collectively.6

6
Internet http://www.mnestudies.com/human-resource/defining-and-changing-organizational-culture

4
 1.2. Dimensions of culture

Since culture is a crucial factor for the continued success of an organization, some
theoreticians in their work and activities are focused on defining dimensions of
organizational culture, as well as their division. Since it has already been established that
no consensus has been reached on the occasion defining organizational culture, so there was
no agreement to exist to a generally accepted division of the dimension of organizational
culture.

Organizational dimensions culture is a kind of framework for developing different

assumptions in organizational studies given the different ways of structuring organizations,
different motivations of employees within organizations and the various issues and problems
that people and organizations face across societies.

The Dutch professor, Geert Hofstede, is one of the most famous authors in the field
organizational culture research. He used quantitative and qualitative analyzes as
complementary dimensions when exploring organizational culture. He participated in IRIC
(Institute for Research on Intercultural Cooperation) were differences in practices typical of
organizational culture were identified. Research project IRIC resulted in differentiating six
dimensions of organizational cultures7:

 Process / results orientation - in process-oriented organizational cultures,

employees avoid risks and invest only limited efforts in doing their job, and
employee - oriented organizational cultures enjoy in unknown and uncertain
situations and invest their maximum effort.
 Orientation towards the employed / business - in organizational cultures oriented
to employed, employees feel that their personal problems are taken into account and
that they are protects while in organizational cultures that are job-oriented
concentration is solely focused on performing work tasks.
 The parochial and professional identity of employees - the parochial identity of
employees comes from the organization (employees consider that the organization’s
standards apply to their behavior at home), and in the professional identity of their

7
Jeknić, R. (2011) Kulture i organizacije: Organizacijske kulture Geerta Hofstedea. Zbornik radova Pravnog
fakulteta u Splitu, 48 (1), 103-123., [Internet], Raspoloživo na: https://hrcak.srce.hr/66433

5
  employees identify with the type of work they are doing (they think it is their personal
life exclusively their privacy).
 Open and closed system - employees of open organizational cultures are more open
according to the newly employed members and by their treatment and behavior to
feel "at home," while the employees in the closed system are quite special and
secretive and take them a long time to adapt to and incorporate into organizational
whole.
 Mild control and firm control - employees in organizations of "mild control" they
do not think they need to pay attention to the costs, and they have the agreed time of
meeting as flexible, while employees in "solid control" organizations are paying for
the costs, and meetings are always timely and precise.
 Pragmatic and normative type - a pragmatic type of organizational practice is
oriented to the market places emphasis on client needs and achievement of results,
and a normative type emphasizes respect for organizational procedures that are more
important than results.

From the above mentioned and explained dimensions, it can be concluded that the
organizational culture is multidimensional. One of the reasons why a large number of
dimensions is proposed is in fact that organizational culture is extremely broad and
comprehensive. It consists of complex, mutually exclusive connected and ambiguous
factors. Consequently, in reality it is almost impossible to include all relevant factors.
Incorporated dimensions need to be aligned with organizational culture in order to achieve
the cohesiveness of working groups in organization that employees work.8

8
Kim S.; Quinn R. E., (2006) Diagnosing and Changing Organizational Culture: Based on the Competing
Values Framework. San Francisco: Jossey-Bass, Str. 32., [Internet], Raspoloživo na:
http://xa.yimg.com/kq/groups/30802428/149246219/name/Diagnosing (2011-09-16)

6
 1.3. Levels of organizational culture

In the opinion of many authors, organizational culture is a system of values, beliefs and
beliefs customs within the organization and can be manifested on two basic levels:

 visible level
 invisible level

The visible level of organizational culture is composed of precisely defined norms possible
to observe. Signs characteristic of this level of organizational culture are easy recognizable
and recognizable, not only for employees in the enterprise, but also for people outside the
organization.

The visible signs of the culture are intensified in the consciousness of each employee, and
as one of them the most distinguishing features are ceremonies, symbols, slogans (certain
phrases or sentences that spell out the key organizational values), but also the style of dress,
behavior, logo, language, jargon, and so on.

On the other hand, the invisible level of organizational culture is organizational values, so-
called supportive value (strategy, goals, leadership philosophy).

Signs that represent invisible culture are less recognizable to all members of organizations,
which does not dispute their importance in determining organizational culture. Among
invisible signs of culture is particularly important to highlight common values, beliefs,
understandings, assumptions, attitudes and feelings. Symbols that shape and direct the
organization's functioning on the market are present in organizations visible and not visible
levels at the same time. Therefore, it can be said that organizational values are prone to
certain behaviors, while organizational standards express the behaviors that others have
accepted. Once values and norms are established in the organization, they then create lasting
organizational culture and organization.9

9
Brčić, R. (2002): Organizacijska kultura u funkciji djelotvornosti upravne organizacije, Ekonomski
pregled,53 (11-12),1048-1069., Internet, Raspoloživo na https://hrcak.srce.hr/28535

7
Picture 1.

Table 1 Source: https://www.researchgate.net/figure/Culture-elements-in-an-iceberg-model-Invisible-values-

visible-actions-and-structures_fig2_283771249

By entering into individual organizations, manager can easily perceive the difference in the
way the staff at the info desk is meeting customers or in the manner of service that is required
and provided. Reason for this is that individuals in the organization express and behave in
their own way, which can, and does not have to be within the prescribed limits. It is therefore
much more important to understand the background that is caused by such a way of
expression.

Likewise, it is often common practice that managers of business decisions rely solely on
visible (formal) part of organizational culture. In that case, the decision may be wrong
because it did not take into account the background of the prevailing circumstances that
ultimately resulted in a negative consequence. Just because of neglecting and less
understanding of deeper layers, of the invisible (informal) part, there is a reflection affecting
the managerial decisions, and thus also on the success of business organization.10

10
Ivana Gabelica, Povezanost organizacijske kulture i učenja u organizacijama, Split Rujan 2018, diplomski
rad.

8
 1.4. Role and meaning of organizational culture

Apart from understanding the symbols on the visible and invisible level of organizational
culture, it is necessary to understand its importance in the creation of behavior of the
organization. First of all, culture creates positive image of the company through recognizable
symbols. Thanks to that image, many organizations have built their own recognizability,
both nationally and globally. Management of each organization must strive to develop its
specific, unique culture that customer/client will always associate with this organization.
However, this is not easy.

For this reason, numerous organizations increasingly focus on their own culture, nurturing
and coordinating with the organization's business strategy.

Sušanj11 categorizes the functions of organizational culture as follows:

 The culture of the organization has the role of determining boundaries, ie, indicates
the difference between organizations,
 It provides a sense of identity to its members,
 It supports the development of collective affiliation,
 It reinforces system stability by providing standards of behavior,
 It serves as a mechanism for determining the meaning of the environment affecting
attitudes and behaviors.

In order for an organizational culture to be appropriate for a particular company at a given

moment, it must be well thought out and appropriate. Employees need to strengthen their
sense of power and satisfaction with themselves and their work, and a sense of community
among colleagues and belonging to the company. Such climate contributes to better
productivity, while employees have greater self-control and self-esteem. Organizational
culture plays a big role in the human resources segment, because satisfaction with the work
environment mostly influences the satisfaction of workers, and therefore their motivation
and dedication.

11
Vujičić, L. (2008) Kultura odgojno-obrazovne ustanove i kvaliteta promjena odgojno-obrazovne
prakse. Pedagogijska istraživanja, 5 (1), 7-20., [Internet], Raspoloživo na: https://hrcak.srce.hr/118267

9
Namely, it is important to point out that the role of culture is valuable for the organization
to the same extent as for its employees whose satisfaction is the basis for achieving even
better results and more efficient work of the entire organization. Human resource
management becomes the most important business function that treats people with valuable
potential and crucial practices. Since employees are like the wheels that push organization,
culture should be like an "invisible hand" that directs their efforts to the desired direction. In
this way a community that knows the vision and values that the organization advocates is
created, the activities and the duties of each individual are determined in detail and the
ambiguity decreases.

Picture 1. shows the four basic functions of organizational culture that encompass
organizational identity, loyalty to the organization, stability of the social system, and
structuring employees. All the above functions create the character of organizational
culture that is crucial in building readiness for market implementation.
Picture 1. Four functions of organizational culture

Identity

Employees
Organizational Loyalty
culture

Social
system

Source: Žugaj,M.,Bojanić-Glavica,B., Brčić, R., Šehanović, J., Organizacijska kultura, 2004,Tiva,

Varaždin., str.16

10
In conclusion, some of the most important functions of organizational culture can be
summed up, such as developing creativity and innovation for employees, creating
harmonious interpersonal relationships, teamwork, and aligning the goals of the employee
and the company itself. Employees are clearly aware of what is expected of them and how
they should behave in line with the company's strategy. In other words, it is necessary to
accept the existing culture so that it can be fully and effectively integrated into the enterprise
as a whole.

1.5. Types of organizational culture

There are many types of organizational culture that influence the behavior of people and
organizations.

Some cultures are fun-loving while others are more balanced and rule-bound. Some cultures
are caring, while others are cold and impersonal.

Organizational culture arises from the underlying assumptions, values and beliefs that
determine how people behave. Culture can be described as the environment or atmosphere,
but it is more than that. We might think of it as an organization’s personality. Looking at the
various aspects of culture, it is possible to determine that many types have been developed
in organizational culture. Some of the most important typologies are12:

 Deal and Kennedy's typology of organizational culture - determines the

organization's culture according to the time needed to gain an idea of the success of
the task and its height the risk of a particular job.
 Edwards Kleiner's typology of organizational culture - its foundations are built on
two key criteria. The first of them is to care for people, and the other is concern for
the effect.
 Scholz's typology of organizational culture – it is based on three dimensions on that
define different types of organizational culture: stability of organization, internally
induced culture and externally induced culture.

