Chapter 5

Organizational Climate

Organizations are like villages in that they have a certain pace and style of working and
unspoken taboos. Organizations have social structures, pecking orders, and behavior patterns,
including habits governing dress, language, food, and the like, established norms of behavior
govern the use of resources. Artifacts of the organizational village are its physical structures,
rituals, stories, and legends, based on shared and deeply held assumptions, beliefs, and values.
An important element in the life of the organizational village is its psychological climate.

Even if an organization has a vision that is leader-initiated, member-supported,

comprehensive detailed, and worth doing, it must be sustained by a supportive
organizational climate.

Important dimensions include;

1. the reward system,
2. organizational clarity,
3. performance standards,
4. warmth and support, and
5. leadership practices.

An evaluation of these and other dimensions of organizational climate can be used to

determine whether that organization is exploitive, impoverished, supportive, or enlightened.

The Following Points;

1. Just as sick societies can make people sick, so can an unhealthy work climate make
employees sick. In contrast, a psychologically healthy work environment brings out the
best in employee and organizational well-being.
2. An organization is only as strong as its weakest link. An individual may have an
excellent nervous system, sound muscular system, and good respiratory system, but if the
circulation system is poor, ultimately, the whole organism will fail. Similarly, an
organization may be strong in performance standards, organizational clarity, and
warmth and support, but if the reward system is poor, the entire organization will
ultimately suffer.
3. Organizational climate is important because it influences both the quality of work
and the quality of the work life of members. Depending on the nature of the group or
organization, even life-and-death consequences can result.

Consider an exploitive or impoverished hospital: People who can find employment

elsewhere will probably leave, and those may be some of the best personnel. People who remain
may spend more time complaining about working conditions and management practices than
actually doing their work, with the result being unattended patients, poor housekeeping, and
medical and clerical errors. Exploitive and impoverished hospitals experience unnecessary
mistakes due to human factors— untrained, unqualified, and uncommitted workers

Now consider an enlightened or supportive hospital, where standards of performance

are high, leadership is effective, goals and responsibilities are clear, warmth and support prevail,
and the reward system reinforces good work.

1. Enlightened and supportive organizations represent good investments because they

attract excellent personnel, who usually outperform their demoralized counterparts in
exploitive and impoverished organizations.
2. Organizations are composed of interdependent groups. The success of the total
organization depends on conditions in each of its subgroups. As such, every division and
unit should develop an enlightened or supportive climate.

Organizational Climate Questionnaire

1. Reward system—the degree to which people are recognized and rewarded for good
work, rather than being ignored, criticized, or punished when something goes wrong
 2. Organizational clarity—the feeling that things are well organized and that goals and
responsibilities are clearly defined, rather than being disorderly, confused, or chaotic
3. Standards of performance—the emphasis placed on quality performance and
achievement of results, including the degree to which meaningful and challenging goals
are set at every level of the organization.
4. Warmth and support—the feeling that friendliness is a valued norm and that people
trust, respect, and support one another; the feeling that good relationships prevail in the
day-to-day work of the organization.
5. Leadership—the extent to which people take leadership roles as the need arises and are
rewarded for successful leadership; the willingness of people to accept leadership and
direction from others who are qualified. The organization is not dominated by or
dependent on just one or two individuals.

6. Communication—the degree to which important information is shared—up, down, and

sideways. Communication channels are open and free-flowing between levels and areas
of the organization.
7. Innovation—the extent to which new ideas are sought and used in all areas of the
organization. Creativity is encouraged at every level of responsibility
8. Feedback and controls—the use of reporting, comparing, and correcting procedures,
such as performance evaluations and financial audits. Controls are used for tracking
progress and solving problems, as opposed to policing and punishment.
9. Teamwork—the amount of understanding, cooperation, and support demonstrated
between different levels and groups in the organization.
10. Involvement—the extent to which responsibility for decision-making is broadly shared
in the organization. People are involved in decisions that affect them

Leaders and followers may have different views about the climate of a group or
organization. People in upper levels of responsibility often evaluate conditions more favorably
than people in lower levels.

Extent to Which Leaders and Followers Agree on Organizational Conditions

Patterns of Leadership
Although members may have considerable influence, organizational climate is
determined primarily by leaders. Those in charge establish the character and define norms of
behaviors. Management author Rensis Likert identifies four patterns of leadership that
correspond to the four types of organizational climate. His conclusions are based on studies of
thousands of leaders in widely different kinds of organizations, both inside and outside the
United States.

