Student Self-administered case study

Organizationculture Valuesandthewaythings aredonehere

Case summary:

Case duration (Min): Organizational Behaviour (OB)

> 60

Organization culture

Worldwide
AConversationwithRonWilliamsCEO,whoarrivedtofindacorporation(Aetna)inneedofchangehavinglost $280millioninthepastyear.HediagnosedkeyareasoffailureandopportunityinAetnasvastenterprise.Williams shapedapathtorecovery,focusingonabetterunderstandingofAetnascurrentcustomers,fromsmallemployers tothelargestcorporations,andconcentratingonthebestwayofexpandingintonewmarkets.Todothis,Aetna neededtobuildproductsandservicessuitedforthosegroups,andWilliamsstrategyinvolveddevelopingintegrated informationsystemsforbothemployersandconsumers,toensurecosteffectiveandhighqualityhealthcare delivery.WilliamsrepeatedlymadethecaseforthisnewstrategydirectlywithAetnasstaff.Hepressedtheissueof values:integrity,employeeengagement,excellentserviceandhighqualityhealthcare,andimplementedemployee surveysandbiannualperformancereviews.Employeeswereinvitedtoanswerwhethertheybelievedtheir supervisorsheldtruetoAetnasvaluesandwhethertheywereproudtobeworkingwiththecompany.

Learningobjectives:
Discusswhatismeantbyorganisationalculture. Distinguishbetweenvalues,espousedvalues,enactedvaluesandassumptions. Describewhatismeantbyastrongcultureandevaluatehowsuchaculturemightimpactupon organisationalperformance. Evaluatetheleader'sroleinshapingandreinforcingculture. Discusswhetherculturecanbemanaged.

Caseproblem:
Whatisorganizationalcultureandwhyisitanimportantconsiderationwhenseekingto enhanceorganizationalperformance?

Company

Aetna, Inc Aetna.com

Accident&HealthInsurance

Foundedin1853,Aetna,Inc.isanAmericandiversifiedhealthinsurancecompany,providinga rangeoftraditionalandconsumerdirectedhealthcareinsuranceproductsandrelatedservices, includingmedical,pharmaceutical,dental,behaviouralhealth,grouplife,longtermcare,and disabilityplans,andmedicalmanagementcapabilities.Withrevenuesof$30.950billion(2008) andaworkforcetotalling35,258(2008),AetnaisamemberoftheFortune100.Aetnaadvanced uptheFortune500listin2009.Thecompanysstrong2008revenuegainswerelargelythe resultofAetnasintegrationandsegmentationstrategies,whichledtostrongmembership gains. TheAetnaMission:Aetnaisdedicatedtohelpingpeopleachievehealthandfinancialsecurityby providingeasyaccesstosafe,costeffective,highqualityhealthcareandprotectingtheir financesagainsthealthrelatedrisks.Buildingonour156yearheritage,Aetnawillbealeader cooperatingwithdoctorsandhospitals,employers,patients,publicofficialsandotherstobuild astronger,moreeffectivehealthcaresystem. Vision:Toearnthedistinction,financiallyandbyreputation,ofbeingthepreferredbenefits companyinallaspectsofourbusiness.Westrivetobetheindustryleaderbyincludingthebest ideasandperspectivesavailable.ThisinturnenablesAetnatodevelopthemostrelevant solutionsforeachofourmarkets. Strategy:Aetnawillbetheindustryleaderinthediversemarketplace.Wewilldeliverbestin classservicetoourcustomersbecausewewantthemtobecomfortablewhendoingbusiness withus.Toachievethismissionwewill:Createinnovativeandtailoredproductandservice solutionsthatwillmeettheuniqueneedsofourcustomers.Developadiversesupplierbase, reflectingourmulticulturalenvironment,thatsupportsinnovativewaystodeliverbestinclass servicestothem.Buildaworkforcethatfullyunderstandsthediversecommunitieswherewe dobusiness.Fosteracultureofinclusionthatgrowsadiversetalentpoolandrecognizesand rewardsthecontributionsofeveryemployeewhilstallowingemployeestodotheirbestwork.

