For Brilliant Answers Only

To understand what makes some organizations winners, take a close look at how employees interpret management's values in three critical areas.

Creating the Climate and Culture of Success BENJAMIN SCHNEIDER SARAH K. GUNNARSON KATHRYN NILES-JOLLY Z f you wandered around 3M for awhile and asked some casual questions, you would soon sense what places this corporation at or near the top of Fortune's "Most Admired Com- pany" list year after year.

You couldn't help noticing, for example, the number of informal meetings in progress.

At these meetings, representatives of 3M's sales, marketing, manufacturing, engineer- ing, R&D, and even accounting departments discuss new-product ideas and problems.

Customers also may be part of the group, conveniently discussing their problems with people from different parts of the company, without ever having to leave the room.

You would see a striking amount of co- operation among 3M employees. Employees go out of their way to help each other—they volunteer to work on other employees' ideas by working long extra hours. Even when told to stop working on something that interests them, employees persist, working on it on their own time.

Chat with any of 3M's 40 division man- agers.

They most likely will reveal that the unit achieved 25 percent of its sales income from products that are less than five years old.

And the manager would probably credit this record to the way employees organize them- selves into product development teams— each team made up of volunteers and chaired by a new-product champion.

In effect, what 3M management has done is create and maintain a climate that fosters innovation, customer service, and "citizenship behavior"—i.e., employees voluntarily help, in various ways, to pre- serve and protect the organization. Man- agers in many organizations, from Marriott to Motorola, from Xerox to Ritz-Carlton, share 3M's belief that organizations must maintain these three aspects of climate simultaneously.

Some call this achivement "total quality management." Others call it a "systems ap- proach." At 3M they call it "success." We imsh to tlianka number of our colleagues at the Uniivrsity of Maryland who provided invaluable input uito the dezvhpment of this article: Richard Guzzo, Paul Manges, and Katlierine Klein. In addition, Fred Lutlmns.

the editor of Organizational Dynamics, pushed us to the clarity of our argument tfmt exists in the presentation.

17 Ber}jamin Schneider is professor of psy- chology and business management at the University of Maryland at College Park. He has also taught at Yale University, Michigan State University, and for brief stints at Bar- lian University (Israel), Peking University (PRC), and the Institute for Administration and Enterprise, University Aix-Marseilles (France). Ben has pubiished wideiy on topics concerning organizationai ciimate, personai- ity in the work place, personnel selection, and services management. These publica- tions have appeared in more than 80 profes- sional journal articles and six books. His most recent book. Winning the Service Game (written with David E. Bowen), is in press with the Harvard Business School Press.

Ben consults with numerous organiza- tions through his consuiting firm.

Organiza- tional and Personnel Research, Inc. His ma- jor projects invoive diagnosis of the service climate and the culture of organizations as a prelude to assisting organizations to become more service-focused, and the development of simulation-based personnei selection and promotion systems. Recent clients have in- cluded GEICO, The Chase Manhattan Bank, the State of Alabama, and the World Bank.

DEFINING CLIMATE AND CULTURE Climate—the "feeling in the air" one gets from walking around a company—may be difficult to define. But this doesn't make it any less real.

Climate is the atmosphere that employees perceive is created in their organizations by practices, procedures, and rewards. These perceptions are developed on a day-to-day basis.

They are not based on what manage- ment, the company newsletter, or the annual report proclaim—rather, the perceptions are based on executives' behavior and the actions they reward.

Certain perceptions play heavily in the cre- ation of the climate employees perceive. At a company like 3M, they include the following; • Practices and procedures in this company encourage innovation.

• Employees in this company get rewarded for giving warm and friendly service.

• Employees cooperate for the organiza- tion's sake, rather than simply meeting the min- imum requirements of their job descriptions.

Employees observe what happens to them (and around them) and then draw con- clusions about their organization's priorities.

They then set their own priorities accordingly.

Thus, these perceptions provide employees with direction and orientation about where they should focus their energies and competencies.

This, in turn, becomes a major factor in creat- ing a climate.

