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Understanding the Role of Company Culture

  Originally Published MDDI August 2006 COMPANY CULTURE Medical device companies can benefit from understanding their culture and taking steps to ensure that it supports the company’s mission.  

COMPANY CULTURE

The attention that organizational culture has received since the early 1980s continues today and has even intensified because companies now better understand the role that culture plays in an organization's success. This article explores how a medical device company's culture affects and influences financial outcomes, market share, employee relations, regulatory compliance, customer perceptions, and many other business metrics. It also provides insight on how to meet a challenge or capitalize on an opportunity.

Exploring and understanding a company's culture, for example, may explain why management's focus is perceived to be strictly financial. Or, exploring the culture may explain why only the quality and regulatory departments control quality and regulatory compliance and no one else does. Culture can also explain why a company considers a customer complaint negative, unimportant, or something to hide. Culture can affect whether a company understands what is needed for knowledge transfer and training, or whether R&D stays involved with a product after launch.

What is Organizational Culture?

What exactly is culture? Culture is the customary beliefs, social forms, and material traits of a social group. Culture represents the beliefs, values, and resultant habits and behaviors that determine how a social group and people within the group make decisions concerning what is right and what is wrong. Culture is an expression of personality and character.

Organizational or company culture is no different from a society's culture. It is represented by the beliefs, values, and presumptions of an organization. These, in turn, create the environment or atmosphere in which the organization operates. A medical device company's decisions and actions, including the justifications for those decisions and actions, are shaped and filtered by the culture that exists. For example, the culture creates a filter and an influence for making decisions on releasing questionable product, submitting an MDR to FDA, or recalling a product.

The work processes and the forms of communication that develop within a medical device company to carry out its business are a result of that culture. For example, are the company's systems and processes used for new product development clearly defined, efficient, effective, and fast? Is bad information shared with management equally with good information? Does information flow freely from function to function, or is keeping information a way of maintaining a power base? In some companies, everything is so departmentalized that it consumes the organization to the point that most work ends up adding no value.

Organizational cultures or attitudes, as with social groups, vary significantly, and this holds true for medical device companies. For example, some medical device companies routinely debate compliance with FDA and others do not. Some medical device companies routinely recall products while others have only occasional recalls. Some device manufacturers have thousands of complaints or MDRs, whereas others have very few. There is no right or wrong culture, and the only true performance measure of a culture is how well the medical device company meets its business objectives.

It is important to recognize that culture affects three major areas. First, understanding an organization's culture is a fundamental requirement for performance improvement within that organization. An organization cannot effectively address strategy (where the company is headed), structure (how the company is organized to do so), and systems (what processes are used to get there) until the culture is defined and understood.

Second, an understanding of the effect that culture cannot have on a company is needed to successfully integrate acquisitions and mergers. Taking one organization's beliefs, behaviors, presumptions, and methods that have been established and accumulated over time and combining them with another organization's culture requires significant planning. Certainly in the past few years, there have been cases in the medical device industry where acquisitions and mergers have been difficult—if not disastrous—because of a lack of quality planning and a lack of cultural understanding.

The third area affected by culture is the recruitment, development, and retention of skilled and disciplined people. A medical device company is no different than any other organization in this regard, and culture certainly affects this crucial process. Personnel turnover rates may be too high, or in some cases too low, reflecting the culture of the company. It is difficult to attract and retain needed skill sets, especially those skills relating to quality systems, regulatory compliance, particulate control, and sterilization, when the company's culture is neither known nor understood.

The beliefs and values concerning people's satisfaction can influence both recruitment and turnover. Having a plan for each individual in terms of training, development, delegation of responsibilities, decision making, and promotion are key to a medical device company's efficiency, effectiveness, and cycle time. The nature of culture is a relevant aspect of both a medical device company's success and an individual's success within and outside that organization.

Medical device companies' cultures either develop and evolve over time, or a conscious effort is made to institute a new culture or to change an old one. These cultures, of course, are influenced by the organization's history, its founders, or by its top executives.

Strategy, Style, Skills, and More

In the 1980s, comparisons of Japanese and U.S. management styles were made in books such as The Art of Japanese Management by Pascale and Athos.1 The authors compared several components that might be described as the key elements of organizational culture. The components, known as the seven Ss, include the following:

• Strategy—the plan of action to get from one position to another.

• Structure—how the company is organized.

• Systems—how work is performed and time is spent, and how information flows in the organization.

• Style—management's patterns of behavior and the expressions of values and beliefs relative to control or enablement.

• Staff—the demographic characterization of the functions and people in the organization and how they relate.

• Skills—what the organization and its people do well that set it apart from other organizations.