12
Žugaj, M. (2004) Organizacijska kultura. Varaždin: TIVA, tiskara, str. 22.

11
  Handy’s typology of organizational culture - links the types of organizational culture
(culture of power, role, tasks and persons) with the appropriate type of organizational
structure.
 Robert E. Quinn and Kim S. Cameron developed the Organizational Culture
Assessment Instrument (OCAI), a validated survey method to assess current and
preferred organizational cultures. The OCAI is based on Quinn and Cameron’s
Competing Values Framework Model. According to the authors and their research
every organization combines mix of four types of organizational culture: Clan,
Adhocracy, Market, and Hierarchy.

As can be seen, there are different perspectives and approaches when it comes to types of
organizational culture, but there are also many different classifications. However, this
work’s emphasis will be placed on Quinn and Cameron's typology of organizational culture
because it points to the importance of creating cohesion between internal (employees),
external (customers), stability or control or flexibility and change. Also later in the paper
there is more on Competing Value Framework, while four types of organizational culture
are described below.

Clan culture

A very friendly working environment where people have a lot in common and that strongly
resembles a large family. The leaders, or the heads of the organizations are viewed as
mentors and maybe even as father figures. The organization is held together by loyalty and
tradition. There is a high level of engagement. Within the organization the emphasis is on
the long-term benefits of human resource development, and great value is attached to
personal relationships and morale. Success is defined in the context of openness to the needs
of the customer and care for the people. The organization attaches great value to teamwork,
participation and consensus.

Hierarchy culture

A highly formalized, structured working environment. Procedures determine what the

people do. The leaders are proud of the fact that they are good, efficiency-oriented
coordinators and organizers. Maintaining a smoothly running organization is the most

12
crucial thing. Formal rules and policy documents hold the organization together. Concern
for the long term focuses on stability and results, accompanied by an efficient and smooth
execution of tasks. Success is defined in the context of reliable delivery, smooth planning
and low costs. Personnel management must ensure certainty about the job and predictability.

Market culture

A result-oriented organization in which the greatest care focuses on completing the work.
The people are competitive and goal-focused. The leaders are drivers, producers and
competitors at the same time. They are tough and demanding. The binding agent that keeps
the organization together is the emphasis on winning. Reputation and success are important
areas of focus. For the long term, people focus on competitive activities and achieving
measurable targets and goals. Success is defined in the context of market share and market
penetration. Competitive pricing and market leadership are important. The organizational
style is one of unflinching competition.

Adhocracy culture

A dynamic, entrepreneurial and creative working environment. People stick their neck out
and take risks. The leaders are viewed as innovators and risk takers. The binding agent that
keeps the organization together is a commitment to experimentation and innovations. The
emphasis is on trendsetting. For the long term the organization’s emphasis is on growth and
tapping new sources. Success means having new products or services available; being a
pioneer in this is considered important. The organization encourages individual initiative and
freedom.

Illustration of culture types

The relationships between the four models are shown in two dimensions in Robert Quinn's
framework. On the vertical axis 'flexibility' is set against 'controlling'. On the horizontal axis
'internal orientation' is set against 'external orientation'.

13
Source: https://www.quinnassociation.com/en/culture_typology

1.6. Trends in organization culture

In the recent theory and practice of the organization, certain trends that emphasize the team
and entrepreneurial culture are present. These trends can affect the organization on the inside
as well as on the outside. In the surroundings where business environment is increasingly
unstable, uncertain and complex, all of which have an impact on the organization's success.
In addition, the increase in education, changes in values system and aspirations of the young
go in favor of emphasis of individualism, entrepreneurship, aspirations for success, creativity
and initiative. That is why there are significant conceptual changes regarding the role of
managers, setting of goals, perceiving the environment and standards in organization.
Previous development of organizational culture is marked by the dominance of organization
over people. Today's events and trends follow the domination of people over the
organizations.

14
When setting goals in the traditional organizational culture is concerned, the main goal is
production and the quantity of products in short-term time frames. In terms of orientation,
traditional organizational culture has a longing for stability and survival, with regard to risk
avoidance strategies. As the main goal modern organizational culture prefers marketing and
quality in long time frames. In short, orientation is on looking at growth and success while
strategy manifests itself in risk tendency.

The perception of the environment in the traditional organizational culture is local and
autocratic. In modern organizational culture, the view of the world is global and
cosmopolitan.

It is also interesting to note the fact that in traditional organizational culture equalitarianism
is preferred, while modern organizations prefer exclusivity and elitism.

Traditional organizational culture, regarding decision-making is characterized by

authoritarianism and modern culture collaboration13.

13
Žugaj, Miroslav, prof. dr. sc., Bojanić-Glavica, Benedikt, prof. dr. sc., Brčić, Ruža, Doc. Dr. sc.,
“Organizacijska kultura u funkciji uspješnosti poslovanja organizacije”, Ekonomski vjesnik br. 1 i 2 (17): 17-
30, 2004.

15
2. Organizational culture in creating value and
effectiveness

The culture of a company is equally important for the individuals in the organization as well
as for the business strategy. An individual can accept the culture, adapt himself to it and be
successful. He can also give his own contribution to it, but if he does not adapt himself to
the existing culture, he cannot bring changes and he is forced to leave the organization. When
talking about business strategy, culture is very important because it affects selection of the
strategy and it represents one of the ways in which the chosen strategy is accomplished.
Implementing and executing a business strategy so important for the company's success that
they demand mobilization of the entire culture of the enterprise. Although, it is difficult to
express exact philosophies, attitudes, beliefs and shared values of employees in the company,
and the feelings that they emanate into the working environment. This is why it is important
to treat the culture of an enterprise as a sensitive and significant factor of business strategy
achievement and market success.

Culture includes both material and abstract elements, so that tracking cultural trends is as
hard as it is important for marketing. Besides, culture is a factor that arises and works through
generations.

Culture is important to the organization because it defines most of what is done and how
things work in that organization. It is entangled with life philosophy of the organization and
it is expressed in its mottos that summarize the purpose, mission and business strategy of the
organization.

Understanding the company culture is very important for the manager and the ability to adapt
to the culture of a company is the decisive factor of survival within the organization.

If they are well acquainted with the elements of organizational culture and if they succeed
to harmonize themselves with the goals of the organization, then the main prerequisites for
the successful operation of the organization will have been created. Personal values,

16
expressed in the attitudes and beliefs of employees, affect every aspect of management and
define the thing that differentiates one organization from the other14.

2.1. Organizational culture as a function in business

effectiveness

Regardless of the organizational form, culture is a powerful force in organizations to the

extent that it can affect the overall effectiveness and long-term success of the enterprise.
The role of organizational culture is very important because it creates a positive
impression of the company through recognizable symbols. The connection of
organizational culture to success and the effectiveness of a business is always one of the
most researched areas of organizational culture.

Because of the growing competition, business are looking for ways to increase their
success and organizational culture is one of the key elements that is being studied.

2.2. Organizational culture in business strategy

implementation

There is a tight bond between organizational culture and business strategy. According to
F. David15 there are 5 phases in developing strategic management:

1. Defining the basic activities and designing strategic missions,

14
Žugaj, Miroslav, prof. dr. sc., Bojanić-Glavica, Benedikt, prof. dr. sc., Brčić, Ruža, Doc. Dr. sc.,
“Organizacijska kultura u funkciji uspješnosti poslovanja organizacije”, Ekonomski vjesnik br. 1 i 2 (17): 17-
30, 2004.
15
David, F. R.: Strategic Management Concepts and Cases, Pearson Education, Inc., publishing as Prentice
Hall, New Jearsey, 2011.

17
 2. Setting strategic and operational goals,

3. Formulating policies for achieving strategic and operational goals,

4. Implementation and execution of the strategy plan,

5. Evaluating results and reviewing the strategic plan and/or its implementation.

Defining the company's basic purpose, setting strategic goals and formulating policy for
their realization is considered basic and the most important entrepreneurial activity.

Management has to decide what to do in a certain period of time, what they want to
achieve and which resources will be used to achieve the goals. In regards to organization
it brings a whole series of questions that are important for choosing technology,
organizational forms and people. Defining the market, adjustment of organizational
structure, attitude toward competition, innovation and the environment, these are all
questions that are a part of a broad set of business strategy definition.

Regardless of all the possibilities of strategic development, stagnation or shutdown of a

company generated in the process of strategic management, after selecting one variation,
the process of its implementation begins.

Strategy can be divided in two phases16: strategic planning and implementation with
control.

There are five aspects of strategic implementation17:

1. Building an organization that is capable of realizing a strategic plan, which implies:

 Development of the organizational structure as a support to the strategy,

 Designing and nurturing skills that the strategy is based on, and
 Selection of people for key positions,

2. Allocation and resource allocation to strategic goals, including:

 Verification that each organizational part has an adequate budget and a program
for realization of its part of the strategic plan and

16
Megginson L. C., Mosley D.C., Pietri Jr. P.H.: Management, Concepts and Applications, Harper and Row,
New York, 1989.
17
David, F. R.: Strategic Management Concepts and Cases, Pearson Education, Inc., publishing as Prentice
Hall, New Jearsey, 2011.