Because organizations have numerous priorities, any organization can harbor many climates. For example. General Electric might have a climate that supports innovation in the R&D division and one that supports service in the 1-800 GE Answering Service division.

These departments also might share an over- all climate for organizational citizenship be- havior (OCB).

Culture, on the other hand, refers to the broader pattern of an organization's mores, values, and beliefs. Again, the actions of senior managers strongly influence culture. By ob- serving and interpreting these actions, em- ployees are able to explain why things are the 18 way they are, and why the organization focus- es on certain priorities. Culture, then, stems from employees' interpretations of the as- sumptions, values, and philosophies that pro- duce the climates they experience. For exam- ple, employees' cultural interpretations might be the following:

• Senior managers create a climate for in- novation because they give higb priority to competitiveness. They also value change, and they recognize the danger of complacency.

• Senior managers create a climate for service excellence because they value cus- tomer and employee satisfaction.

• Senior managers create a climate for cit- izenship behavior because they want em- ployees to do more than just come to work.

They value the extra effort it takes to preserve and promote organizational success.

Employees automatically make these at- tributions about what management values.

The challenge for management is to act in ways that will lead employees to the kinds of attributions that result in commitment to management's most important values.

Culture is created and transmitted mainly through employees sharing their interpreta- tions of events ("They are bringing in com- puters so they can reduce head count"), or through storytelling ("One day there was a blizzard and the manager drove a customer home because the customer's car was buried in the snow"). Cultural characteristics at- tributed to the organization actually become the organization's characteristics when em- ployees share their beliefs about management.

The more employees talk about manage- ment's qualities, the more the qualities be- come organization characteristics.

Thus, it is virtually impossible to have a service, innovative, or OCB culture unless em- ployees attribute these values to management.

Employees must first make these attributions, then share their attributions with other em- ployees, for these aspects of culture to literal- ly become part of the organization.

From our experience, an organization needs employees to perceive all three man- agement values to be successful. No organiza- Sarah K.

Gunnarson received her Ph.D. in Industrial and Organizational Psychology from the University of fVtaryland at College Park. She completed her undergraduate de- gree at the University of Virginia. She is a consultant with McManis Associates and is currently conducting transfer of training re- search for the Department of the Navy's To- tal Quality Leadership Office. Dr. Gunnarson has also consulted in the areas of cultural change and the use of incentives to increase productivity. Her primary interests are the ef- fects of job attitudes on employee motivation, organizational citizenship behavior, and ser- vices management.

19 Kattiryn Niles-Jolly Is employed as a per- sonnel research psychologist with the U.S.

Offioe of Personnel Management. Her pri- mary projects there are job analyses of fed- eral occupations and workforce quality stud- ies.

Ms. Niles-Jolly is a doctoral candidate in industrial/organizational psychology at the University of Maryland, where she was a Na- tional Science Foundation fellow. She re- ceived her Bachelor of Science degree from Howard University, graduating magna cum laude.

Her research interests include ser- vices management and transfer of training.

Previous publications include an article in the Journal of Applied Psychology and a book chapter on leadership.

tion succeeds over the long run without at- tention to customer service, to innovafion and change, and to the extra effort and energy that comes from employees' good will.

Readers might debate with us whether these are the three climates and cultures that must simultaneously exist for a business to be successful. These are the three we are betting on; contentious readers are free to choose their own three—or four or five—and con- duct their own research. Even if we lose the bet, our major point still holds: that organiza- tions must focus their employees' energies and competencies on multiple priorities si- multaneously, and that it is through climate and culture that this focus happens.

Below, we consider each of the three re- quirements, giving special attention to man- agement actions that can foster these climates, as well as employee attribufions that create (or are) culture.

THE CLIMATE AND CULTURE FOR INNOVATION Andre Delbecq and Peter Mills of the Universi- ty of Santa Clara in California tried to identify the characteristics that distinguish highly inno- vative companies from companies that are less innovative. Their findings, based on studies of several hundred managers in high-technology and health service organizations, provide valu- able insight into an innovative climate and cul- ture.

While Delbecq and Mills did not interpret their findings using the terminology of climate and culture, we will do so here.