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Case media MIT World - Case study Dr Phil Kelly 2009

First, if you are taking a taught management course then consult with your tutor and ensure that the case has not been scheduled into a teaching class or tutorial. If it has not: 1. Play/ read the media associated with the case. You may need to access the Internet and enter a URL to locate any video clips. 2. Attempt the Case study questions. Consider attempting the case study as a group exercise; you could form a study group with fellow students. 3. Check the suggested answers - remember these are suggestions only and there are often many possible answers. Discuss questions and answers with other students. 4. If you feel your answer(s) were weak then consider reading the relevant suggested readings again (also see the case study suggested references).

Title/ Mediatype
Leading Change: A Conversation with Ron Williams.

URL/Mediadescription
http://mitworld.mit.edu/video/614
Williamscasestudybeginsin2001,whenhearrivedtofindacorporation(Aetna)inneedof changehavinglost$280millioninthepastyear.Hediagnosedkeyareasoffailureand opportunityinAetnasvastenterprise:orchestratingmedical,dentalandotherhealthand insurancebenefitsinanetworkof843thousandhealthcareprofessionalswith37million members.Williamsshapedapathtorecovery,focusingonabetterunderstandingof Aetnascurrentcustomers,fromsmallemployerstothelargestcorporations,and concentratedonthebestwayofexpandingintonewmarketssuchasretailers,banksand lawfirms.Todothis,Aetnaneededtobuildproductsandservicessuitedforthosegroups, andWilliamsstrategyinvolveddevelopingintegratedinformationsystemsforboth employersandconsumers,toensurecosteffectiveandhighqualityhealthcaredelivery. WilliamsrepeatedlymadethecaseforthisnewstrategydirectlywithAetnasstaff.He pressedtheissueofvalues:integrity,employeeengagement,excellentserviceandhigh qualityhealthcare,andimplementedemployeesurveysandbiannualperformancereviews. Employeeswereinvitedtoanswerwhethertheybelievedtheirsupervisorsheldtrueto Aetnasvaluesandwhethertheywereproudtobeworkingwiththecompany.Williamshas notedamarkedimprovementinresponsesoverjustafewyears.Externalbenchmarks reflectpositivegrowthaswell:AetnahasreachedthenumberonespotasFortune Magazinesmostadmiredhealthcarecompany,afteroccupyingthebottomposition. Williamsinvestedagreatdealintechnologyhebelieveswillshapethefutureofhealth care.HedescribesaCareEngine,containinganindividualmemberspersonalhealthrecord anduptotheminutejournalinformationandhealthguidelinesthatareconvertedinto computeralgorithms.Thissystemcandetectandfillgapsincareforpatientsconditions thatgoundetected,teststhatshouldbeadministered,medicinethatshouldnotbe prescribed.Williamshasalsogivenconsumerstheabilitytofindandcomparethecostsof testsanddoctorvisits.Hebelieveswecancheckthetrillionsofdollarsinhealthcare spendingthroughsmarttechnology.Forhim,healthcarereformmeanswegetandkeep everyonecovered;maintaintheemployerbasedsystemreorientthesystemtoward prevention,value,andqualityofcare;andusemarketincentivestoimprovecoverage,drive downcostsandmakethesystemmoreconsumeroriented. Tutorsandstudentsmaywatch(1)thewholefilmclipof56min,(2)thecorelecturefrom 4.30to40:00i.e.36minorselectedpartsseebelow: 00:0000:04:30|INTRODUCTIONS|Positionsthelectureacorporateturnaround:the companywasfailingin2000/1,throughchangenewleadershipandastrategyfocusingon customers,employees,companyvaluesandculture,informationtechnologyand management,thecompanywasturnedaround.Fromalmostthebottomintherankingsto thetopby2008. 00:04:30|RONWILLIAMSTAKESTHESTAGE|Explainshowthecompanyhadlostitsway/ outlinesthestructureofthepresentation

Film

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Case media MIT World - Case study Dr Phil Kelly 2009