18
  Insuring that individuals and organizational parts are in a position to contribute
jointly to the achievement of strategic goals and objectives,

3. Concretization of common efforts on selected strategic plan by means of:

 Motivation of individuals and organizational parts to contribute to the realization

of the strategy,
 Creating a creative climate and organizational culture that supports it strategy
 Promotion of performance-based direction and drive for achieving top
performance, and
 Establishing a tight link between the structure of rewards and strategies, or
achievement of goals and tasks

4. Establishment of internal control system for support, including:

 Translating policies and procedures that are in the function of achieving the
strategy,
 Generating timely and accurate information relevant for the strategy,
 Institutionalization of internal control that has the task of holding an organization
on a strategic course, and
 Establishing dependencies between strategies and different ways to do
something,

5. Execution of strategic management, and in particular:

 By conducting a value-creating process, molding culture, and leading the

strategy with energy,
 By making the organization innovative, flexible and adequate,
 By participating in the major battles for strategy realization, and
 By initiating corrective actions to improve the execution of the strategy.

Obviously, organizational culture appears as a significant factor in achieving the chosen

strategy in the company. Given that the business strategy represents the shaping of the
purpose and the global goals of the organization as well as the choice of ways to achieve
them, it can be concluded that the organizational culture must be in the function of
strategy realization, and that is the only way to achieve the desired results.

Each organization has a specific, original culture, but different organizations can choose
the same business strategy: growth, acquisition, stagnation or something else.

19
 The impact of culture on a business strategy will make the strategy easier to implement
and emphasize even more all the original features of each organization. Of course, even
small differences in behavior, leadership, motivation, communication or rewarding, can
make greater changes than achieving results and have an impact on the realization of
business strategy.

In organizational theory, it is not yet completely determined whether the organizational

strategy that has been selected determines organizational culture, or the strategy is
shaped under the influence of recognizable organizational culture. The practice points to
interdependence of organizational culture and strategy.

It is obvious that organizational culture should be in the function of choice, as well as of

implementation of the strategy of organizations. Organizational culture is at the same
time some kind of support to the chosen strategy of the organization.

If choice of a business strategy is a result of the management’s desire to achieve the best
results in business, then organizational shaping of the culture is the best support to these
efforts and surely cultivating the organizational culture makes sense only in the context
of achieving strategic goals.18

18
Scholz C.: Corporate culture and strategy, Long Range Planning, vol 20., No.4

20
 2.3. The impact of management on organizational
culture of business systems

Management of an organization establishes organizational culture and is responsible for its

maintenance. An important prerequisite for the organization's success, for satisfaction and
motivation of its members reflects in conformity of the characteristics and expectations of
these members with the organization's culture. Organizing converts plans into activities. In
order to achieve goals and the realization of plans, permanent activity is necessary in
management of human and material resources, division of labor, delegation of concrete tasks
and responsibilities of individuals and group. People are a key factor in achieving
organizational plans and goals. Complexity of the human factor is reflected in the complexity
of the relationship, process of influence, leadership and initiation, activities of members in
the organization, and securing the conditions for the motivation and organization of people
in the realization of organizational tasks and goals. It is therefore important to emphasize
that without motivation of people there are not successful organizations. Organizing is,
therefore, a process that successfully connects people and tasks, and coordinate individual
and group activities, in order to achieve the set goals.
We can say that the acquisition and selection of human potentials, concern for their
development and advancement, education and encouragement of their creativity is one of
the most significant strategic tasks of management. This stimulation primarily refers to the
system of progression, based on performance and commitment.

Management and its levels in each business system are viewed from the point of view of the
knowledge and abilities needed to perform them. Katz [11, 90-102] and Bahtijarević-Šiber,
[1, 234-235] emphasize three basic kinds of abilities, i.e. the skills necessary for successful
management that the manager must possess to ensure a successful business activity.19 They
are technical, social and conceptual (strategic) skills. Concept skill is used in terms of ability
to transform knowledge into action.
The technical skills of the manager include his specialized knowledge, analytical abilities
within his specialty, and abilities to use resources and techniques of specific discipline.
These skills, which the manager must possess, refer to knowledge of job as well as technical

19
Prof. dr. sc. Miroslav Žugaj, Prof. dr. sc. Benedikt Bojanić-Glavica, Doc. dr. sc. Ruža Brčić: Organizacijska
kultura u funkciji uspješnosti poslovanja organizacije, Ekonomski vjesnik br. 1 i 2 (17): 17-30, 2004.

21
and professional problems of the work the manager is dealing with. Technical skills are of
greatest importance at the lower levels of management.

Social skills are reflected in the ability of managers to successfully communicate, motivate,
successfully introduce individuals and groups, affect building relationships of collaboration
and teamwork, contribute to the atmosphere of support and security and influences on all the
elements that are relevant to the above processes.

Conceptual (strategic) skills include the ability of a manager to observe the organization
(company) as a whole, with high interdependence of many functions and activities, as well
as the influence of changing one part on other organizational parts. These skills also apply
in consideration of relationship between the organization and its business activities. The
significance of conceptual levels grows with organizational levels, and as such they are the
most critical success factor at top management positions.

Top management is the one that creates and influences organizational climate in an
organization. The values that they possess influence the organization's focus. The set of
values forms an ideology that is perceived daily when making business decisions.
Managers, who manage these values, serve as a model in many successful organizations.
They set up standards, various performances, motivate employees, and thus make the
organization unique and symbol. Organizational culture, that top managers create, can
completely change the ways of executing manager functions.
To conclude, the effectiveness of management greatly depends on the organizational culture
that affects the way managerial functions are performed, such as planning, organizing,
managing human resources, managing and controlling.

22
 2.4. Impact of organization culture on
organization effectiveness and success

Scientists Danison and Mishra in 1995 presented the results of their research related to the
influence of culture on organizational performance and efficiency, that were based on a
multiannual research of over 39 companies from 20 industrial sectors. They highlighted four
characteristics of culture that were related to success and efficiency of these organizations,
namely: employee involvement, consistency, adaptability and the mission of the
organization. These four features are linked to formation of organization in the process
dealing with the problem of external adaptation and internal integration.
Request for adaptation of external environment in modern business conditions are becoming
more important because of the change in the environment that determines the survival and
success of the organization. Often the demand for external adaptation and internal integration
leads to contradictions. Eg. market-oriented organizations often have problems with internal
integration and well integrated organizations have problems with strong control system that
are difficult to adapt. Equally, organizations with top-down vision management ("from top
to bottom ") often have difficulty focusing on abilities (empowerment), while those who
have a bottom-up vision, participation of lower levels, have difficulties with issuing
instructions, i.e. guiding. Effective organizations are the ones that are able to overcome these
contradictions.
Denison and Mishra concluded that each of the four features of culture shows a significant
positive relationship with a large number of objective and subjective standards of
organizational performance and efficiency. The following elements were measured:
 Return on total capital (property) - (Return on Assets - ROA),
 Return on invested (Retum on investment - ROI),
and less exact indicators such as:
- product development and quality,
- sales growth,
- market share, and
- employee satisfaction.
We can connect these performance metrics with the features explained in Table 1, depending
on whether the organization is stable or flexible, or an internally or externally oriented.

23
The research of the mentioned scientists points to following relationships:
 MISSION AND CONSISTENCY (constant organizations) reflects mostly on
financial indicators (profitability indicators) such as: return on assets (ROA), return
on investment (ROI) and return on sales ( ROS), i.e. in the case of a stable
organization these indicators have high value.
 INCLUSION (PARTICIPATION) OF EMPLOYEES AND ADAPTABILITY
(flexible organization). Features of flexible organization enable high levels of
production and service innovativeness (creativity) as well as the rapid response of
the organization to changing needs of customer and employees.
 CONSISTENCY AND INCLUSION OF EMPLOYEES (the internal direction of the
organization) strongly affect the quality, employee satisfaction and Return on
Investment (ROI), i.e. internal orientation of an organization is related to high levels
of product quality, good resource utilization and high the level of satisfaction of her
employees.
 ADAPTABILITY AND MISSION (externally orientation of the organization) the
main characteristics are constantly reflected in growing volume of sales and market
share.

Successful culture and effective organization must show all these four characteristics.
Therefore, a successful and efficient organization will likely have a culture that is flexible
and adaptable.
However, it is, to a large extent consistent and predictable. It will "nurture" the high degree
of participation of all members, i.e. in the context of a clear common understanding of the
organizational mission.20

20
M. Žugaj.B.Glavica, Ruža Brčić:Organizacijska kultura u funkciji uspješnosti poslovanja organizacije.
Ekonomski vjesnik br.1 i 2.(17): 17-30, 2004.

24
3. Leadership that creates value

The values that make up the culture of an organization are either a reflection of the
underlying beliefs of the current leaders—particularly the chief executive—or they are the
reflection of the heritage of past leaders.

Most organizations operate with “default” cultures. Because no one is measuring or paying
attention to the culture, the underlying values and beliefs of the leaders become “the way
things are done around here.”

When there is a lack of alignment between the values of the culture of the organization and
the personal values of employees, the result is low performance, which can further result in
low levels of staff engagement and poor quality of products and services. All of these factors
can have a significant impact on the financial performance of the organization or its ability
to deliver services of sustainable high quality.

On the other hand, when the values of the organization are in alignment with the aspirational
values of employees, the result is high performance. There is a high level of staff engagement
and a pursuit of excellence regarding the quality of products and services.

There are two other major benefits to values alignment. First, when values are aligned, the
culture of an organization is able to attract and retain talented individuals. This gives
organizations a significant commercial advantage, especially when talent is in short supply.
Second, values alignment builds a strong brand. Brand values and company values are two
sides of the same coin. The strongest external brands are always those with the strongest
internal cultures.

Ultimately, therefore, whether we are talking about high-performance, brand differentiation,

or retaining talented individuals, the success of an organization is directly related to the
degree of alignment that exists between the underlying values of the leaders and the
aspirational values of employees. Long‐term, sustainable success is highly dependent on the
culture that the leaders create.