The researchers defined innovation as the capacity to develop and effectively market in- novations. We define innovation more broad- ly, as an organization's capacity to change and to continuously reinvent itself.

Delbecq and Mills discovered that the practices and procedures shown in Exhibit 1 and discussed below were the major ways in which the highly innovative organizations differed from less innovative organizations:

• Commitment from top management and sponsorship. In organizations with low inno- vation, top management does not provide fi- 20 nancial and/or emotional support to get the innovation project started. In contrast, orga- nizations that promote innovation commit many resources to the project: They earmark special funds, they assign employees to find and promote innovations, and they make sure that each potential innovation has an as- signed advocate or sponsor.

• Emphasis on market analyses and cus- tomer sensitivity. The low innovators relied on poor feasibility studies, or moved forward with no feasibility study. This left them with unrealistic assessments of the demand for the innovation, overly complex designs, and in- sufficient attention to the support (such as training or marketing) that success requires.

High innovators, on the other hand, were "close to" and "in touch with" the average po- tential user, so they could accurately assess market demand and the support required to meet that demand.

• Adoption procedures.

The low innova- tors lacked the organization's formal com- mitment, as well as the resources for imple- mentation. High innovators, in contrast, received firm commitments from people throughout the organization. As a result, the innovations' advocates felt supported rather than alone and isolated.

• Implementation. Not only were low in- novators under-resourced, they also had delusions of grandeur that prompted them to prematurely implement the innovations with- out adequate testing along the way. The high innovation organizations took small steps, evaluating each throughout the process.

They then made the necessary adjustments for market acceptance. In addition, the gradual rollout allowed the companies to realistically determine the resources required to sustain the innovation.

When an organization's practices and pro- cedures are similar to the high innovators de- scribed by Delbecq and Mills, a company has a climate for innovation. No single practice or procedure shown in Exhibit 1 would suffice for such a climate; all of the differences between the way the high and low innovators function must first be in place.

The reason is that climate EXHIBIT 1 KEYS TO SUCCESSFUL INNOVATORS • Top management commits emo- tional and financial support and provides an advocate for the innovation.

• Top management ensures there is a market for the planned innovation.

• The planned innovation has sup- port from all levels of the organization.

• The planned innovation goes through several small, carefully evaluat- ed steps prior to actual implementation.

perceptions are based on aggregate practices and procedures, not isolated practices or pro- cedures. Climate perceptions are global; they are summaries of many experiences.

The contrasts that Delbecq and Mills pre- sent can be used to infer the beliefs employ- ees might share about senior managers' im- plicit assumptions and values. Although Delbecq and Mills did not explicitly identify these, we will surmise what they might in- clude. Employees might agree that manage- ment believes that:

• Success in the marketplace comes from complete knowledge of, and input from, the end user. Customer acceptance, not engineering sophistication, is what ultimately leads to suc- cessful innovation.

• The quality of the idea is important, not the authority and power of the person behind the innovation. Decisions should be based on information and data rather than politics and power.

• Creative people need nurturing, support, and organizational commitment to succeed.

No matter how creative, these people cannot sus- tain the effort it takes to successfully innovate if left alone and unsupported.

• Decisions should be made a step at a time. This is slow but also the most effective path to success.

This last inference may seem to be 21 • T counter-intuitive: intuition, for example, sug- gests that innovative companies are quick ac- tors.

In fact, they are quick actors—but only af- ter careful analysis and study. Innovative firms are the way they are because they con- sfanlly pursue innovative ideas; they are stick- lers for detail; and they demonstrate commit- ment to innovation over time.

Our research and consulting show us that management creates a climate by what man- agement tioes, not by what it says. Employees believe their company is an innovative com- pany when they see things happening to them and around them that push them to be innovative and demand they pay attention to innovation. At 3M and elsewhere (for exam- ple, at the Proctor & Gamble Co.

and Hewlett- Packard) everything is set up to foster innova- tion—who gets hired, who is rewarded, how the organization is structured, what proce- dures and resources are available, and so on.