Exploitive leadership is autocratic and hierarchical, with virtually no participation by

members. Leaders make decisions, and members are expected to comply without question.
Leaders show little confidence or trust in others, and members do not feel free to discuss
job-related problems with leaders. In a free social and economic order, organizations rarely
survive because people avoid them as much as possible. Where they do exist, they are
characterized by a lack of loyalty and recurrent financial crises.

Impoverished leadership makes some attempts to avoid being completely autocratic. Power
remains at the top, but members are given occasional opportunities for participation in the
decision-making process. Organizations fall into two categories that determine their relative
success.
1. Successful Pattern II organizations are benevolent autocracies in which leaders
have a genuine concern for the welfare of members.
2. Failing Pattern II organizations are autocracies that do not consider the interests
or ideas of members. Some organizations are founded by autocratic but
benevolent leaders, who achieve good results. Then, as time passes and new
leaders assume power, the autocratic style of leadership is maintained, but
benevolence is not, and the organization fails.

Supportive leadership shows a great deal of interest and confidence in members. Power
resides in leaders, but there is good communication and participation throughout the
organization. People understand the goals of the organization, and commitment to achieve them
is widespread. Members feel free to discuss job-related problems with leaders. This leadership
pattern involves broad member participation and involvement in decision-making activities.

Enlightened leadership delegates power to the logical focus of interest and concern for a
problem. People at all levels of the organization have a high degree of freedom to initiate,
coordinate, and execute plans to accomplish goals. Communication is open, honest, and
uncensored. People are treated with trust rather than suspicion. Leaders ask for ideas and try
to use others’ suggestions. Pattern IV leadership results in high satisfaction and productivity.
Absenteeism and turnover are low, strikes are nonexistent, and efficiency is high.

Four principles should be followed to develop an enlightened, Pattern IV organization:

1. View human resources as the organization’s greatest asset.

2. Treat every individual with understanding, dignity, warmth, and support.
3. Tap the constructive power of groups through visioning and team building.
4. Set high-performance goals at every level of the organization.
Likert recommends that all organizations adopt the enlightened principles of Pattern IV
leadership. Pattern IV would improve employee morale and productivity by 20 to 40 percent,
or more.

Research supports Likert’s ideas. Study after study shows that when an organization moves to
Pattern IV leadership, performance effectiveness improves, costs decrease, and gains occur in the
overall satisfaction and health of the members of the organization. In addition, research findings
show that Pattern IV leadership applies to every size and type of organization, including private
businesses, not-for-profit organizations, and government agencies.

How important are organizational climate and enlightened leadership practices?

Management author John Hoerr states: “We are in a global economy. To have world-class
quality and costs and the ability to assimilate new technology, an organization must have a
world-class ability to develop human capabilities. This can’t be a drag on the system; it has to be
a leading variable.”

POWER OF STORYTELLING
The Power of Stories Storytelling has an almost innate appeal. When a teacher
interrupts a class with the statement, “Let me tell you a story,” attention in the room doubles.
Stories can be used in a similar way to develop and reinforce a positive work climate. They
serve as prescriptions of the way things should (or should not) be done. They have the
greatest impact on an organization when they describe real people and are known by employees
throughout the organization.

More than a decade ago, Southwest Airlines introduced an ad campaign with the phrase
“Just Plane Smart.” Unknowingly, the Dallas-based airline had infringed on the “Plane Smart”
slogan at Stevens Aviation, an aviation sales and maintenance company in Greenville, South
Carolina. Rather than paying buckets of money to lawyers, Stevens’s chairman Kurt Herwald
and Southwest CEO Herb Kelleher decided to settle the dispute with an old-fashioned arm
wrestling match at a rundown wrestling stadium in Dallas. A boisterous crowd watched the
“Malice in Dallas” event as “Smokin” Herb Kelleher and “Kurtsey” Herwald battled their
designates, and then each other. When Kelleher lost the final round to Herwald, he jested (while
being carried off on a stretcher) that his defeat was due to a cold and the strain of walking up a
flight of stairs. Stevens Aviation later decided to let Southwest Airlines continue to use its ad
campaign, and both companies donated funds from the event to charities. “Malice in Dallas” is a
legendary story that almost every Southwest employee knows by heart. It is a tale that
communicates one of the airline’s core values—that having fun is part of doing business.

Building Community in the Workplace

The word corporation conjures up images of authority, bureaucracy, competition,

control, and power. The word community evokes images of democracy, diversity,
cooperation, inclusion, and common purpose. The model under which an organization chooses
to operate can determine its survival in a competitive and changing world. The idea of
community at work is particularly satisfying to the makeup and challenges of today’s diverse
workforce.