25
Significantly, the culture that leaders create is highly dependent on the behaviors of the
leaders and their relationships to other leaders in the organization, and on their relationships
with their employees. Leaders whose energies are wrapped up in status-seeking, empire‐
building, and internal competition create toxic environments with little or no organizational
cohesion. Leaders who share the same vision and values, who work for the common good,
and focus on internal community building create internal cohesion and values alignment.

To put it another way, the organizational transformation begins with the personal
transformation of the leaders. Organizations don’t transform; people do! The key factor in
transforming a low‐performance culture into a high‐performance culture is leadership. This
is why organizations with strong, high‐ performing cultures tend to replace their leaders by
promoting from within, whereas low‐performing cultures tend to replace their leaders with
external candidates. By promoting from within, thriving cultures are able to retain their
successful leadership styles with the least perturbation. Struggling cultures, on the other
hand, absolutely need to change their leadership styles. That is why they typically hire from
outside the company, with the hope that the new leader will bring a new way of being that
translates into a more dynamic culture.

Bringing in an external leader is not the only way to transform organizational culture. More
and more companies are engaging in cultural transformation programs that involve a whole‐
system approach.

In order to grasp the process and benefits of a whole‐system approach21 to cultural

transformation, it is important to understand the differences between change, transformation
and evolution and how to measure the current and desired cultures of an organization,
thereby identifying the current and desired leadership styles. From a cultural alignment
perspective, it is necessary to have a clear understanding of where an organization is and
where it wants to go before embarking on a program of transformation.22

21
Richard Barrett, Building a Values-Driven Organization: A Whole-System Approach to Cultural
Transformation, Boston: ButterworthHeinemann, 2006.
22
Richard Barrett, Liberating the Corporate Soul: Building a Visionary Organization, Boston: Butterworth-
Heinemann, 1998; pp. 12-13.

26
 3.1. Leadership theory

Management and leadership are often used as synonyms, though there are significant
differences. Management involves the process of working with others and using others to
achieving organizational goals in changing the environment with effective and efficient use
of limited resources Therefore, in this context, the leadership is narrow term as from
management, that is, as part of management.

Leadership, as part of management, is primarily about people and social interactions, and
represents the process of influencing people as they have contributed to the goals of groups
and businesses. In that context leadership usually consists of four groups of activities:
employee motivation, leadership, interpersonal processes, groups and conflict, and
communication. In leadership, therefore, the emphasis is more on the ability to influence
others - it is in some sense the art of influencing people, which is why it is considered to be
the part of the leadership.

Leadership can be defined either as a process or as a trait. As a process, leadership is a use

of innocent influence on the formation of group and organizational goals, motivating
behavior towards achieving these goals and helping to define a culture or organization. As
traits, leadership is a set of characteristics that characterize one person as potential leader.23

Thus, leadership is one of the internally oriented management activities related to people and
social interactions. It is a significant, crucial aspect of the managerial job, but not the whole
job.

There are many definitions of leadership, some of which are24:

- The ability to work meaningfully with the subordinate to gain their respect and affected
their value systems.

- The ability of managers to influence subordinates to carry out specific tasks for a purpose
of achieving goals.

- A process of social influence in which the leader seeks willing participation by subordinates
for a purpose of achieving organizational goals.

23
Buble, M., ( 2006 ): Menadžment, Ekonomski fakukltet, Split, str. 473.
24
Ibid, str.475

27
- The art or process of influencing people so that they readily and enthusiastically aspire to
achieving group goals.

The following leadership characteristics can be derived from the following definitions25:

- Leadership is about social interactions and collaboration with people.

- An essential determinant of leadership is to influence the behavior of others.

- The influence of the leader is related to his personal characteristics or personality, not his
position.

- Leader power depends on followers, leadership is based on accepting influence from the
side those affected.

- For leadership, there is a fundamental understanding of people and their motivation. The
motivation is another key concept essentially related to leadership. It is often defined as one,
external, aspect of the motivational process.

- Basically leadership is the ability to inspire, create enthusiasm and volunteer people's
participation in the accomplishment of organizational tasks and goals.

The basic task of leadership is to find and maintain a balance between these variables, which
is what the leader can that has the appropriate abilities, motivation and power. In literature
leader is commonly defined as a person who influences other members of the group, that is,
a person who initiates in social situations, plans and organizes the action and thus acts to
provoke cooperation of others.

25
Sikavica, P. (1999): Organizacija, Školska knjiga, Zagreb.

28
 3.2. Contemporary approaches to leadership

The major changes that have taken place in the organizational structure of the company are
that managers often change their jobs. Some from the mid-tier become part of the lower tier
by gaining powers greater than the superintendent, and some squeezed out of large
companies find work in medium-sized enterprises. All these changes have led to new
leadership styles. Daft thinks it is quality leadership that inspires and motivates people to
perform above normal expectations, and differentiates the following new approaches to
leadership26:

1. Transactional leadership

2. Charismatic leadership

3. Transformational leadership

4. Interactive leadership

5. Service leadership.

Transactional leadership

A transactional leader is one who effectively organizes the work of subordinate staff, he
poses reasonable goals, and provides subordinates with all the help, advice they need to
accomplish set goals. The leader defines goals, determines how they must be achieved,
communicates with subordinates and rewards subordinates if they successfully achieve the
set goals.

A transactional leader defines the role and tasks of subordinates, gives appropriate rewards,
and attempts to meet the social needs of subordinates. The ability of a transactional leader
to subordinate make them satisfied leads to increased productivity. This type of leader is
tolerant and just.

26
Koontz, H., Weihrich, H., (2008): Management, New York (McGraw-Hill), str. 518.

29
Charismatic leadership

A charismatic leader has the ability to motivate subordinates to perform above normal
expectations. The effect of a charismatic leader stems from:

- Visions of the future of the company with which employees can identify

- Designing an enterprise value system that everyone will accept

- Trust in employees

A charismatic leader is distinguished from a non-charismatic leader by the following:

1. Self-confidence - Has complete confidence in his judgment and ability

2. Visionary - Has the ability to shape the vision to which they are utterly committed

3. Unconventional behavior - behaves in a way that is considered novelty, unconventionality

and opposition to norms.

4. Creating change - it is considered to be the initiator of radical change.

Transformational leadership

A transformational leader is one who is able to change the basic attitudes of a subordinate
staff to increase their commitment to the organization. Such leaders possess charisma, vision,
understanding, and empathy for workers and their needs. It is transformational leadership
the ability of the manager to create such conditions in the environment that will encourage
workers to exercise performance above normal expectations. A transformational leader has
similar traits as charismatic leadership but is different in his ability to innovate and changes.

Interactive leadership

The interactive leader is prone to consensus and participation. Considers that if employees
achieve goals, the company also achieves its own goals. Although this style of leadership is
considered characteristic of women because they are more prone to interactive behavior than
men, yet men also use it because of leadership qualities, which are related to men's leadership
style, aggressiveness and initiative.

30
Service leadership

It is based on the assumption that a job exists for employee development, just as much as it
an employee exists to do his or her job. The service leader operates on two levels:

- At the level of achievement of the goals and needs of their subordinates

- At the level of accomplishment of the purpose or mission of the organization

The aim of this leadership style is to increase motivation and help employees to accomplish
their goals by accomplishing the goals of company. Service leadership is especially used in
learning organizations because it drives its employee creativity, confidence and natural
impulses to learn.

3.3. Impact of leadership on culture

The founders of the organization have a major influence on establishing the initial culture of
the organization with their visions and missions of what the organization should be like. The
advantage of the founder is that at the beginning there are fewer employees in the
organization and the fact that there is no previous one so the culture of the organization does
not need to change. It is important to emphasize that although the founders have an idea,
many times they do not know how to achieve it, which means that the organizational culture
comes from the influence of the founders' preferences and certain assumptions made by the
first employees of organizations adopt based on their own experience. Whether or not the
elements are upgraded existing cultures or new cultures being created, the demands placed
on the organization will be starting point.

With the development, maintenance and nurturing of corporate culture, one of the most
important tasks of manager and leader is also the destruction of corporate culture if it is a
bad culture that needs change. Leaders create culture, and managers are the ones who live in
it and who must develop the specific and unique culture by which the organization will be
recognized and stand out among numerous competitors. In order for this to be possible,
leadership has to create an organizational culture that is difficult to imitate and copy because

31
competition constantly strives to copy models and the culture symbols of successful
organizations.

According to many, organizational culture is influenced by different internal and external

factors. According to Žugaj27 personalities, traditions, rituals/symbols, manner, intensity of
management communication, existing organizational system and entrepreneurial a strategy
that includes goals and a strategy are internal factors.

External factors are changes, economic, technological and environmental conditions and
social, legal, political and cultural conditions. If it is a market oriented organization,
according to some points of view, at organizational culture is influenced solely by external
factors. In many cases the relationship strategies and organizational culture are intertwined
to such an extent that it is not possible to determine what is preceded. Therefore, it can be
concluded that organizational culture and strategy are influenced by one on the other, and
shape and change them under constant interplay.

It often happens in practice that organizational culture and its values are imposed and
incomprehensible, and so unworkable. Such organizational values mean nothing, if they are
not understandable to everyone and if not accepted and implemented by everyone in their
daily behavior. Therefore it is imperative that employees themselves participate in the
implementation of organizational culture28.