It takes more than innovation to win in today's competitive national and internation- al environment, however. Recall that the U.S.

bred the concepts and early models of the compact disk and the video cassette recorder, only to see these innovations languish in re- search, not in development. Companies like 3M, Motorola, and Hewlett-Packard know that research is not enough; development of the product for market is required. More recently, another issue has become a key to success in the marketplace—service to the end-user con- sumer.

Perhaps researchers and consultants have focused so intently on customer satisfac- tion with products that they have overlooked the role of service in the world of consumer goods. Recently, however, various studies of service industries have shed new light on the role service plays in any business. The impli- cations of these findings for goods-producing firms are becoming clear.

THE CLIMATE AND CULTURE FOR SERVICE EXCELLENCE Service organizations need to think different- ly about their business, compared with those EXHIBIT 2 KEYS TO SERVICE EXCELLENCE • Human resource practices pro- mote employee well-being and a sense of community.

• There is active retention of exist- ing customers.

• There is attention to details regarding the quality of staff and the resources needed to deliver excellent service.

companies producing tangible products. This is true because of the ways in which services differ from goods:

• Services are more intangible than goods. Goods yield "things" while services yield "experiences." As a result, relationships between the consumer and the service deliv- erer are more significant in the evaluation of a service. Consider the "intangibility" of an experience in the theater. Once a play is over, the participant is left only with the experi- ence, not an object or product. Many services have some of this same intangibility.

• Services often require consumer par- ticipation in the production of the service.

For example, airplane passengers provide in- formation about where they want to go, what they want to eat, and where they want to sit.

If the customer fails to do his or her part (i.e., arrive for departure), the airline cannot save that flight for another customer and recoup its costs.

• Services tend to be produced and con- sumed simultaneously. Due to intangibility and the need for consumer participation, services are usually produced and consumed in the presence of both an employee and a consumer. Thus, a cabin attendant in an air- plane cannot deliver a service in the absence of a passenger, in contrast, a product can be manufactured at one place and point in time, then shipped, stored, inventoried, and ulti- mately delivered to a consumer at another place and time.

22 These differences between services and products exist on continua; they are not di- chotomies. The more central that providing a service is to the business, however, the more important delivery becomes in determining an organization's effectiveness.

One of us (Schneider) and his colleagues have produced a series of studies and papers that reveal the kinds of practices and proce- dures that characterize a climate for service.

Exhibit 2 summarizes these findings and shows the kinds of practices and procedures employees report exist when customers say they experience high-quality service.

• Human resources practices that pro- mote employee well-being and a sense of community. When employees view their orga- nization's practices and procedures as "treat- ing them well" and providing a sense of com- munity at work, customers report they receive high-quality service.

• Active retention of current customers.

When customers say a service organization de- livers high service quality, employees describe their organization as being equally concerned with retaining current customers and attract- ing new consumers.

• Attention to details regarding the qual- ity of staff and availability of necessary re- sources. In organizations that deliver service rated as superior by customers, employees say they are well trained, and that the equip- ment and supplies they work with are up-to- date and well-serviced. In general, the logis- tics of service excellence are very carefully thought out.

Because service quality is in the delivery, it is the interaction between the service deliv- erer and the consumer at the time of delivery that determines service quality for the con- sumer. Organizations can only indirectly con- trol what has been called the "service en- counter" because of the simultaneous nature of production and consumption. In the ab- sence of direct control of the service en- counter, it is the climate and culture that de- termine high-quality service. When the organization has practices and procedures that communicate service as a top priority, then service quality is usually the result.

How does management communicate that service quality is a priority? Management sends this message through various facets of "how things are done" within the organiza- tion. When employees experience support for performing well (via staffing, training, and lo- gistics support), when they feel they are per- sonally treated well, and when the organiza- tion emphasizes excellence in the treatment of current customers, then employees experi- ence a climate for service excellence. At Dis- neyland, for example, "cast members" go through an intensive selection process and a continuous socialization to the Disney way.

This socialization includes education and ex- perience in multiple functions so they can identify with how their "role" fits with the rest of the experience created for customers.

