Organisational Culture of Aldi Essays

Organisational Culture of Aldi Essays Organisational Culture of Aldi Paper Organisational Culture of Aldi Paper which operate separately from each other within specific market boundaries. These individual groups were owned and managed by the two brothers. Their mother however maintained a small grocery store close to their home to make ends meet. Karl and Theo attended middle school and then went on to do training with Karl doing a training at the delicatessen and Theo at his mother’s grocery store. After returning from army duty after the second world war in 1945, they took over their mother’s store and in the post war years the brothers expanded the business rapidly. In 1948, soon after the German currency reform, the Albrechts’ incorporated their business as the Albrecht Discount store (Aldi). The two brothers however split in 1960 over a dispute on whether to sell cigarettes at the Till or not. Aldi expanded internationally in the 1970’s , specifically expanding into the UK in 1989 with a total of 421 outlets in the UK. Introduction As the economic or business environment is increasingly changing and getting more dynamic, it is very essential for organisations and companies to change their organisational culture to adapt to this changing environment and therefore achieve a competitive advantage over its competitors. Culture can be defined as a set of shared values, shared beliefs and customary ways of thinking doing things, which shape and guides the ways of organisational members. Culture is therefore very crucial as it has the ability to influence the processes or the activities of employees and the functioning of the organisation without necessarily imposing measures and control. All Organisations posses a distinct form of culture with some having more than a single culture. This culture is usually very difficult to measure, change and most especially change. This report is going to present the current culture of Aldi, critically examining its current culture and possible proposal for a change in culture. It identifies the current organisational culture, its strengths and weaknesses and make recommendations necessary for an organisational culture change. A descriptive methodology will be used to determine the current culture of the Organisation, through research and survey from the Organisation’s website and from current employees. This is going to give us a general picture of the current culture and also analysed to determine how effective the current culture is. Having given a brief summary of what this report is going to contain, I will now discuss the detail of Aldi ‘s current culture and a possible culture change of the Organisation in the main part of the report below. ALDI’s CURRENT CULTURE AND FINDINGS Edgar Schein’s (2004) model of culture which is widely accepted, considers Organisational culture in three different levels , each distinguished by its visibility and accessibility by individuals. These levels are artefacts and creation, values and beliefs and basic assumptions. However, Charles Handy( 1978), suggested Organisations could be classified into a broad range of four cultures. This formation of culture will depend u[on a whole host of factors including company history, ownership , organisation structure environments and others. One of the cultures he suggested was the â€Å"Power Culture† which he suggested reflects the concentration of power of a family-owned business, either extremely large or small. Aldi’s organisational culture has been highly influenced by its founders. The cultural values and rules of Aldi clearly reflect the Organisation’s philosophy , guiding principles and strategy. Dieter Brandes a former Managing Director of Aldi described the culture as one of ‘simplicity’. The Aldi model which is based on a simple concept of which is the provision of highly quality products at low prices, is clearly understood by managers, employees and customers. The managers at all levels and the employees pay particular attention to economic efficiency and are very cost conscious. Waste or defects is not tolerable in the organisation at any point, therefore the staffs have a culture of striving to avoid the possibility of waste. This culture originally instigated by the founders of cost efficiency could be demonstrated, for Theo Albrecht is said to have personally switched off the lights in offices when there was enough daylight from outside. This concept of ‘cost watching’ extends into all areas of the value chain , including the development of new techniques for the warehouse management or for the transportation of goods. This is very obvious in the Aldi stores as they have a buy your own bag policy where the customers have to purchase their bags or bring along their bags for shopping. The aim is to find small improvements in all areas and to develop pleasure in achieving small successes. This culture of continuous improvement, is accompanied by the strong focus on the development and implementation of solutions. According to Brandes, the people of Aldi can be described as practitioners, new ideas and solutions are tried, rather than being exposed to detailed analysis, if they prove to be successful then they are implemented quickly. In addition to its focus on continuous improvement and economic efficiency, the organisational culture is also characterised by determination and persistence. As outlined above, there have been very few changes in Aldi’s business approach since its foundation. Aldi has consequently pursued its business concept and has resisted temptations such as expanding its number of products, diversifying into other areas and changing its cost leadership strategy. This is an important trait of its culture namely continue doing what they do best. This Organisational culture is reinforced by Aldi’s recruitment and selection approach. Aldi tend to select, promote and train managerial talents from inside the organisation. Important