Before starting to shape the organizational culture, the fundamentals need to be established
assumptions on which the organization rests, which means that the core business needs to be
defined, determine market conditions, determine the relationship of companies to business
partners and the public, determine the attitude towards employees, criteria for their selection
and promotion, and define the attitude according to the organization and its organization.
After defining the above assumptions, it starts with shaping the organizational culture by
identifying the main elements - values, climate and management style.

27
Žugaj, M. et al.: Organizacijska kultura, TIVA tiskara, Fakultet organizacije i informatike, Varaždin, 2004.
str. 17
28
Blažinić, B.: The Model of Systematic Development of Human Resources (ISA), Learning for
Entrepreneurship, 1 (1), p. 107- 116, 2011, p. 111-112.31

32
Values are employees' attitude towards the principal products, quality, innovation,
productivity gains and interpersonal relationships.

The climate applies to all types of communication in the organization as well as to all types
of interconnections relationships between individuals and groups in the organization, while
management style comes in the range of democratic to autocratic.

Today, business organization is gaining importance with its organizational structure and
organizational culture. Enterprise culture has a growing role to play in business, so it must
be devoted to it proper attention. With the organizational structure, organizational culture is
becoming today the most important component of an organization's effectiveness. This is
especially true for those companies that have a distinctive culture, not only in the immediate
vicinity but also in the wider environment.

Therefore, the task of the management of the company is to create such a strong culture that
is difficult to imitate.

Top management tasks and goals:

 Development of organizational culture

 Maintaining organizational culture
 Nurturing organizational culture

They need to develop their own specific, unique culture that will associate the customer with
that specific company. This is not always easy, especially because of competing companies,
who in one way or another try to copy successful models as well as the culture symbols of
others.

To develop a unique culture, which is the goal of the management of each organization,
Gross and Shichman invent so-called HOME model whose name is derived from the first
letters of English words29:

• History - develops a sense of tradition and history through a comprehensive description of

history and talk about role models and others

29
Sikavica, P.: Organizacija, Školska knjiga, Zagreb, 2011., str. 757.

33
• Oneness - developing a sense of uniqueness through the role of leadership and developing
a communication system

• Membership - develop a sense of membership through different rewarding systems

• Exchange - develops a sense of change in members, which is achieved through contacts

among members, participation in decision-making, employee change, and intergroup
coordination

3.4. Competing Values Framework

If we want our organization to become competitive on the global stage, we need to have the
appropriate organizational culture to be able to execute the proper strategies.

The Competing Values Framework (CVF) is a practical tool on organizational culture, and
helps plot a course for the organizational culture change that is a necessary part of any
strategic initiatives that involves better performance of the company.

The CVF evolved out of research to determine the key factors of organizational
effectiveness. This research initially yielded a comprehensive list of 39 possible indicators
to measure effectiveness. Quinn and Rohrbaugh (1983), through factor analysis, condensed
this list into a more economic set of two major dimensions, which defined four major
quadrants representing opposite and competing assumptions. The first dimension ranges
from flexibility and discretion on one end, to stability and control on the other. The second
dimension measures the degree to which the organization emphasizes internal focus and
integration or external focus and differentiation (Cameron & Quinn, 2006). The four major
quadrants defined by these two axes were originally labeled the Human Relations Model,
the Open System Model, the Internal Process Model, and the Rational Goal Model (Quinn
& Rohrbaugh). These respective quadrants have alternatively been labeled as the group,
developmental, hierarchical, and rational cultures (Denison & Spreitzer, 1991); collaborate,
create, control, and compete (Cameron, Quinn, DeGraff, & Thakor, 2006); and also clan,
adhocracy, hierarchy, and market cultures (Cameron & Quinn).

34
Source:https://www.ocai-online.com/about-the-Organizational-Culture-Assessment-Instrument-
OCAI/Competing-Values-Framework

The clan culture is like an extended family. This type of organization emphasizes
teamwork, employee involvement, empowerment, cohesion, participation, corporate
commitment to employees, and self-managed work teams. It is held together by loyalty and
tradition. In this context, leaders are thought of as mentors or parent figures. Their main
responsibilities are to empower employees, and facilitate their participation, commitment,
and loyalty (Cameron & Quinn, 2006).

The adhocracy culture is a dynamic, entrepreneurial, and creative organization. This

organization thrives in an uncertain, ambiguous, and turbulent environment. The common
values are innovation, flexibility, adaptability, risk taking, experimentation, and taking
initiative. Leaders are also expected to be visionary, innovative, and risk oriented (Cameron
& Quinn, 2006).

The hierarchy culture is a formalized and structured bureaucracy. This culture values
efficiency, reliability, predictability, and standardization. Fast and smooth operations are
maintained by strict adherence to the numerous rules, policies, and procedures. The
employees throughout the multiple hierarchical levels have almost no discretion. Leaders in
this organization are expected to be good organizers and coordinators, and minimize costs.

The market culture is fiercely competitive and goal oriented. They focus on productivity,
profitability, market share and penetration, and winning. Leaders in this culture are expected
to be hard driving, tough, and demanding competitors (Cameron & Quinn, 2006).

35
One culture is not necessarily better than the others. The proper culture for each organization
depends on the organization’s industry and strategy. For example, Gregory, Harris,
Armenakis, and Shook (2009) found a positive relationship between clan cultures and patient
satisfaction in healthcare facilities. Some early research also indicated that in a university
setting, clan cultures scored higher on student educational satisfaction, student personal
development, faculty and administrator employment satisfaction, and organizational health
(Cameron & Freeman, 1991). However, a different study found that organizational
effectiveness in institutions of higher education was highest in organizations that emphasized
both the adhocracy and hierarchy cultures (Cameron, 1986).

A tool known as the Organizational Culture Assessment Instrument (or OCAI) is used to
determine the organization’s dominant culture. The OCAI contains 6 to 24 items, each with
four alternatives. The respondents rank each of the four alternatives using an ipsative rating
scale, that is, they divide 100 points among the four alternatives.

36
3.5. How leadership uses organizational culture and CVF for
creating value and effectiveness

3.5.1. Meaning of value creation

Creating value is ultimate objective of leadership and desire outcome of effective

organizations. Picture 1.

Effective Value creation

Leadership organizational (financial and
performance human capital)

Picture 1. Source: Kim. Cameron, R. Quinn,J. Degraff, AA. Thakor: Competing Values Leadership,
New Horiznos in management, 2014.

The major reason that people are employed is because the benefits they produce for their
organization exceed the cost to the organizations of producing those benefits. They create
value when they increase the flow of benefits being produced for organizations or when they
reduce the amount of resources being consumed to produce those benefits. Producing more
benefit than cost makes them value creators. This value may take the form of products and
services, meaningfulness in work, expanded opportunities, personal energy, positive
example, interpersonal support, innovative ideas and so on.

Similarly, organizations create value when the products and service they produce provide
greater benefits to customers then the cost of producing those products and services. When
organizational achieve the goals expected by the shareholders, sponsors, customers and other
stakeholders and the cost to those groups is less than the benefits received, value has been
created by organization. Companies that consistently outperforms others are also those with
the most value creating members.

So, creating value is the primary motivation that drives both individuals and organizations.
At a personal level having a positive impact and making contribution in an area of personal
significance is one of the most basic needs. Creating value is the way people achieve self
fulfilment and realize their potential. All organizations, exist to create value, whether they

37
are corporations, churches, schools or government agencies. Employees’ families,
customers, stake holders, all receive value from organizations, otherwise there is little reason
for them to survive. Of course what represents value for one organization may not represent
value for another. The extent to which value is created is the chief predictor of organizational
success. The more value created, the more valuable the organization and more the
organization is likely to succeed over the long run.

Moreover, rapid, dynamic and dramatic change in the modern environment makes creating
value ambiguous process. The rules of value creation have changed over the years.
Efficiency and predictability were keys to financial success in the decades after WWII
whereas innovation and entrepreneurship have become more central value drivers in twenty-
first century. Traditional measurements of value creation as captured by many corporate
balance sheets, work less well in today’s economy then they did in the past. Instead of being
accurately assessed by traditional financial ratios, value creation is often represented by hard
to measure soft factors such as knowledge assets, innovation, and human capital. Tools for
measuring value have typically been developed in isolation from one another, despite their
interconnections. For example, value creation approaches like strategy formulation,
organizational redesign, leadership development, HR training, culture change initiatives and
improved resource allocation process have not been encapsulated in a congruent whole.
Approaches to measuring value typically have involved financial metrics such as EVA, ROA
or ROI, but no systematic integration has emerged among these various measures.30

In contrast, The Competing Value framework advocates an integrated and comprehensive

approach to value creation that uncovers many alternatives to traditional financial measures
of value.

From a list of thirty-nine indicators of effectiveness for organizations, Cameron and Quinn
found two polarities by statistical analysis that make the difference when it comes to
organizational effectiveness. Organizations have to choose whether they have:

Internal focus and integration - or - External focus and differentiation

Stability and control - or - Flexibility and discretion

30
Kim. Cameron, R. Quinn,J. Degraff, AA. Thakor: Competing Values Leadership, New Horiznos in
management, 2014.

38
3.5.2. Organizational leadership

Authors Cameron, Quinn, Degraff and Thakor have made a research31 that has discovered
that most organizations develop a dominant cultural style.

More than 80 percent of the several thousand organizations they have studied have been
characterized by one or more of the culture types identified by the framework. Those that do
not have a dominant culture type either tend to be unclear about their culture or emphasize
the four different cultural types nearly equally. When an organization is dominated by the
hierarchy culture, they have found that the most effective managers—those rated as most
successful by their subordinates, peers, and superiors and those who tend to move up quickly
in the organization—demonstrate a matching leadership capability. That is, they are good at
organizing, controlling, monitoring, administering, coordinating, and maintaining
efficiency. When an organization is dominated by the market culture, the managers rated as
most effective tend to be hard-driving, whip-cracking, commanding competitors. They are
good at directing, producing results, negotiating, and motivating others. When the
organization is dominated by the clan culture, the most effective leaders are parent figures,
team builders, facilitators, nurturers, mentors, and supporters. Effective leaders in
organizations dominated by the adhocracy culture tend to be entrepreneurial, visionary,
innovative, creative, risk oriented, and focused on the future.