But Disneyland does more than carefully se- lect and train employees—it is impeccably maintained. Because management has made the collection and disposal of trash a high pri- ority, customers are struck by the overall cleanliness of the facility. In general, the back- stage activities (e.g., kitchen help in the restaurants) receive as much attention as the people who play the characters. Consequent- ly, the total environment sends a service qual- ity message, and this message leads to an un- forgettable experience for the Disney guests.

The principles we have enumerated also apply to (a) internal service and (b) service to customers of goods-producing organizations.

By internal service, we refer to relationships between employees and work groups within an organization—the relationship between sales and production, for example, or be- tween marketing and human resources.

When these functions treat each other as val- ued "customers," people working in the func- tions feel better about themselves and the or- ganization and end-user consumers report they receive superior service. At hundreds of companies now (Xerox, to cite one example), project teams composed of employees from different functions are being used to solve problems. These teams break down the old walls separating functions—walls that result- ed in poor service quality to each other, and ultimately to customers.

23 EXHIBIT 3 KEYS TO ORGANIZATIONAL CITIZENSHIP BEHAVIOR • Management is non-exploitative and trustworthy.

• There are norms of helpfulness and cooperation.

• There are fair reward systems based on broad and diverse contribu- tions to organizational success.

At Chrysler, a similar process seems to have led to improved products, such as the best-selling mini-vans and a new line of cars for 1993 that has received rave reviews.

In this goods-producing environment, cross-func- tional project teams have improved internal communication and internal service to each other such that Chrysler has cut the amount of time required to produce a new Une of au- tomobiles from five years to three years (for the new Neon). Not only has internal com- munication and service improved, but Chrysler is also involving dealer sales and ser- vice people as partners in new ways of think- ing about the production, delivery, sales, and service of Chrysler products. Total quality management is moving beyond customer sat- isfaction with the product to customer satisfac- tion with the entire experience of buying and owning a car.

When management creates and main- tains a climate for service, employees are like- ly to attribute to management the following values:

• People are the key to our success. Both customers and employees are valuable re- sources and should be viewed as long-term investments in the future.

• Employees have a tendency to treat others as they have been treated. Customer- contact employees who are treated as valu- able persons by the organization will treat the organization's customers similarly. How em- ployees get treated will be reflected in how customers get treated.

24 • It is the little things that count. Good service consists of many well-executed small details.

• Work should offer employees a sense of community and belonging where em- ployees treat each other like family. Studies at Sears and Ryder, as well as studies report- ed by the FORUM Corporation, all support the following conclusion: When employees experience their organization as one that sup- ports them as people and supports excellence in service delivery, customers report they re- ceive superior service.

There is more to organizational effective- ness than service and innovation, however.

Organizational effectiveness also requires that employees be committed to the organi- zation's success. This commitment needs to take the form of cooperative, extra-role be- haviors where employees are dedicated to the organization's long-term survival. In short, employees determine the success of an orga- nization by their support of the organization.

These kinds of supportive behaviors on the part of employees are called good citizenship.

THE CLIMATE AND CULTURE FOR CITIZENSHIP BEHAVIOR For about a decade now, Dennis Organ and his colleagues at Indiana University (Blooming- ton) have studied the role that cooperative, ex- tra-role behaviors play in facilitating organiza- tional effectiveness. Organizational citizenship behavior (OCB) or prosodal organizational be- havior (POB) consists of helpful, cooperative acts that are not directly required of employ- ees.

Examples include orienting new employ- ees, using sick leave only when one is really sick, and helping a supervisor with a task with- out being asked. Taken as a whole, however, these behaviors quickly add up and greatly benefit the organization. The research suggests that three key issues (summarized in Exhibit 3) relate to a climate and culture for OCBs:

• Perceptions of fairness and trust.

When employees perceive that a "just world" exists in their organization, supervisors report that employees display more OCBs. Fairness generates a sense of trust, and this trust yields employee behaviors supportive of organiza- tional effectiveness.

A just world is created for employees based on perceptions of fairness and equity, not only with regard to pay but also with regard to all forms of recognition and reward—benefits, respect, and opportu- nities for advancement.

• Norms of helpfulness and cooperation.

