Chapter 5: Organizational Culture and Change Management
Organizational culture shapes how members think, feel, and behave. Change management is the process of transitioning organizations from current to desired states. Together, culture and change determine whether organizations adapt and thrive or stagnate. This chapter covers culture types, creation, change models, and resistance management.
5.1 Organizational Culture
Definition: A system of shared meaning held by members that distinguishes one organization from another (Robbins). It includes values, beliefs, norms, rituals, symbols, and stories that guide behaviour.
Levels of Culture (Edgar Schein)
| Level | Description | Visibility | Example |
|---|---|---|---|
| Artifacts | Visible structures, processes, dress code, office layout | High (observable) | Open-plan office, casual dress at IT firms |
| Espoused Values | Stated strategies, goals, philosophies | Medium | "Customer first" mission statement |
| Basic Assumptions | Unconscious, taken-for-granted beliefs | Low (deep, invisible) | Belief that hierarchy is essential (Nepali organizations) |
Types of Culture (Handy/Harrison)
| Type | Characteristics | Nepal Example |
|---|---|---|
| Power Culture | Central power figure controls; few rules; quick decisions | Family-owned businesses (Chaudhary Group style) |
| Role Culture | Bureaucratic; defined roles, procedures; stable but slow | Government offices, Nepal Rastra Bank |
| Task Culture | Team-based; flexible; project-oriented; expertise valued | IT companies, consulting firms |
| Person Culture | Individual talent is central; organization serves individuals | Law firms, medical practices, academic institutions |
5.2 Change Management
Lewin's Three-Step Change Model
| Step | Description | Activities |
|---|---|---|
| Unfreeze | Create awareness that change is needed; overcome resistance | Communicate urgency, show data, challenge status quo |
| Change (Move) | Implement the actual change; transition period | New processes, training, restructuring, new systems |
| Refreeze | Stabilize the change; make it permanent | Reinforce new behaviours, update policies, celebrate success |
Kotter's 8-Step Change Model
| Step | Action |
|---|---|
| 1 | Create urgency — show why change is necessary |
| 2 | Build a guiding coalition — assemble influential supporters |
| 3 | Form a strategic vision — clear picture of desired future |
| 4 | Communicate the vision — share widely and repeatedly |
| 5 | Empower action — remove obstacles, change systems blocking change |
| 6 | Generate short-term wins — visible improvements early on |
| 7 | Consolidate gains — build on momentum, drive more change |
| 8 | Anchor in culture — embed changes in organizational DNA |
5.3 Resistance to Change
| Source | Cause | Overcoming Strategy |
|---|---|---|
| Individual | Fear of unknown, habit, economic insecurity, selective perception | Communication, training, participation, support |
| Organizational | Structural inertia, threat to power, resource allocation, group norms | Top management support, incentives, gradual implementation |
Strategies to Overcome Resistance (Kotter & Schlesinger)
| Strategy | When to Use |
|---|---|
| Education & Communication | When resistance is based on misinformation |
| Participation | When resistors have expertise to contribute |
| Facilitation & Support | When people fear they can't adapt |
| Negotiation | When a powerful group will clearly lose |
| Manipulation & Co-optation | When other tactics fail (ethically questionable) |
| Coercion | When speed is essential and change initiator has power |
5.4 Creating and Maintaining Organizational Culture
| Mechanism | How It Creates/Maintains Culture | Nepal Example |
|---|---|---|
| Founder's Values | Organization reflects founder's beliefs and vision | Chaudhary Group reflects Binod Chaudhary's entrepreneurial, global vision |
| Selection Process | Hiring people who fit the existing culture | INGOs hire for values alignment (inclusivity, community focus) |
| Top Management | Leaders model expected behaviors daily | Bank CEO who arrives early sets punctuality culture |
| Socialization | New employees learn "how things work here" | Orientation programs, mentoring, informal learning |
| Stories and Myths | Organizational legends about founders, heroes, crises | Stories about how the company survived the 2015 earthquake build resilience culture |
| Rituals and Ceremonies | Repeated activities reinforcing values | Annual awards ceremony, Dashain celebration, team retreats |
| Symbols | Physical artifacts representing culture | Open-plan office = collaboration culture; executive floor = hierarchy culture |
5.5 Strong vs Weak Culture
| Aspect | Strong Culture | Weak Culture |
|---|---|---|
