Culture Change at Chrysler Group, LLC: PE Fit and Competing Values Framework

The story of Chrysler Group, LLC is one of significant paradigm change led by Chief Executive Sergio Marchionne in response to the company’s bankruptcy. Joann Muller (2011) explains that Marchionne “forced Chrysler to confront problems it had long ignored such as inefficient plants, production overcapacity and value-destroying incentives." Of these problems, Marchionne expressed a great deal of contempt for the use of heavy rebates and other incentives to boost sales; explaining that heavy discounting rarely helps auto makers generate profits in the long run.


Among the significant changes that helped to bring the company out of bankruptcy, Marchionne put a great deal of emphasis on building a new corporate culture that serves the goals of the organization. His aggressive redesign resulted in drastic restructuring of the executive ranks; laying off several veteran executives and flattening the bureaucracy. He called for weekly management meetings that include video equipment to allow the presence of Fiat SpA executives, where Marchionne also serves as CEO. These meetings serve as an opportunity for Marchionne to point out deficiencies such as vehicle quality, profit margins, and pricing controls.

To better understand the culture change that took place at Chrysler Group, it is necessary to evaluate the layers of organizational culture. These layers are comprised of observable artifacts, espoused values, and basic assumptions. Observable artifacts represent the more visible level of culture. This includes acronyms, manner of dress, awards, myths and stories told about the organization, published lists of values, observable rituals and ceremonies, special parking spaces, decorations, and so on. We can look to the company’s website as an observable artifact to better understand their culture. Chrysler explains that the five traits that make their culture distinctive are innovation, leadership, passion, cooperation, and responsibility. The long and impressive list of awards and recognition listed on their website are supportive of these values. Along with the five listed values outlined in their culture overview, their website places a great deal of emphasis on diversity, sustainability, and community; three noteworthy values that can be seen as important subsets of cooperation and sustainability.

While the company’s website and awards represent observable artifacts, the values described there make up the espoused values that guide behavior and define the company’s culture. The goal is to convert these espoused values into enacted values, becoming a part of the basic assumptions that represent the core of the organization. Basic assumptions are unobserved and highly resistant to change, requiring persistent effort on behalf of management to influence these underlying assumptions. The main takeaway from assessing the levels of culture within an organization is called PE fit, defined as the compatibility between an individual and a work environment that occurs when their characteristics are well matched.

The major restructuring of management previously discussed represents Marchionne’s effort to improve the PE fit of his direct reports. At the end of the restructuring process, Marchionne had twenty-three people reporting to him that were specifically selected to ensure that they each possessed the appropriate skills, values, abilities, and personalities to match the job requirements of each specific position. PE fit is especially important in managerial positions to ensure the perpetuation of appropriate values throughout each level of the organization. Written values hold little weight if they are not consistently reinforced through the example of the leaders within the organization.

One way to further assess Chrysler’s new culture is to classify it using the competing values framework (CVF). This “provides a practical way for managers to understand, measure, and change organizational culture." There are four basic types of cultures outlined in the CVF: Clan, adhocracy, hierarchy, and market. As is the case with Chrysler, organizations can possess characteristics of each type, but generally have one that is more dominant than the others. By looking at the two fundamental dimensions or axes, we can determine the new type of organizational culture manifested through the changes orchestrated by Marchionne.

The x-axis represents whether the organization focuses its efforts on the internal or external environment. It is clear that the primary goal of Marchionne is profitability, giving the company an external positioning. The values outlined on the company’s website, however, seem to indicate qualities of both internal and external focus. For example, innovation and cooperation represent two opposing sides of the spectrum. Also, Marchionne stressed quality which is an internal focus most related to a hierarchy culture, but yet he disseminated much of the executive power in the fashion of a clan culture. Many of the changes would seem to suggest an internal focus, although the desired ends of profitability and innovation are drivers of external positioning. For the sake of the assessment, we will base it on means rather than ends and say that the new culture is internally focused.

The y-axis represents an organizations preference for flexibility and discretion or control and stability. Marchionne’s micromanaging style of leadership and his desire for control over pricing and quality would suggest stability and control, although the company’s stated value of cooperation is contrary to this. During the weekly meetings with managers, little is said about cooperation and communication; but rather how Mr. Marchionne often spelled out what he saw as Chrysler’s many deficiencies. Despite stated values, it seems that the new culture is about control and internal focus, making it a hierarchy culture.

It is clear that Marchionne took charge of Chrysler Group with a vision of restoring profitability and the company’s brand image. His approach involved a dramatic change to the organizational structure, systems, and procedures; shaking the company to the core. 

References

Kreitner, R., & Kinicki, A. (2013). Organizational Behavior (10th ed.). New York, NY: McGraw-Hill Irwin.

Muller, J. (2011). Sergio's Star Turn. Forbes, 188(4), 64-66.

Chrysler Group, LLC. (n.d.). Our Culture. Retrieved May 16, 2014, from http://www.chryslercareers.com/OurCulture/Pages/home.aspx

Image retrieved from http://www.artsjournal.com/fieldnotes/2012/12/the-competing-values-framework/