When a senior manager is willing to pitch in on the assembly line or take over a teller's post during a crisis, this communicates the importance of cooperation. When employees see others "going beyond the call of duty" to benefit the organization as a whole, they tend to do the same. When an new employee ob- serves these behaviors early in his or her tenure, that employee is more likely to see such action as the norm—what is expected.

• Fair reward systems based on broad contributions. Individually based piece-rate systems have the potential to depress the probability of OCBs.

For example, if employ- ees are rewarded only for very specific per- formance behaviors and nothing else (such as loyalty, tenure, courtesy, trying new ways of doing things), then they may conclude that the only behaviors of importance are those tied to the productivity on which the piece- rate system is based. When employees see co- workers being recognized for many different kinds of activities that promote organization- al effectiveness, the probability increases that they, too, will display these other forms of OCB.

In summary, research shows that a cli- mate for these cooperative and organization- ally helpful behaviors is likely to exist when management is perceived to be fair and just, when newcomers see cooperative behavior on the part of co-workers and supervisors, and when reward systems are tied to more than job-specific, individually based piece- rate productivity. An organization with a cli- mate for OCB might have employees who at- tribute to management the following values:

• Earning employees' trust is essential to employee commitment. Workers who see themselves as exploited have little or no com- mitment. The employer-employee relation- ship is a reciprocal, two-way relationship.

• An atmosphere of reciprocation and cooperation establishes a culture in which employees willingly go beyond their job de- scriptions. Management must display coop- eration and helpfulness if they expect em- ployees to be cooperative and helpful.

• Leaders must set trends for perfor- mance by doing the same kinds of things they expect from subordinates. Leaders are not special.

For example, if leaders expect em- ployees to take a cut in pay, they should be willing to take a comparable salary reduction.

When employees attribute these assump- tions to management, they create a culture for OCBs.

We argue that this culture is likely only when the climate for OCBs exists. As we said about the climates and cultures for service and for innovation, it is the practices and proce- dures employees observe that yield the global climate perceptions. These perceptions, in turn, yield the attributions about manage- ment's assumptions, beliefs, and values.

IMPLICATIONS FOR ORGANIZATIONAL CHANGE Managers can improve their organization's effectiveness by changing their organization's climate and culture, but the process for doing so is slow and difficult. This is because man- agers must modify the practices, procedures, and behavior by which they manage before there will be a change in the climate. And di- mate change precedes culture change.

To complicate things, not only is it diffi- cult for people to change their behavior, it can take a long time for the change to become no- ticeable. We change very slowly because we must overcome the inertia of our own behav- ior first; only after we overcome that inertia do we actually begin to change in ways that others can see. The whole process is some- what like the launch of a space shuttle. The rocket motors, fighting against gravity, ex- pend most of their fuel on the launch pad— producing no noticeable movement for a 25 while. Similarly, managers can expend a lot of energy to change a climate and culture with- out having a lot to show for it—until inertia is overcome and the climate can get moving in new directions.

One risk of change is that the organiza- tion will operate less effectively for a while as the new climate is being created; when the practices and procedures are changing, em- ployees become less certain about what man- agement has as its priorities. This creates am- biguity, and ambiguity leads to stress.

One CEO with whom we have worked said that changing the climate of an organiza- tion is like changing a Boeing 727 into a Boe- ing 747 in mid flight. On the one hand, the change seems worth the trouble, because the 747 will be a more effective transport vehicle.

On the other hand, there will be a point where the craft is neither 727 nor 747—and the whole thing could crash!

But change, and the change process, have posihve consequences, too. Change sensitizes people to what happens to them and around them. Consequently, the change process is a great opportunity for management to flood the environment with cues to the intended new priorities. The more consistent the mes- sages are about the new priorities, and the more employees participate in the change, the more likely the change in climate is to happen. Also, the more visible the manifesta- tions of the change are, the more likely em- ployees will latch onto the new climate.

The new culture will emerge later as em- ployees have opportunities to talk with each other about what is going on and why it is happening. They will begin to share their be- liefs about the change and management's goals and priorities, and make attributions about management's values based on their experiences.

In general, management can more direct- ly change climate than it can change culture.