In other words, their research has confirmed a congruence hypothesis between culture and
competencies. When the leadership strengths of an individual are congruent with the
dominant organizational culture, those leaders tend to be more successful, as are the units
they manage.

Congruence predicts success. Of course, the dominant competencies in the diagonal

quadrants are opposite from each other, so that adhocracy leaders are rule breakers whereas
hierarchy leaders are rule enforcers. Clan leaders are warm and supportive, whereas market
leaders are tough and demanding. This has led them to confirm another hypothesis—a
paradox hypothesis. That is, they have also discovered that the highest-performing leaders—
those rated by their peers, superiors, and subordinates as the most highly effective—have

31
Kim. Cameron, R. Quinn,J. Degraff, AA. Thakor: Competing Values Leadership, New Horiznos in
management, 2014.

39
developed capabilities and skills that allow them to succeed in each of the four quadrants
(Denison, Hooijberg, and Quinn, 1995). That is, they are self-contradictory, behaviorally
complex leaders in the sense that they can be simultaneously hard and soft, entrepreneurial
and controlled (Lawrence, Quinn, and Lenk, 2009). In other words, they discovered the
presence of paradox in their research, so that managerial effectiveness is inherently tied to
paradoxical attributes, just as organizational effectiveness is (Cameron, 1984, 1986; Quinn
and Cameron, 1988). Effective managers and effective organizations are paradoxical. In
addition to the roles of leaders, the skills possessed by those involved in the culture change
process also have an important relationship to personal and organizational effectiveness.

3.5.3. Organizational Effectiveness

The criteria of effectiveness most highly valued in a hierarchy culture are efficiency,
timeliness, smooth functioning, and predictability.

The dominant operational theory that drives organizational success is that control fosters
efficiency (elimination of waste and redundancy) and therefore effectiveness. Hierarchy
organizations, for example, are judged to be effective only if they achieve these dominant
characteristics. The criteria of effectiveness most highly valued in a market culture are
achieving goals, outpacing the competition, increasing market share, and acquiring premium
levels of financial return. The dominant operational theory that drives organizational success
is that competition creates an impetus for higher levels of productivity and therefore higher
levels of effectiveness. Anything short of increasing market share, increasing revenues, and
improving visibility is seen as failure.

In a clan culture, the criteria of effectiveness most highly valued are cohesion, high levels of
employee morale and satisfaction, human resource development, and teamwork. The
operational theory that dominates this culture type is that employee involvement and
participation foster empowerment and commitment. Committed, satisfied employees
produce effectiveness.

Finally, the adhocracy culture most highly values new products, creative solutions to
problems, cutting-edge ideas, and growth in new markets as the dominant effectiveness
criteria. The underlying operational theory is that innovation and new ideas create new

40
markets, new customers, and new opportunities. These outcomes comprise the basic
indicators of effective performance. 32

32
Kim. Cameron, R. Quinn,J. Degraff, AA. Thakor: Competing Values Leadership, New Horiznos in
management, 2014.

41
4. ORGANIZATIONAL CHANGE

4.1. Defining change

Change is a natural inclination inherent in all things and states. Every organization's life is
marked by changes and they are even a way of life for the organization. According to Daft,
organizational change involves accepting new ideas or behavior of an organization.33

More than ever, organizations are characterized by a process of change and change has
become a permanent state of all organizations. Many organizations have pursued the same
goals in the past as they do today, but the environment in which they operate has changed
significantly. Changes in the environment lead to changes or additions to the ways of
managing the enterprise in order to harmonize with the environment. Changes in
organizations have occurred before, but their number and type have greatly increased.
According to some, the basis of competitive advantage of an organization, its ability to
accept change is no longer a resource such as a plant or financial resources.34

"Every organization must integrate strategic and active environmental monitoring and
change management into its day-to-day operations to build a sustainable competitive
capability and long-term growth and survival”35. The organization's response to
environmental change, Sikavica sees in the flexibility of the organization, that is, its ability
to change. It lists three types of flexibility36:

- functional flexibility (transferring employees from one job to a co-operative),

- numerical flexibility (successful job performance and with fewer employees), and
- financial flexibility (ability to adjust operating costs to market conditions).

33
Žugaj, M., Šehanović, J., Cingula, M.: Organizacija, Fakultet organizacije i informatike, Varaždin, 1999.,
str.210-211.
34
Aleksić, A.: Uloga upravljanja organizacijskim promjenama u izgradnji održive konkurentske sposobnosti
poduzeća, Zborni Ekonomskog fakulteta u Zagrebu, 7 (2), str. 37-47., 2009., str. 37.
35
Ibid, str.38
36
Sikavica, P.: Organizacija, Školska knjiga, Zagreb, 2011., str. 670.

42
Organizational changes can be planned (intended) or those that occur as a result of the
actions of external forces, without direct intent, or even against the intentions of managers.
The goals of the planned changes are mainly to adapt the organization to changes in the
environment and to change the behavior of the employees. Change has become a part of the
manager's daily life, and the ability to manage change is the most important function of
management. Modern managers, as agents of change, they must have the skill of teaching
employees how to accept change and more easily master the transition from old to new. They
must also teach employees openness to change at all levels in the organization as well as
accepting transformations from one state to another.37

Organizational efficiency requires that organizations recognize the need for different types
of change and take steps to manage them properly. Organizations that are able to respond in
a timely manner to the constant new demands from the environment, in order to create and
maintain their competitive advantage and achieve longevity, grow and survive on the market
in the long run, while other organizations fail and disappear.

Identifying the need for organizational change is the most critical moment in managing
organizational change. When the indicators of change, which are more or less obscured,
become visible, it is often too late to start implementing changes in the organization.

According to Burke, the most common indicators that indicate the need to fulfill
organizational needs are a dramatic decline in sales, faster growth in cost of earnings, lagging
behind the industry, decline in employee morale, lack of market strategy, etc. The crisis of
the organization culture, which is one of the belated indicators of change, but in a certain
way also a new opportunity, because it inspires and motivates employees and leaves them
asleep and can be a messenger of new the future of the organization.38

37
Dujanić, M.: Upravljanje promjenama u poduzeću, Zbornik radova Ekonomskog fakulteta u Rijeci: časopis
za ekonomsku teoriju i praksu, 22 (1), str. 39-51., 2004., str. 39.
38
Ibid, str. 671

43
After recognizing the need for change, managers need to take a good look at a number of
elements that affect the success of implementing organizational change before deciding on
changing the culture, because any change in the organization carries both the risk and the
risk of additional costs. Thus, some changes can create higher costs than performance, while
others, while cost-effective and desirable, can be impracticable at the moment and should be
discarded. Changes can often have catastrophic consequences for an organization simply
because the wrong moment is chosen to implement them.

The managers that are trying to make any proposal for organizational change to a greater or
lesser extent will be met with suspicion, anger, resistance and even sabotage. Employees
will try to block the implementation of organizational change due to various interests. In that
case, managers can give up or challenge the environment and not be afraid to acquire
enemies among colleagues, in order to achieve the established goals of the organization,
which is the only acceptable option.39

39
Sikavica, P.: Organizacija, Školska knjiga, Zagreb, 2011., str. 677

44
4.2. Development of organizational culture

In order to further understand the notion of organizational culture, it is necessary to look at

its concept its occurrence and changes that occur with it over time. Formation and
development of Organizational culture is usually viewed through three phases:

1. Birth and early development

2. Middle ages

3. Maturity (Žugaj et al., 2004, p.54).

The birth and early development phase refers to the emergence of organizational culture and
to the former years during which a new organization is created and shaped. This phase is
about quite small enterprises with small number of employees. All employees strive to create
strong culture in a company. Employees have a common sense of commitment and
commitment vision. The success of an organization is measured by the results and means for
making results are everything.

The second phase, i.e. the middle-age phase, was marked by the rapid expansion of
enterprises and by creating new subcultures. This phase can be very critical for further
progress of organizations. Specifically, by expanding the organization, new people are
recruited whose views, beliefs and ideas do not have to resonate with a culture that has been
dominant so far. It is essential that the key values of the culture are not disturbed at the stage.
A quality manager is crucial for early detection and adequate response in such crisis
situations.

It is necessary to combine diversity and introduce order in order to shape a dominant culture
which will be accepted by all employees.

The third stage, i.e. the stage of maturity, is characterized by an organization with a strong
dominant culture. All crises have been overcome and employees are satisfied and do not
want change. Challenge in this phase represents change and innovation which impair
satisfaction with employees and bring discomfort to the organizational culture, especially if
they are not in line with the culture. Managers in these situations choose the path that the
company will take, they redefine the current dominant culture or they embrace innovation.

45
4.3. Changing organizational culture

The need to change organizational culture is inevitable because modern organization is

characterized by constant changes, but this should not call into question the fundamental
characteristics and symbols that have created a positive reputation for a company.

In order to change the organizational culture of an enterprise at all, we need to know that
culture very well to find out what does not meet the criteria and what we should change.