00:06:15|AETNATODAY(2008)|37millionmembersovereightcountries,35thousand employees 00:09:00|STRATEGICPATHTOINDUSTRYLEADERSHIP|Williamsdescribesthreephases (one)20014;(two)20046and(three)20068;foreachstageWilliamsevaluatesthe strategic,operationalandfinancialperformance:inphaseonethecompanywaslosing moneyandwentBACKTOBASICS,seekingtobetterunderstanditscustomers,theirneeds, THECOMPANYANDITSVALUES;inphasetwo,thecompanywitnessedaveragereturns, refinedsegmentationandfocussedonperfectionofthebasicsandinphasethree,the companywasinthetoptieroftheindustrystrategicallytheyfocussedoninnovation, informationandintegrationandSETOUTTODIFFERENTIATETHEMSELVESWITHUNIQUE OPERATINGCAPABILITIESthestrategicpathtoindustryleadershipisexploredinmore detailintheremainderofthelecture 00:11:3000:12:00|Change|Williamsdiscussesthestartofthepathtoindustryleadership; hehadtomakethecaseforchangewhichinvolvescommunicationwithemployees. Williamsargues,understandinghowtomanagechangeeffectivelyisanextremely importanttoolandskillsetthatwillserveyouwell 00:12:00|Strategy|CreatedastrategycalledthethreeIs:information,innovationand integration;anexecutivemanagementinformationsystem(dashboard)wascreatedand madeavailabletoall,presentingoneversionofthetruthandimprovingthespeedand qualityofdecisionmaking.Williamsemphasisestheneedforcommunicationofboth problemsandsolutions 00:13:15|CULTURE|CREATEDTHEAETNAWAY:customerfocus,betterarticulatedand demonstratedVALUES(integrity,qualityandvalue,excellenceandaccountability,employee engagement) 00:14:10|asaleader|Williams,wheneverheaddressedagroupofemployeeswithinthe company,wouldfirsttalkaboutthevaluesanddemonstratedtheirimportance 00:15:00|EMPLOYEEENGAGEMENT|Williamsemphasisedtheimportanceofemployee engagement,suggestingthatanengagedworkforcewassatisfiedandthisledtoincreased motivation 00:16:15||Employeesurveyswereimplemented:employeesurveysparticipationshifted from<50%atthebeginningofthedecadetoalmost100%towardstheend(bestinclass) similarchangeswereobservedinloyaltywithmoreemployeesindicatingtheywereproud toworkforthecompanyandmoreemployeesbehavingintheAetnaway(astronger culture) 00:19:45|Leadership|TheCompanyfocusedondevelopinghighperformingleaders improvementsweremadeinperformancemanagement,successionplanning,leader developmentandleadershipassessment 00:26:00|Milestones| 00:32:30|Environment|Theenvironmentisdiscussed:Healthexpenditureisgrowing,asare costs 00:34:40|Leadershipstrategyandtheroleofinformationtechnology|Aetnawillleadthe industryinprovidinghighquality,costeffectiveandpersonalisedhealthandrelated solutionsthatleverageinformationtomeettheneedsofourtargetedcustomers.A fundamentalpartofthestrategyrequiresinvestmentininformationsystems;suchsystems haveenabledcapabilitiesthatcompetitorscannoteasilyemulatebecausemanyofthem operatemultipleunintegratedsystems.Williamsmovesontodiscussthecareengine, patientdata,aknowledgebase,decisionsupporttechnologies,findingandsuggestingcare optionsandtheprovisionofinformationtocarers 00:35:50|Lessonslearned| 00:37:48|LEADINGANDMANAGING|Importanttoknowthedifferencebetweenleading themanaging 00:40:00|Endlecture||Questionsession| 00:43:47|COREVALUES|WILLIAMSFURTHEREXPLAINSHOWTHEYDERIVEDCOREVALUES WHICHWEREALREADYINEXISTENCEBUTWEREINNEEDOFBETTERPROMOTION 00:48:50|Principlesofleading,communication|Williamsexplainsthatpeoplehadnoidea thatthecompanywaslosingmoneyi.e.theneedforchange;herecognisedtheneedto informemployeesaboutthesituationonanongoingbasis.Hesetupregularmeetingsto