But changing even climate is a demanding task—ask managers at General Motors or IBM or Sears.

Suppose the management of an organi- zation wished to create a climate and culture for success by dealing with the three priorities we have outlined. How might management use our presentation as a framework? Here are some areas to consider.

NEW EMPLOYEE RECRUITMENT, SELEC- TION, AND ORIENTATION. The kinds of em- ployees recruited and selected and the kinds of orientation experiences provided for new employees send strong messages about orga- nizational priorities. For example, human re- sources personnel can conduct job and orga- nizational analyses to identify the characteristics important to consider in selec- tion. Only people who are likely to have those persona] attributes should be recruited and hired. You simply cannot hire and socialize new employees for only one priority; success requires competencies and energies directed at multiple simultaneous priorities.

TRAINING. The mere presence of for- mal training programs and what is empha- sized in training sends powerful messages about an organization's priorities. Most orga- nizations, if they have training at all, focus narrowly on job-specific skills. To our way of thinking, all employees require training for all of the organization's priorities. Every em- ployee has responsibility for identifying op- portunities to be innovative, for ensuring the service deUvered both internally and exter- nally is superior, and for finding opportuni- ties to be helpful and to support the organi- zation's progress.

Most employees possess inclinations or predispositions toward making greater contri- butions to the organization. Training gives them the skills that permit those inclinations and predispositions to become active. In oth- er words, training transfers a motivation into a competency.

FORMAL AND INEORMAL REWARD SYSTEMS. There are two key issues here: (1) which behaviors get rewarded and (2) whether rewards are dispensed fairly. Hu- mans direct their energies and competencies toward rewards they value. Management must ensure that rewards reinforce behavior that maximizes the simultaneous attainment of multiple organizational priorities. Behav- 26 EXHIBIT 4 KEY CULTURAL ASSUMPTIONS RELATED TO INNOVATION, SERVICE, AND OCB INNOVATION SERVICE OCB HOW WE SOLVE PROBLEMS How WE MANAGE PEOPLE How WE SUCCEED Througb gathering information, not power; slow but sure A creative mind needs nurturing and support Through customer acceptance By attending to small details With consideration; treat employees as you want them to treat customers By treating both employees and customers well If you see some- thing that needs doing, you do it By setting examples for employees; act as you want employees to act Througb both man- agers and employees going beyond their role requirements for the greater good of the organization iors that are customer-oriented and innova- tion-oriented and put tbe spotlight on citizen- ship behavior sbould be rewarded. Valued re- wards include not only pay and promotion but also recognition and other perquisites (cars, offices, and so fortb).

LOGISTICAL RESOURCES. Employees can experience their work world as one that ei- tber facilitates or inhibits tbe attainment of stat- ed priorities. Organizations tbat state priorities but fail to support those priorities with re- sources will evoke appropriate cynicism. Em- ployees pay attention to what management ac- tually provides resources to accomplish—to wbere management puts its money, not where it puts its moutb. Money is usually required to support priorities, especially to support tbe at- tainment of service and innovation and OCB.

Resources in the way of staff, tecbnology, train- ing to use new tecbnology, and so fortb are what really send tbe message about priorities.

Tbe purpose of this list is to encourage managers to scrutinize every facet of tbeir or- ganization's practices, procedures, and re- wards, and look for omissions and inconsisten- cies between what is being preacbed and what is actually happening. What is happening de- termines the climate and the attributions em- ployees make about what management values.

SUMMARY Organizations become effective wben they create, maintain, and sometimes change ch- mates and cultures to emphasize the achieve- ment of multiple priorities. In tbis environ- ment, employees are able to interpret what happens to them and around them in ways that are consistent witb their organization's goals and priorities—and set tbeir own prior- ities accordingly.

Employees bave thousands, if not mil- lions, of seemingly isolated experiences as tbey go about their work. But tbese experi- ences do not remain isolated. Tbe experiences are clustered according to tbe meaning em- ployees give them. These clusters of events and experiences result in climate perceptions.