qualities for potential managers are a focus on economic efficiency, fairness towards others , including suppliers modesty and reservation towards the public and the press. These behavioural characteristics are reinforced by job descriptions outlining clear goals and competencies. Aldi managers have usually been employed from different sections of the organisation, both from the stores and warehouse with these employees having a broad knowledge and experience on how the organisation operates and have digested and accepted the organisational culture. For example the area managers will have to undergo a one year training program in which they learn about the structural and procedural elements of retail management, including store operations, administration and logistics and property management. An important part of this training includes Aldi’s management system, including its focus on economic efficiency. The first part of the training takes place in the store where future area managers takes over the responsibilities of the store managers for a certain period of time. This â€Å"hands-on† approach used by Aldi aims at acquainting them with the organisation’s operations and also its business philosophy and core values. During the second part of this training, the area managers will then work alongside the experienced colleagues , this will therefore help them learn their roles and responsibilities. This includes the tasks of planning, recruitment and organisation of the stores. The Aldi culture has been effective and has been the push for the organisation to be in the position and enable them to obtain the profits they have earned so far. Aldi has also grown internationally over the years, with the most recent globalisation in Poland in 2008 with a total number of 54 outlets at present. Aldi which originally had a reputation and being ridiculed as cheap selling low quality products, with their customers branded as poor and could not shop anywhere else, this did not however dent Aldi’s profits and gradually the German consumers discovered that this poor reputation of Aldi’s products was either undeserved or economically justifiable. Therefore Aldi was definitely able and is still able to strive for continuity and a going concern of the organisation with its current culture. However they are several criticisms of Aldi ‘s current culture mainly due to the changes in the economic environment and the constant changes in consumers’ behaviours. These criticisms are classified below as; NEED FOR CHANGE * Given the recent forces and changes in the economic environment and a constant increase in competition, it is absolutely necessary for Aldi to change and improve on certain cultural norm such as the culture which tolerates recent ideas being tried rather than being exposed to detailed analysis is outdated and ineffective. For example new products are not subjected to elaborate market research but are rather tested in three stores and if they achieve a fast moving pre-determined minimum turn over, then they are introduced in all other shops. However this is not an effective strategy because the shops chosen for the exposure might be situated in a strategic area, where particular customers are targeted and therefore a high turnover. This will definitely mislead the decision to accept this products which might lead to its introduction to other stores which might not produce the same turnover. * Aldi has also resisted the temptation of introducing and expanding its number of products and also diversifying into other areas, for example services such as banking services and other products such as mobile phones. The growth of the market recently is very rapid, with increasing demands and innovation and therefore organisations need to grow proportionately to be able to meet to the consumers demands and this can be achieved by expanding, with organisation’s constantly changing their strategies. * Another aspect of the Aldi culture which can be criticised refers to the culture of customers being obliged to buy their bags or bring their bags for shopping. Despite this being a cost effective method for Aldi and also a very efficient way of encouraging recycling, it is however very inconveniencing for some customers who will prefer to shop somewhere else, in a case where they forgot to bring along a shopping bag and therefore leading to a loss in income from these group of customers. * Aldi’s culture is also reinforced by its selection and recruitment process or method. Aldi has a culture of internally selecting, recruiting and training of managers. This is cost efficient for the organisation and also enables them maintain their culture, but however this discourages innovations, idea and therefore promotes stereotypes and discourages initiatives and ideas. * The Aldi culture also is extremely focused on cost efficiency and ignores all the external and internal opportunities for growth and developments. The above points indicates that there is an important need for change in the culture of the organisation. Therefore, the above driving forces which can be classified under the main headings of external forces that is from customer needs and the external environment and also internal forces such as the need for organisational growth and restructuring. However these forces for change will be met by the driving forces against change. These forces can be distinguished into individual resistance and organisational resistance. Aldi Culture change. Richard Whittington and Michael Mayer (2002) argued that the reorganisation or the ability to redesign the organisation’s structure frequently is now vital to Organisations. This therefore supports the fact that a change of culture is very critical to Organisations in order to improve their performance. Changing a culture generally means changing some of the organisation’s beliefs, values and the customary ways of doing things. This is usually often disruptive as change is