Assumptions for changing organizational culture:

1. Identify the need for change

2. Find appropriate methods for change

3. Implement a new culture

Organizational culture should be changed if:

 The company has strong values that no longer fit into the changing environment.
 The industry to which the company belongs is very competitive and rapidly
developing.
 The company is among the weaker and worse in its industry
 The company intends to join a chain of very large and successful companies
 The company is one of the smaller but grow very fast

If these questions are answered in the affirmative, the organizational culture of the company
would have to change.

Since organizational culture originates from people and is related to people who work for
the company, especially managers, it implies that the change in organizational culture is also
related to changes in people, which can be done in two ways:

1. Replacing some, or all, of your key players with new people

2. Changing the mindset of these key players

Both of these ways have their pros and cons. New people are not burdened by the mortgage
of the old and can very successfully create and develop new patterns of culture, which is a
significant advantage of them. The downside is that they are new and do not know the

46
company. On the other hand, changing the mindset of existing managerial staff requires them
to change themselves, which is not always easy. Contrary to this difficulty, their advantage
is that they know the company in all its dimensions.

In some cases, both options will be combined, i.e. some of the management will be replaced
with new people and some will stay the same.

4.4. Measuring and changing organizational culture

The prerequisite for changing the organizational culture is the measurement, i.e. the
existence of a system for comparing the current situation with the future. Different features
and effects of organizational culture are measured. Measuring culture depends on the
profession of the person doing the measurement and why participate in the measurement
process. Thus, Alvesson distinguishes three types of researchers40:

 Open minded - observes and attempts to see what the situation is and notes
everything
 Consultant - attempts to give advice on how to change the current situation in the
organization
 An academically educated researcher who provides explanations - attempts to
explain what lies behind of all that.

Specifically, everything needs to be examined for an accurate picture of organizational

culture, and even then there is the danger of collecting personal statements about the
organizational climate that will present itself as an organizational culture. James also states
that members need to be massively examined and consulted. Then a common opinion on
each element of the organizational culture under study should be reached through discussion.
Shein41 suggests interviewing and observing members of the organization, after which
assumptions should be drawn together with the members of the organization.

After determining how organizational culture is measured, as well as the problems that may
arise when performing measurements, changes can be made. Changes can be proactive or

40
60 Žugaj, M. et al .: Organizational Culture, TIVA Printing House, Faculty of Organization and Informatics,
Varaždin, 2004, p. 32.35
41
Edgar H. Schein: Organizational Culture and Leadership, Wiley, 2017.p. 365

47
reactive. Proactive changes are changes created by an initiative of an organization as a result
of its assessment of the future state of the environment and the situation in the organization,
while reactive changes arise as a response of the organization to changes in the environment
and a situation that has already occurred. The change can be seen as a one-time event, with
the exception of the usual way of running an organization, that is, something that needs to
be addressed individually as needed, or as a continuous process that is part of daily
organizational activities42.

Organizational culture is linked to the life cycle of an organization. It needs a change in order
for the organization to survive in the market, regardless of tradition and the characteristics
and symbols it has developed throughout history and which have contributed to the positive
image of the organization.

Every organization is a living organism that is influenced by many factors and which
encourages change in the organization, and so does the organizational culture. These factors
can be external, such as social, political, cultural, technological or economic, and internal,
such as changes in organization, strategy, policy, goals, technology, and interpersonal
relationships.43

It should be emphasized that a change in management is the most common reason for a
change in organizational culture because management is the bearer of the development,
maintenance and change of culture in an organization.

Changing the organizational culture is not a painless process and it is important to be familiar
with the existing organizational culture before joining the changes in order to know exactly
what needs to be changed.

42
Burnes, B.: Managing Change - A Strategic Approach to Organizational Dynamics, Pearson Education
Limited, Harlow, 2014, p. 467.36
43
Flamholtz, E., Randle, Y.: Leading Strategic Change: Bridging Theory and Practice, Cambridge University
Press, New York, 2018, p. 9-10.

48
For the organization, the worst option is to ignore environmental changes or internal
changes, and not implement changes in response to a new situation. The situations in which
organizational culture may change, or may even be necessary, according to Kennedy, are:

 when strictly defined enterprise values no longer fit into a dynamic environment
 when the business of the company is developing rapidly and is very dynamic
 when the company is about average or even lower
 when a business becomes one of the largest
 when the enterprise is small but developing at a high speed.

After determining the need to change the organizational culture, the method by which the
change will be implemented should be determined.

4.5. The Organizational Culture Assessment Instrument

(OCAI)

The OCAI is based on a theoretical model known as the Competing Values Framework.
This framework is extremely useful in organizing and interpreting a wide variety of
organizational phenomena. The Competing Value Framework makes possible for leaders
to diagnose and implement an actual cultural change initiative in their organizations.

OCAI is used to diagnose and measure organization’s culture. The instrument is in the
form of a questionnaire that requires individuals to respond to just six cultural aspects.
In OCAI assessment a participant divides 100 points over a number of descriptions that
correspond to the four organizational culture types, according to their experience of the
present organization. By answering the questionnaire a second time, this time dividing the
100 points according to what the respondent would prefer for the future, the preferred
organizational culture and the desire for change can be measured. This method assesses the
mix of the four culture types that dominate the current organizational or team culture.

49
Its intent is to help identify the organization’s current culture. The same instrument helps
identify the culture that organization members think should be developed to match the future
demands of the environment and the opportunities to be faced by the company.44

The six culture aspects that are assessed in the OCAI survey, are: dominant characteristics,
organizational leadership, management of employees, organization glue, strategic emphases,
criteria of success.

By averaging all individual OCAI scores, we then calculate a collective organization profile.

4.6. Key steps for organizational change

We have pointed out that almost all organizations develop a dominant type of organizational
culture. They tend to emphasize one or more of four culture types—adhocracy, clan,
hierarchy, or market culture. Particular types of cultures form as a result of certain values,
assumptions, and priorities becoming dominant as the organization addresses challenges and
adjusts to changes. These dominant cultures help the organization become more consistent
and stable as well as more adaptable and flexible in dealing with its rapidly changing
environment. Whereas these culture types tend to evolve in predictable ways over time,
organizations face the need to change cultures in connection with many other forms of
organizational change. Without a change in culture, most change initiatives, such as TQM,
downsizing, reengineering, and teamwork, growth or major change of business model will
be hard to accomplish.

There is process and methodology for effectively managing a change in organizational

culture, and instruments have been provided to help assess the current organizational
culture, the future preferred organizational culture, and the managerial competencies
needed to facilitate the change initiative.

44
Kim S.Camerun, Robert E. Quinn: Diagnosing and changing organizational culture, Wiley, 2007., p.23

50
This list of steps is intended to serve as a checklist or a set of reminders, not as a
comprehensive description of the process. To implement a culture change process this key
steps can help managers to facilitate cultural change:

Diagnosis

1. Complete the Organizational Culture Assessment Instrument (OCAI). Rate the way the
organization is right now. Select as the focus of ratings the organization that is the target of
the culture change effort.

2. Other members of the team should also complete the OCAI by themselves.

3. Each team member should compute an organizational culture profile for the currently
existing culture.

4. Hold a discussion as a team regarding the culture that characterizes the organization right
now. Reach consensus regarding each person’s organizational culture profile. Do not just
average numbers.

5. Complete the OCAI again, this time rating the way the organization should be in the
future.

6. Other members of the team should also complete the OCAI again, rating the preferred or
future culture.

7. Each team member should compute an organizational culture profile for the preferred
culture.

8. Hold a discussion as a team regarding the culture that should characterize the organization
in the future. Reach consensus. Do not just average numbers. Make certain that all
individuals’ perspectives are heard regarding where and how the organization needs to
change.

9. Compare the profiles of the “Now” and “Preferred” cultures. Identify the gaps that help
identify the changes in culture that need to be initiated.

51
Interpretation

10. Plot each question on the OCAI. Draw conclusions about the organization’s culture type,
the congruency of the culture, the strength of culture, and the comparisons between the
culture and some norm groups. These comparisons will also help identify the culture changes
that may be required.

11. Identify what culture changes need to occur. Identify which quadrants will increase in
emphasis and which will decrease in emphasis.

12. Identify what it means and what it does not mean to initiate the changes in culture being
suggested.

13. Identify two or three incidents or events that illustrate the key values that you want to
permeate the future organizational culture. Recount these incidents or events in story form
so that they illustrate the core values needed in the preferred culture. These stories should
capture the essence of the future culture.

14. Reach consensus on which actions should be started, which should be stopped, and which
should be continued in order for the culture change process to begin.

Implementation

15. Rely on the ten principles of organizational change when designing specific change
initiatives.

16. Identify a few key steps that can be implemented right away. Select the strategies that
will begin the process of culture change and create visible results. Specify timetables,
benchmarks, and accountability targets.

17. Design a communication strategy that opens two-way communication channels and
keeps everyone informed of changes. This strategy will involve identifying how, when,
where, and who will communicate the new cultural values. Plan on continuous and
comprehensive communication.

18. Identify the various aspects of the organization that must be changed in order to reinforce
the preferred culture change.

Consider especially the “seven S’s”: structure, symbols, systems, staff, strategy, style of
leaders, and skills of managers.

52
Personalize the culture change. Identify the behaviors and competencies that each team
member will need to develop or improve to reflect the new culture.

Changing an organization’s culture is a very difficult endeavor, of course. It requires a great

deal of commitment and dedication on the part of the management team to make it work.
This sort of commitment and dedication is needed mainly when a mismatch exists between
the organization’s own performance and the requirements of customers, the environment, or
standards of excellence. It also is required when the organization’s leaders hold a vision of
the future that requires a shift in the organization’s direction. Under such circumstances,
commitment to a culture change process is crucial to the future success of the organization.

The real work in culture change, and the most difficult part lies in the actual implementation
and follow-up45.