• Superordinate goal—an important purpose for the organization other than financial.

The authors concluded that the Japanese companies focused on all seven components equally, whereas U.S. companies focused primarily on the first three components, referred to as the hard Ss. The cultures of the U.S. firms, therefore, tended to reflect the importance of strategy, structure, and systems and to minimize the importance of the softer Ss of style, staff, skills, and having a superordinate goal.

The character of U.S. company cultures at that time was described as autocratic, hierarchical, vertical, controlling, centralized, and inflexible. U.S. companies were driven by month-to-month and quarter-to-quarter financial performance with minimal regard for the soft Ss.

Although the cultures of medical device companies vary, there are indications that many are moving toward the softer Ss. More directly, structure continues to be a dominant characteristic, which is reflected by functions and departments being more important than the business as a whole. When this happens, the company experiences communication gaps. In the medical device industry, another structural issue involves to whom the quality function reports and how high up in the organization it extends.

It is important to look at strategy, particularly as it relates to the ownership of quality and regulatory compliance. What if, strategically, the goal were to make everyone responsible for quality and compliance? The success, then, of any current quality function would be based on downsizing the function to serve only as the regulatory conscience of the company. The need for a quality function would be supplanted by everyone in the organization sharing the responsibility for quality and compliance.

Strategy should focus on system and process thinking rather than on functional responsibilities and individual work. Mapping all of the company's processes (including those of the quality system), identifying process owners and stakeholders, and managing the processes rather than people would have a significant effect on efficiency (costs), effectiveness (quality), and cycle time (speed). Most progressive medical device companies would welcome this approach to the management of quality and regulatory compliance. Through this approach, quality and compliance are essentially managed as part of the culture.

A company's culture affects every aspect of the organization. Culture has a profound effect on the image of the company and the perceptions created in the eyes of customers, suppliers, employees, shareholders, and the community. The culture defines how communication occurs both internally and externally. It also determines to what level barriers will evolve between functions and how impermeable and isolated departments will become.

Some company cultures allow enemies to be created within their own organizations. Cultures define the relationship between management and employees and between employees and customers.

A company's culture expresses very quickly the trust and confidence that exists between all parties within and outside an organization, and it can reveal a company's potential to be exploited. The culture sets the boundaries for how power and information are shared or not shared and distributed in an organization. It creates the environment for how much an individual is able to contribute to the decision-making process.

Culture also determines how rewards and discipline are configured to reinforce the behaviors that are expected in an organization. There is no doubt that the softer aspects of organizational life (style, staff, skills, and superordinate goal) contribute to the success of a company to the same or greater extent than strategy, structure, systems, and financial factors do.

Conclusion

Recognizing that there is no right or wrong culture, how can a device company develop—or reshape—its culture? The first step is to define where the organization is heading, which requires answering a few key questions:

• What does the company need to do to become more successful and why?

• What are its current strengths and weaknesses?

• What is the company's vision for the future?

• What are the beliefs, values, and significant goals of the organization to support its mission of achieving its vision?

These sensitive and powerful questions need to be answered before a culture can be effectively changed. If a company fails to answer these questions, it risks developing a culture by chance or a culture based solely on the attitudes of a very few at the top of the organization. The culture should be linked to what the company wants to accomplish, and culture should be considered in the context of business planning.

The next step is to determine how the organization will transition between its current situation and its ideal culture. Borrowing again from Pascale and Athos, a company must determine what form the strategy, structure, systems, style, staff, skills, and superordinate goal must take for the company to succeed. All policies, procedures, processes, methods, and characteristics of the organization must be aligned in a way that creates and encourages the desired behaviors. System and process thinking should eventually replace functional or individual assignments and work. This defossilizing process is extremely critical and must be carefully planned to build in the necessary ownership.

The most critical component of a device company's culture is how people in the organization are recruited, developed, and treated. Today, more than any other time since Frederick Taylor, people in an organization are becoming recognized as legitimate assets of a company, contributing with brainpower, not just labor. Employees can no longer simply occupy a position on an organizational chart without adding value and continuously learning in the process.

Achieving the full potential of people and their knowledge results in economies never imagined. If a company does nothing, a culture will certainly develop on its own. However, a culture can be shaped and cultured to reflect a company's beliefs, values, and mission.

Truby has more than 35 years experience in the medical device industry and is a management facilitator assisting organizations in optimizing organizational performance and regulatory compliance through operational systems and process improvement. He can be contacted at [email protected]sn.com.


Reference

1. Richard Pascale and Anthony Athos, The Art of Japanese Management (New York City: Simon and Schuster, 1981.)

Copyright ©2006 Medical Device & Diagnostic Industry
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