Community is experienced in two ways:

1. as “a group of people” and
2. as “a way of being.”
The first type of community is formed by bringing people together in place and time.
The second is created when barriers between people are let down. Under such conditions,
people become bonded, sensing that they can rely on and trust each other. When people
experience a feeling of community, their potential for achievement becomes enormous.

Thomas Carlyle, the Scottish philosopher, thought that each person wanted to be treated as a
unique and valuable individual. He also believed we each have a simultaneous need to belong to
something greater than self, something more than one alone can do or be. For many people,
feelings of self-worth and transcendence to something greater than self occur in the
experience of community.
 The benefits of interrelationships can be found everywhere in nature. If a gardener
places two plants close together, the roots commingle and improve the quality of the soil, thus
helping both plants grow better than if they were separated. If a carpenter joins two boards
together, they will hold much more weight than the total held by each alone.

In the human sphere, our challenge is to apply the creative cooperation we learn from nature in
dealing with those around us. The essence of this is to value differences, build on each other’s
strengths, transcend individual limitations, and achieve the full potential of a community.

Writer and educator John Gardner states, “We are a community-building species.” He goes on
to describe the conditions necessary to experience true community:

1. Shared vision. A healthy community has a sense of where it should go, and what it might
become. A positive and future-focused role image provides direction and motivation for
its members.
2. Wholeness incorporating diversity. A group is less of a community if fragmentation or
divisiveness exists—and if the rifts are deep, it is no community at all. We expect and
value diversity, and there is dissent in the best of groups. But true community requires
facing and resolving differences. (A group cannot be called a community if division
exists, hence we should always include the diversity of people in terms of their races,
culture, politics, beliefs, and others)
3. Shared culture. Success is enhanced when people have a shared culture—that is, shared
norms of behavior and core values to live by. If a community is lucky, it has shared
history and traditions as well. This is why developing communities must form symbols of
group identity and generate stories to pass on core values, customs, and central purpose.
4. Internal communications. Members of a well-functioning community communicate
freely with one another. There are regular occasions when people gather and share
information. There are opportunities and means for people to get to know and understand
what others need and want. Communication is uncensored and flows in all directions
within the community.
5. Consideration and trust. A healthy community cares about its members and fosters an
atmosphere of trust. People deal with one another humanely; they respect each other and
value the integrity of each person.
6. Maintenance and government. A fully functioning community has provisions for
maintenance and governance. Roles, responsibilities, and decision-making processes are
conducive to achieving tasks while maintaining a supportive group climate.
7. Participation and shared leadership. A healthy community encourages the involvement
of all individuals in the pursuit of shared goals. All members have the opportunity to
influence events and outcomes. A good community finds a productive balance between
individual interests and group responsibilities as community tasks are accomplished.
8. Development of younger members. Growth opportunities are numerous and varied for
all members. Mature members ensure that younger members develop knowledge, skills,
and attitudes that support the continuation of the community’s purpose and values.
9. Affirmation. A healthy community reaffirms itself continuously. It celebrates its
beginnings, rewards its achievements, and takes pride in its challenges. In this way,
community morale and confidence are developed.
10. Links with outside groups. There is a certain tension between the community’s need to
draw boundaries to accomplish its tasks and its need to have fruitful alliances with
external groups and the larger community of which it is a part. A successful community
masters both ends of this spectrum. (Community should establish alliances with outside
groups to accomplish bigger tasks)

In Productive Workplaces, Marvin Weisbord writes that we hunger for community and
are a great deal more productive when we find it. If we feed this hunger in ways that preserve
individual dignity, opportunity for all, and mutual support, we will harness energy and
productivity beyond imagining. (We are aiming for a community and become productive
whenever there is a great opportunity)

Community Building and The Role of Leaders

The plaque outside the two-family house at 367 Addison Street in Palo Alto, California,
identifies the dusty one-car garage out back as the “birthplace of Silicon Valley.” But the site,
where Dave Packard and Bill Hewlett first set up shop, in 1938, is more than that. It’s the
birthplace of a new approach to management, a West Coast alternative to the traditional,
hierarchical corporation. More than seven decades later, the methods of Hewlett and Packard
remain the dominant DNA for tech companies—and a major reason for U.S. preeminence
in the information age.

The result was one of the most influential companies of the 20th century.
Hewlett-Packard Co. (they flipped a coin to decide whose name would go first) cranked out a
blizzard of electronic tools that were crucial to the development of radar, computers, and other
digital wonders. Still, the pair’s greatest innovation was managerial, not technical. From the first
days in the garage, they set out to create a company that would attract like-minded people. They
shunned the rigid hierarchy of companies back East in favor of an egalitarian, decentralized
system that came to be known as “the HP Way.” The essence of the idea, radical at the time, was
that employees’ brainpower was the company’s most important resource.