These climate perceptions, in turn, serve to illustrate for employees what management believes in and values. Exhibit 4 summarizes wbat employees may surmise management values in an organization that has climates for innovation, service, and OCB. Tbe exhibit 27 shows that employees attribute to manage- ment a set of broadly focused values—values concerning how the organization solves prob- lems, or how an organization manages peo- ple, or what an organization believes are the keys to success.

A look back at Exhibits 1,2, and 3 reveals that the values summarized in Exhibit 4 are based on employees' climate perceptions.

These perceptions, in turn, are based on em- ployee experiences with the practices and procedures of the organization and the kinds of behaviors they see being rewarded.

In tandem with climate, the key to orga- nizational effectiveness is for management to identify the values they hold about the nature of people and the way the world works. Man- agers need to identify their values because it is inevitable that the practices and procedures they establish and the behaviors they reward will reflect those values—and their employ- ees will attribute values to them based on what they do—not what they say. Our expe- rience is that many managers are unaware of the kinds of values they hold or, even worse, they espouse values that are inconsistent with their behavior and with the values their em- ployees attribute to them.

Obviously, every service organization es- pouses good service, but how many man- agers hold the kinds of values that lead to the promotion of a climate for service excellence?

Just as obviously, every organization would rather be a successful innovator than a failed innovator, but how many organizations cre- ate the kinds of practices and procedures and reward the behaviors required to create a cli- mate for innovation? According to Delbecq and Mills, most of the organizations they studied were failures at innovation. We be- lieve this is true because most decision mak- ers hold values about people and how to run a business that are inconsistent with success at innovation. And to be successful in an in- creasingly competitive and global environ- ment, organizations must be simultaneously excellent in service and innovation. They must also create conditions that foster a willingness to expend extra effort on behalf of the organi- zation.

Management cannot expect employees to focus their energies and competencies only on what management says is important. In- stead, employees will focus on what manage- ment communicates through their behav- ior—through the decisions they make about the practices and procedures and rewards employees experience. Whether on purpose or by default, management is responsible for the climates and cultures created in the minds of employees. Ultimately, these are the cli- mates and cultures that determine how suc- cessful an organization will be.

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28 SELECTED BIBLIOGRAPHY Some useful books on climate and culture in- clude Benjamin Schneider (ed.).

Organization- al Climate and Culture (San Francisco: Jossey- Bass, 1990); Harrison Trice and Jan Byers, Organizational Culture (Englewood Cliffs, NJ; Prentice-Hall, 1992); and Edgar Schein, Orga- nizational Culture and Leadership, 2nd ed. (San Francisco: Jossey-Bass, 1992).

Tbe information about 3M at the opening comes from Tom Peters and Robert Water- man, Jr., In Search of Excellence:

Lessons from America's Best-run Companies (New York:

Warner Books, 1982).

The materials on innovation used as a basis for this article are from Andre Delbecq and Peter Mills, "Managerial Practices tbat Enhance Innovation," Organizational Dynam- ics, Summer 1985, pp.

24-34.

The materials on innovation throughout tbe article profited from a book by Louis Tornatzky and Mitchell Fleischer, The Process of Technological Innova- tion (New York: Lexington Books, 1990).

The information about service climate comes from Benjamin Schneider and David Bowen, "Employee and Customer Perceptions of Service in Banks: Replication and Exten- sion," Journal of Applied Psychology, August 1985, pp.

423-433.

For additional information on service quality and human resources management, see Benjamin Schneider and David Bowen, "The Service Organization:

Human Resources Is Crucial," Organizational Dynamics, Spring 1993.

For a good treatise on management action for service quality and tbe FORUM Corporation's research, see Richard Whitely, The Customer Driven Com- pany: Moi'ing From Talk to Action (Reading, MA: Addison-Wesley, 1990). On organiza- tional citizenship behavior, see Dennis Or- gan, Organizational Citizenship Behavior:

The Good Soldier Syndrome (Lexington, MA: Lex- ington Books, 1986). On the importance of organizational reward systems, ratber than management's words, for directing employ- ee energies and competencies, see the semi- nal article by Steven Kerr, "On tbe Folly of Rewarding A, Wbile Hoping for B," Academy of Management Journal, May 1975, pp. 769-783.