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Case media MIT World - Case study Dr Phil Kelly 2009

cascadeperformanceandwhatneededtobedone 00:54:50|LEADERSHIPVERSUSMANAGEMENT|Amemberoftheaudienceposedthe questioncansomeonewhoisnotseenasaleaderbeaneffectivemanager?Williams arguesthattheycanbut

NOTES:

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Case media MIT World - Case study Dr Phil Kelly 2009

Casestudyquestions...
Action
Pre/During/After class

LEVELS OF ORGANISATIONAL CULTURE:

In your groups, drawing upon information from the film, text books and your wider experiences; discuss what is meant by organisational culture. In your discussion, you should identify the common aspects of the many definitions of organisational culture and comment upon levels of culture. Consider the film you have just watched, which level of culture is mentioned most frequently?

During

2 3

VALUES:
Distinguish between values, espoused values, enacted values and assumptions; list the Aetna, Inc core (espoused values) and discuss how they were created.

During

SURVIVAL IN COMPETITIVE AND TURBULENT ENVIRONMENTS: FUNCTIONS OF ORGANIZATIONAL CULTURE.

Peters and Waterman (1982) p75 argued 'the stronger the culture and the more it was directed toward the marketplace, the less need was there for policy manuals, organization charts, or detailed procedures and rules. What is meant by a strong culture and how might such a culture impact upon organisational performance (you should consider both positive and negative consequences)?

During

4 5 6

ORGANISATIONAL PERFORMANCE:
Consider the role of culture in relation to organisational performance; explain what is meant by the Fit and the adaptation perspective and evaluate these concepts in relation to Aetna, Inc.

During

THE ROLE OF THE LEADER IN SHAPING AND REINFORCING CULTURE:

Evaluate the leader's role (for example that of Ron Williams) in shaping and reinforcing culture.

During During

MANAGING CULTURE:
Discuss whether culture can be managed and suggested approaches used to manage culture if you believe that it can be managed. Evaluate why Aetna, Inc soared to develop a culture of empowerment and quality amongst other things.

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Answers...
ORGANISATIONAL BEHAVIOUR Thestudyand understandingof individualandgroup behaviourandpatternsof structureinordertohelp improveorganisational performanceand effectiveness. ORGANISATIONAL CLIMATE Relatingtotheprevailing atmospheresurrounding theorganisation,tothe levelofmorale,andtothe strengthoffeelingsor belonging,careand goodwillamongmembers. Organisationalclimateis basedontheperceptions ofmemberstowardsthe organisation. ORGANISATIONAL CULTURE. Thisconceptincludes sharedvalues,unwritten rulesandassumptions withintheorganisationas wellasthepracticesthat allgroupsshare. Corporateculturesare createdwhenagroupof employeesinteractover timeandarerelatively successfulinwhatthey undertake. VALUES Valuesareattheheartof corporateculture.They aremadeupofthekey beliefsandconcepts sharedbyan organizationsemployees. Successfulcompaniesare clearaboutthesevalues andtheirmanagers publiclyreinforcethem. Oftenvaluesare unwrittenandoperateat asubconsciouslevel. EMPLOYEEINVOLVEMENT Anumbrellatermthatis inconsistentlyand impreciselyusedto embraceadiverserange ofmanagementprocesses involvingparticipation, communication, decisionmaking,industrial democracyandemployee motivation.

Question/Answer
1 LEVELSOFORGANISATIONALCULTURE:
Inyourgroups,drawinguponinformationfromthefilm,textbooksandyourwiderexperiences; discusswhatismeantbyorganisationalculture.Inyourdiscussion,youshouldidentifythecommon aspectsofthemanydefinitionsoforganisationalcultureandcommentuponlevelsofculture.Consider thefilmyouhavejustwatched,whichlevelofcultureismentionedmostfrequently? Culture - This concept includes shared values, unwritten rules and assumptions within the organization as well as the practices that all groups share. Corporate cultures are created when a group of employees interact over time and are relatively successful in what they undertake. Corporate culture - Defined by Bower (1966) as the way we do things around here. Trice and Beyer (1984) elaborated upon this, with their definition : the system of ... publicly and collectively accepted meanings operating for a given group at a given time. Hofstede (1994) describes corporate culture as the psychological assets of an organization, which can be used to predict what will happen to its financial assets in five years time. See also Culture. Corporate culture - The organization's norms and value systems. Culture may be defined at the country or company level. Definitions of culture generally apply to groups of people whose thinking and behaving share something in common. Many scholars refer to 3 levels of organisational culture: artefacts, values and basic assumptions. The level of organisational culture discussed most frequently in the film is values: Values are at the heart of corporate culture. They are made up of the key beliefs and concepts shared by an organizations employees. Successful companies are clear about these values and their managers publicly reinforce them. Often values are unwritten and operate at a subconscious level.