To make the idea a reality, the young entrepreneurs instituted a slew of pioneering
practices. Starting in 1941, they granted big bonuses to all employees when the company
improved its productivity. That evolved into one of the first all-company profit-sharing plans.
When HP went public in 1957, the founders gave shares to all employees. Later, they were
among the first to offer tuition assistance, flextime, and job sharing.

Even HP’s offices were unusual. To encourage the free flow of ideas, employees worked
in open cubicles. Even supply closets were to be kept open. Once, Hewlett sawed a lock off a
closet and left a note: “HP trusts its employees.” In Packard’s own words, “The close
relationship among people encouraged a form of participative management that supported
individual freedom and initiative while emphasizing commonness of purpose and teamwork. We
were all working on the same problems and we used ideas from wherever we could get them.”

If HP’s policies were progressive, nothing was coddling about either man. Until he died
in 1996, Packard was a fearsome paragon of corporate integrity. He was famous for flying to
distant branches to make a show of firing managers who skirted ethical lines. Neither man would
hesitate to kill a business if it wasn’t hitting its profit goals. The result: HP grew nearly 20
percent a year for 50 years without a loss.

Today, the behavior of the two founders remains a benchmark for business. Hewlett,
who died in 2001, and Packard, who died in 1996, expected employees to donate their time to
civic causes. And they gave more than 95 percent of their fortunes to charity. “My father and
Mr. Packard felt they’d made this money almost as a fluke,” says Hewlett’s son Walter. “If
anything, the employees deserved it more than they did.” It’s an insight that changed corporate
America—and the lives of workers everywhere.

In A World Waiting to Be Born, Scott Peck identifies the leader within a group or
organization to be a potential obstacle to creating community. Specifically, no matter how deeply
those at the bottom or middle desire it, the community will be difficult to achieve if those at the
top are resistant. Conversely, if the leaders are the kinds of people who want community, they
can probably have it. They may have to work hard for it. It may require time and resources. But
if leaders want to achieve a positive and healthy human environment, it can be done under
almost any circumstances.

In an article entitled “The Brave New World of Leadership Training,” Jay Conger
describes building community as the most important task facing leaders today. He views this
as a special assignment that combines two basic leadership competencies— visioning and
empowerment—which are related since vision itself must be empowering. The vision’s purpose
is not only to achieve a meaningful strategic or company goal but also to create a dedicated
community of people.
The Struggle to Stay Flat

An important element of organizational culture and climate is structure. As organizations

grow in size, there is a need for layers and divisions of responsibility. Mid-level leaders are
needed to guide work activities, coach subordinates, and manage organizational growth.
Sufficient resources must be allocated to perform these functions well. Past an optimum point,
organizations can have too many layers of management with a corresponding reduction in
creativity and performance. The case of Nucor Corporation shows the value of being flat:

There are strong arguments for being as flat as it is practical to be:

1. Tall organizational structures have higher overhead costs due to the cost of
managers versus employees who make the product or supply the service. (Big and
successful firms tend to have higher costs due to the managers versus employees who
make products or supply the services. It is because of their skills and expertise)
2. Layers of hierarchy tend to slow down the transmittal of information and the speed
of response even in today’s e-business environment. (Organizational hierarchy slows
down the dissemination of information and speed of response due to lots of involved
persons)
3. Tall structures tend to undermine employee satisfaction and organizational
commitment because they focus power on managers rather than employees. (Tall
structure mostly focuses on the power of managers rather than the employees' reason why
employees are neglected and not given enough opportunity to showcase their skills.)

Summary:

The most important function of a leader is to develop a clear, compelling vision and to secure
commitment to that ideal. In addition, the leader must have a strategy to succeed. Finally, the
leader must have stamina to see these through. These three items are the requirements for
leadership success. Four distinct areas that correlate positively with leadership effectiveness are
getting the facts, creating a vision, motivating people, and empowering others, An effective
vision must be leader-initiated, shared and supported by followers, comprehensive and
detailed, uplifting and inspiring. The three motives for assuming leadership responsibility are
power, achievement, and affiliation, The climate of an organization includes the reward
system, organizational clarity, standards of performance, warmth and support, leadership,
communication, innovation, feedback and controls, teamwork, and involvement, The
climate of an organization is determined primarily by the quality of leadership. Leaders in the
best organizations follow four enlightened principles: view human resources as the
organization’s greatest asset; treat every individual with understanding, dignity, warmth,
and support; tap the constructive power of groups through visioning and team building;
and set high-performance goals at every level of the organization.