45
Kim S. Camerun, Robert E. Quinn: Diagnosing and changing organizational culture, Wiley, 2007., p.139

53
4.7. Using the competing value framework to diagnose
and change organizational culture

The usefulness of this framework is that it serves as a way to diagnose and initiate change in
the underlying organizational culture that organizations develop as they progress through
their life cycles and as they cope with the pressures of their external environments. Each
organizational culture profile reflects underlying attributes, including the management style,
strategic plans, climate, reward system, means of bonding, leadership, and basic values of
the organization.

Changing the culture, then, requires that these various elements of culture be identified and
altered. This identification and alternative generation task is a key challenge faced by
individuals interested in initiating culture change.

Because the culture of most organizations is invisible and taken for granted, most
organization members have a difficult time identifying or describing it, let alone consciously
changing it. This is where the OCAI can be especially useful. The instrument helps uncover,
or bring to the surface, aspects of the organization’s culture that might otherwise not be
identifiable or articulated by organization members.

The OCAI allows a manager or a change agent to identify key characteristics of company
culture. It focuses on six elements that reflect what culture is and how to approach
organizational challenges. This instrument allows to measure where organization is and
where it want to be.46

46
Kim S. Camerun, Robert E. Quinn, J. Degraff, Anjan V. Thakor: Competing Values Leadership, Edward
Elgar, 2014., p.120

54
5. Diagnose and change the culture of organization
Maras d.o.o. in retail industry and identification
of key cultural dimensions that add value and
effectiveness.

5.1. Company description

Company Maras d.o.o. was established in 1994. Since then it has been exclusive distributor
for many different brands in luggage category including Samsonite, Tommy Hilfiger, Tumi,
American Tourister etc.

Maras is the biggest family owned retail luggage company with over 15 stores in Croatia
(Zagreb, Split, Rijeka, Zadar, Split) in all major cities and shopping malls, with developed
wholesale network and online shop.

The HQ of company is in Zagreb with total of 70 employees. Organizational structure of the

company is designed to have 10 employees that work in administration which includes
management board, marketing, purchase, finance, and e-commerce department. 60 of them
are working in the stores as sales managers or sales staff.

Company principles and mission is to have positive financial results, professionalism, stabile
growth and great service for customers.

Thanks to trust and respect the company earned over the years from its partners, since 2016
it became an exclusive distributor for Samsonite in Serbia and Bosnia and Hercegovina.

In Serbia the company has opened 5 flagship stores in Belgrade with plans to open 2 more
stores. In Belgrade HQ there are 3 people in management and 25 sales staff employees in all
stores. In Bosnia there are 2 opened stores, and several wholesale partners. The online shop
is currently in development for both countries.

Over the years the company has had stabile but small profit, so the growth was needed to
make further investments for expansion.

55
 5.2. Objective and purpose

Company Maras d.o.o. is at a stage where the company has been operating at slow but stabile
pace for many years. Today the market is changing and there are many different challenges.
There are new sales channels, customers are changing, and the company needs growth and
development to respond to new market conditions, rebuild sales points and expand its
business beyond the borders of the Republic of Croatia.

In order to build good foundations for future business the company needs to significantly
improve business processes, organizational structure, marketing investments, invest in
digital transformation, and introduce managerial tools to create efficiency in the company
and thus increase value and effectiveness. All of the above leads to the need for a thorough
reorganization and cultural change.

The purpose of the paper is to analyze and diagnose the existing organizational culture and
on the basis of research, find a link between the current and desirable organizational culture
to make a cultural change and create new value and growth using Competing Value
Framework.

The results obtained could significantly facilitate the right decision making when changing
organizational culture in order to successfully reorganize and create a new space for
organizational growth.

It also wants to highlight the significant role of organizational culture and the need to foster
and develop it as an important competitive advantage for businesses. The results of the
research can serve as a starting point for the creation of strategies for improving the
management practice and business of the company, and the findings could be applied to
other similar companies in the retail industry.

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 5.3. Method of research

The theoretical part of the final paper presents insights related to the key objects of research:
creating and changing the culture to create value and effectiveness. That part of the paper is
grounded on works published in scientific and professional journals, books, proceedings and
other available literature on internet.

In the empirical part of the paper, methodological procedures are:

 Organizational culture assessment instrument (OCAI) is in the form of a

questionnaire that requires individuals to respond to six cultural aspects. In OCAI
assessment a participant divides 100 points over a number of descriptions that
correspond to the four organizational culture types, according to their experience of
the present organization. It is based on the theoretical model known as the Competing
Value Framework.
 Different methods of tabular and graphical presentation of the obtained results.

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 5.4. Results

The results were aggregated from 23 individual responses by Maras d.o.o. employees who
were participating in OCAI questionnaires. See table 1.

The average responses on this six items in the questionnaire helped highlight aspects of
Maras d.o.o. organization’s culture and identify its general culture type according to CVF
model. The average score for each alternative—A, B, C, and D—for the “Now” and the
“Preferred” Columns, for Maras company based on 23 participants looks like this:

Picture 3.

The Clan Culture The Adhocracy Culture

An organization that focuses on An organization that focuses on
internal maintenance with flexibility, external positioning with a high degree
concern for people, and sensitivity to of flexibility and individuality
customers.

Clan (A) Adhocracy (B)

30
27
21
10

11
16
26

42

Hierarchy (D) Market (C)

Maras d.o.o. Now

N= 23 Preferred

The Hierarchy Culture The Market Culture

An organization that focuses on An organization that focuses on
internal maintenance with a need for external positioning with a need for
stability and control stability and control.

58
From the graph we got a picture of overall culture profile of Maras company and we can
interprets this results from several perspectives.

First, we see what type of culture dominates the organization. In this case the dominant
type culture is Hierarchy. More on characteristics of each culture type can be find in this
paper on page 12.

The quadrant in which scores are the highest indicates the culture that tends to be emphasized
in organization Maras d.o.o. It identifies the basic assumptions, styles, and values that
predominate. The reason why is useful to know organization’s culture type is because
organizational success depends on the extent to which organization’s culture matches the
demands of the competitive environment. In this case with a strong hierarchy culture which
represents stability and control and low cost, if the company operates in the competitive
environment it may be hard to have needed growth and results because of the mismatch
between culture and environment where competitors are result oriented organizations with
emphasis on wining.

Second, another important information that we see on Maras CVF is discrepancies between
the current organizational culture and preferred one. By observing the areas of greatest
discrepancy between the preferred future culture and the current culture we can see what
needs to be changed to close these cultural gaps. This data in cultural profile may be the most
powerful if the goal is to initiate change.

Third, we can see the strengths of the culture that is determined by the number of points
awarded to a specific culture type. The higher the score, the stronger or more dominant is
that particular culture is. We can see that dominant culture has 42 points which is quite
strong. The extent to which organization needs a strong dominant culture as opposed to a
more balanced one is a matter of individual circumstance and environment. The nature of
the challenges the firm faces is likely to be the determining factor.

Fourth, we look for congruence between individual profiles and average profile plots from
the data in OCAI. Having all aspects of the organization clear about and focused on the same
values and sharing the same assumptions means that the data is congruent.

If there is presence of cultural incongruence in organizations, (more than 10 points) that

often stimulates an awareness of a need for change. When discrepancies do exist, they may
indicate a lack of focus, that the culture is unclear to respondents.

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For further analysis it would be interesting to see comparison between Maras and average
retail industry profile.

Comparing particular organization’s profile with industry’s profile and with the average
industry profiles for each OCAI item may help stimulate additional insights for changing the
culture in a way that enhances organizational effectiveness.

Having a culture profile different from average industry’s, may mean that Maras has a unique
competitive advantage, or it may mean there is a mismatch in culture with the demands of
the market.

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6. CONCLUSION

Monitoring organization’s culture is as important as monitoring profits. If at some point

culture and business strategies are no longer aligned, we will need to think about culture
change. When considering change, we have to look at the opposite type of culture for clues
on what’s needed, instead of dismissing the opposite (ex. collaborative is better than
competitive).

The right culture will be the one that closely fits the direction and strategy of a particular
organization as it confronts its own issues and the challenges of a particular time.

Also, organizational culture can affect both the overall effectiveness and long-term success
of the organization as a significant part of the business strategy of the organization, that is,
a significant factor in achieving the chosen strategy in the organization.

Organizational culture is an important driving force for change in the organization and for
introducing new knowledge necessary to create comparative advantages for the organization.
Quick changes environments also mean rapid obsolescence of knowledge, requiring internal
adaptation of strategy, structure, processes, tools and, most importantly, requiring people
and organizations to learn quickly.

Organizational culture is a tool for achieving the goals of an organization made by a business
strategy because it is the one that brings life to the strategy. A large number of different
organizations may choose the same strategy, but they will not be as successful as their
organizational cultures are different.

In order to determine the acceptability of a particular strategy in cultural contexts, an analysis

of the key beliefs they share is needed employees of the organization. A culture analysis will
show how well the option under consideration fits into the existing culture, that is, identify
the need for significant cultural change. A culture that embraces values, practices, and
standards of behavior based on the strategy will greatly contribute to the strength and
effectiveness of the organization's strategy implementation efforts. Options that require
significant cultural change does not necessarily have to be rejected, but in this case the need
to create plans for implementing change will arise.

Organizational culture is most influenced by top management who is responsible for its
development, maintenance and nurturing. It follows that organizational culture is a

61
fundamental tool for achieving managerial goals, and thus a means of increasing a
company’s effectiveness.

There is no one best culture. The best shape for your culture depends on the business and its
goals. What’s important is that the culture and business effectiveness are aligned.

62
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Appendix

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