| Shared Values | Widely held, deeply internalized | Values differ across subgroups; no consensus |
| Behavioral Consistency | Employees behave predictably aligned with values | Behavior varies widely; unclear expectations |
| Turnover | Lower — employees feel belonging | Higher — employees don't feel connected |
| Need for Formal Rules | Less — culture guides behavior naturally | More — must rely on rules and procedures |
| Advantage | Alignment, commitment, identity | Flexibility, diversity of thought |
| Risk | Groupthink; resistance to change; arrogance | Confusion; inconsistency; low morale |
5.6 Organizational Development (OD) Interventions
| Intervention | Level | Purpose | Nepal Application |
|---|---|---|---|
| Survey Feedback | Organization | Collect and share employee attitudes; identify issues | Annual engagement survey at banks and MNCs |
| Team Building | Group | Improve group functioning and interpersonal relations | Outbound programs, retreats at Nagarkot/Dhulikhel |
| Process Consultation | Group | External consultant observes and advises on group processes | Management consultants helping restructure departments |
| Sensitivity Training | Individual | Increase self-awareness and understanding of others | Diversity training for managers handling multicultural teams |
| Structural Redesign | Organization | Change reporting relationships, span of control, departments | Federal restructuring of government agencies after 2015 constitution |
5.7 Change Management Case Study: Digital Banking Transformation in Nepal
Background: A mid-sized Nepali commercial bank decided to shift from branch-centric banking to digital-first model, requiring significant organizational change affecting 2,000+ employees.
Applying Kotter's 8 Steps:
1. Create Urgency: Presented data showing competitors gaining 30% more customers through digital channels; shared NRB's digital banking directive timeline.
2. Guiding Coalition: Formed Digital Transformation Committee — CEO (sponsor), CTO (technical lead), HR Head (people change), CFO (investment), two respected branch managers (operational credibility).
3. Strategic Vision: "Be Nepal's most digitally accessible bank by 2027 — banking at every Nepali's fingertips."
4. Communicate: Town halls in all 75 branches; weekly email updates from CEO; Q&A sessions; FAQ documents addressing job security fears.
5. Empower Action: Removed old approval processes; gave branches authority to onboard digital customers; assigned "Digital Champions" in each branch; upgraded IT infrastructure.
6. Short-term Wins: Within 3 months, mobile app downloads exceeded 50,000; digital loan applications started; 5 branches went paperless — celebrated publicly.
7. Consolidate: Used early wins to justify further investment; expanded digital products; retrained 500 employees in digital skills over next year.
8. Anchor: Updated KPIs to include digital metrics; promoted Digital Champions; new hires required digital competency; annual awards for innovation.
Resistance Encountered: Senior tellers feared job loss (addressed through retraining to "Digital Service Advisors"); union demanded no retrenchment guarantee (management agreed — redeploy, not terminate); some branch managers resisted reduced foot traffic (shown how digital customers are more profitable).
Result: 70% of transactions moved digital within 18 months. Customer base grew 40%. Operating cost per transaction fell 60%. No forced layoffs — employees transitioned to advisory roles. Culture shifted from "process compliance" to "customer experience."
Practice Questions
Short Answer:
1. Define organizational culture. Explain Schein's three levels.
2. Compare Handy's four types of organizational culture.
3. Explain Lewin's three-step model of change.
4. What are the main sources of resistance to change?
5. List Kotter's 8 steps for leading change.
Long Answer:
6. "Culture eats strategy for breakfast." Discuss the importance of organizational culture for business success with Nepal examples. (15 marks)
7. Compare Lewin's and Kotter's change models. Which is more practical for implementing change in a Nepali bank? (15 marks)
8. Discuss the causes of resistance to change and strategies to overcome them. Apply to digital transformation in Nepal. (15 marks)
9. Analyze the organizational culture of a typical Nepali government office vs a private IT company using Schein's framework. (15 marks)
10. A Nepali manufacturing company wants to shift from autocratic to participative culture. Develop a change management plan using Kotter's model. (15 marks)
Exam Tips: ✓ Schein's three levels and Handy's four types frequently asked ✓ Know both Lewin's and Kotter's models ✓ Resistance causes and strategies important ✓ Use Nepal organizational examples ✓ Connect culture to performance outcomes