2 VALUES:
Distinguishbetweenvalues,espousedvalues,enactedvaluesandassumptions;listtheAetna,Inccore (espousedvalues)anddiscusshowtheywerecreated. Values - Values are at the heart of corporate culture. They are made up of the key beliefs and concepts shared by an organizations employees. Successful companies are clear about these values and their managers publicly reinforce them. Often values are unwritten and operate at a subconscious level. Espoused values what members of an organisation say they value. Enacted values - values reflected in the way individuals actually behave. Assumptions - deeply held beliefs that guide behaviour and tell members of an organisation how to perceive and think about things. Core values at Aetna, Inc include: integrity, quality and value, excellence and accountability, employee engagement-see the film clip (13.15), the Aetna way, customer focus etc, see also (42.40) for comments on how the values were created. The espoused values already existed but had not been overly promoted. People from around the organisation worked to identify these values, which were then suggested to the executive committee who debated them and selected the most appropriate for adoption as core values.

3 SURVIVALINCOMPETITIVEANDTURBULENTENVIRONMENTS:FUNCTIONSOFORGANIZATIONALCUL
PetersandWaterman(1982)p75argued'thestrongerthecultureandthemoreitwasdirectedtoward themarketplace,thelessneedwasthereforpolicymanuals,organizationcharts,ordetailed proceduresandrules.Whatismeantbyastrongcultureandhowmightsuchacultureimpactupon organisationalperformance(youshouldconsiderbothpositiveandnegativeconsequences)? Strong culture - an organisational culture with a consensus on the values that drive the company and with an intensity recognisable even to outsiders (a homogenous culture). Strong cultures are thought to enhance performance by ensuring goal alignment between employee and employer, improving motivation and therefore discretionary effort and providing control of employees without the detrimental effects of bureaucracy. When employees share the same goal as the organisation, they will instinctively do what is in the best interests of the organisation. Consequently, there is less need for formal control which can increase cost and demotivate employees. However, in a strong culture, all employees tend to follow the same path-if this is leading in the wrong direction then the organisation will cease to be effective.

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Case media MIT World - Case study Dr Phil Kelly 2009

CULTURE Thisconceptincludes sharedvalues,unwritten rulesandassumptions withintheorganizationas wellasthepracticesthat allgroupsshare. Corporateculturesare createdwhenagroupof employeesinteractover timeandarerelatively successfulinwhatthey undertake. BELIEFSYSTEM(FORMAL) theexplicitsetof organizationaldefinitions thatseniormanagers communicateformallyand reinforcesystematicallyto providebasicvalues, purpose,anddirectionfor theorganization. ORGANISATIONAL IDEOLOGY Basedonthebeliefs, valuesandattitudesofthe individuals,determines thecultureofthe organisationandprovides asetofprincipleswhich governtheoverallconduct oftheorganisation. CORPORATECULTURE Theorganization'snorms andvaluesystems CORPORATECULTURE DefinedbyBower(1966) asthewaywedothings aroundhere.Triceand Beyer(1984)elaborated thisas:thesystemof... publiclyandcollectively acceptedmeanings operatingforagiven groupatagiventime. Hofstede(1994)describes corporatecultureasthe psychologicalassetsofan organization,whichcanbe usedtopredictwhatwill happentoitsfinancial assetsinfiveyearstime. SeealsoCulture. ESPOUSEDVALUES whatmembersofan organisationsaytheyvalue ENACTEDVALUES valuesreflectedintheway individualsactuallybehave ASSUMPTIONS deeplyheldbeliefsthat guidebehaviourandtell membersofan organisationhowto perceiveandthinkabout things

4 ORGANISATIONALPERFORMANCE:
Considertheroleofcultureinrelationtoorganisationalperformance;explainwhatismeantbythe FitandtheadaptationperspectiveandevaluatetheseconceptsinrelationtoAetna,Inc. The Fit perspective argues that the culture is good only if it fits the industry or the organisation's strategy. Within the industry, the competitive environment, customer requirements and social expectations may determine the culture. Aetna, Inc operate in a competitive environment where they have been losing market share; consequently they devised a strategy that supported a greater customer focus through the behaviour of employees, the product range, segmentation and the use of information system technologies. An organisational culture which encourages confidence and risk-taking amongst employees, has leadership that produces change, and focuses on the changing needs of customers is said to have an Adaptive culture. Such cultures are desirable in turbulent environments where the organisation must continually adapt. Aetna, Inc operates in a turbulent environment where innovation and entrepreneurial activity, creativity and risk-taking may lead to competitive advantage.

5 THEROLEOFTHELEADERINSHAPINGANDREINFORCINGCULTURE:
Evaluatetheleader'srole(forexamplethatofRonWilliams)inshapingandreinforcingculture. Leaders play a crucial role as employees watch what they focus upon and to what they give their attention. How leaders react to crisis communiqus aspects of the culture and the way leaders behave can reinforce the values that support the organisational culture. Employees often imitate leader behaviour. Employees will also be guided by the allocation of rewards and punishments which will be used to signal desirable behaviours. Williams frequently communicates organisational problems and provide a focus for attention. He never talks to a group of employees without talking about the values (14.10) and suggests that unless the values are important to him and he demonstrates their importance they will be unimportant. He considers it important to live by a core set of values (35.50) and holds regular management meetings (45.50) where he communicates the successes and failures of the past quarter.

6 MANAGINGCULTURE:
Discusswhetherculturecanbemanagedandsuggestedapproachesusedtomanagecultureifyou believethatitcanbemanaged.EvaluatewhyAetna,Incsoaredtodevelopacultureofempowerment andqualityamongstotherthings. Scholars are in disagreement as to whether culture can indeed be managed. Whereas the assumptions may be harder to change, more surface level aspects of culture may be more easily changed. Attempts to change culture typically involve the rule of the leader described in the previous question and the development and communication of values. The selection of employees with congruent values, induction, socialisation and inculcation may all be used as tactics to develop organisational culture. Similarly, employees who think and behave in a manner radically different from the organisational culture may be removed. In turbulent environments, constant change renders the formalised work procedures redundant and bureaucratic forms of control not only stifle creativity but delay important decision-making. A culture that empowers employees can unleash creativity, speed up decision-making and allow the organisation to benefit from continuous improvement.

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Case media MIT World - Case study Dr Phil Kelly 2009

STRONGCULTURE anorganisationalculture withaconsensusonthe valuesthatdrivethe companyandwithan intensitythatis recognisableevento outsiders ADAPTIVECULTURE anorganisationalculture thatencourages confidenceandrisktaking amongstemployees,has leadershipthatproduces change,andfocuseson thechangingneedsof customers

Casestudyreferences
Cole,GA.andKelly,PP.(2011)'ManagementTheoryandPractice',Ed.7.CengageEMEA. Kelly,PP.(2009)'InternationalBusinessandManagement',CengageLearningEMEA. Martin,J.(2005)'OrganizationalBehaviourandManagement',Ed.3.ThomsonLearning. Nelson,DL.andQuick,JC.(2009)'ORGB',Ed.1.SouthWestern. Peters,T.andWaterman,R.(1982)'InSearchofExcellence',Ed.1995.HarperCollinsBusiness. Schein,E.(1997)'OrganizationalCultureandLeadership',Ed.2.SanFrancisco:JosseyBass.

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Case media MIT World - Case study Dr Phil Kelly 2009