usually met with resistance. They are several underlying reasons why individuals resist change and they include: * Loss of Power base: It is very obvious that an introduction to a change in the current Aldi culture will be met with resistance most probably by the management as they will find it hard to cope with the fact that they might loss power or control of the situation. Dislike of Uncertainty and ambiguity: A change in the Aldi culture will mean the employees will be unsure of the future and this is definitely going to motivate a resistance. * Fear of unknown: An attempt at the culture change might lead to the need of employing new staffs externally, which will lead to pressure on the current Aldi employees as their current culture means recruitment of managers is often done internally. Effectively they will be a resistance to change due to the fear of what might happen. Perceived lack of new skills and loss of old: A change of Aldi culture could also be met with fierce resistance by individuals because they are not sure of how the new ways of doing things will be or if they will be skilled enough to cope with the new culture. They might also be some insecurities and fear of losing their old skills. Individuals therefore have different reasons as to why they resist change and therefore their reactions will be different. This reaction could either be positive, such as enthusiasm, excitement, fulfilment, survival and others. However some individuals may have a negative reaction to change such as anger, stress, confusion, conflicts, fear and depression. Change does not however affect just the employees or members of the organisation, it does affect all the stakeholders of that organisation, either positively or negatively. Therefore the Aldi culture change will also affect its customers, suppliers, shareholders and the society as a whole. Culture change therefore, needs to be done in a very systematic, dynamic and slow way as a rapid change will definitely lead to disaster as people might resist to change and sometimes even become aggressive. They are several theories which were put in place in order to assist Organisations in the change process. Some of these theories include; * Lewin’s Force Field model of change: Lewin stated that an organisational change will occur when the forces for change strengthen and the restraining forces lessen or if both forces occur simultaneously. This is effective in the case of Aldi employees who are likely to resist to a change in culture. The management should therefore focus on lessening the resistance to change by training communicating the benefits of the change to the staffs and the other stakeholders of Aldi. Information will be very crucial in attempts at lessening the resistance. However this theory might not be very effective as there is no stated fact hat, by communicating the benefits of change, they will be a corresponding decrease in the resistance as some individuals might just be adamant and reluctant to change. * Strebel’s possible change paths : According to Strebel, the Management of Aldi, should divide the employees according to different levels of change, that is those individuals who are closed to change, those who are open to change and the third level will be those who can be opened to change. By so doing, the management can therefore use three different options depending on the level. These options could either be proactive, reactive or rapid. This theory is can be used in different parts of the organisation and therefore it is flexible and also it is advantageous because it gives detailed strategies to be used. However this theory could be complicated, and is also based on the assumption that the individuals in Aldi are grouped in the different levels. The Beer et al’s six steps could also be used by the management of Aldi to implement the cultural change. This is a fairly easy model to use in an Organisation where it is easy to change and it is also very detailed and involves the employees and therefore mobilises commitment. Therefore if the individuals or employees in Aldi are open to change, the Beer et al model could be implemented effectively to minimise the resistance and successively change the culture. However if Aldi is a very anti -change organisation, then it will be difficult to deal with the resistance using this model * Kotter and Schlesinger (2008): This model states possible ways to deal with resistance to change and I will therefore recommend the management of Aldi to use this model to reduce the resistance to change because it involves; a) Education and communication; The management should begin by communicating and educating the current stakeholders of Aldi, the reasons for change, the benefits for a ulture change and also the way or method by which the change is going to occur. This will therefore increase commitment and reconcile opposing views. b) Participation and involvement: Aldi’s management should also involve the employees in the planning process of change as well as the implementation as this is going to reduce fear and opposition from the stakeholders. ) Facilitation and support: The management should be able to encourage and support those involved in t his change, by developing individual awareness of the need for change, as well as self awareness of feelings towards change. d) Manipulation and Co-optation: The top management could also use a method of bringing forward proposals that appeal to the specific interests of Aldi’s stakeholders. ) Explicit and implicit coercion: This is another method, which could be used where there is profound disagreement between those concerned with the change, and a very little probability of anyone shifting their ground. This method will resort to threat and force but no violence. f) Negotiation and agreement: Powerful individuals and groups may resist changes that may damage their intersests, as such the top management could overcome this resistance by compromising and negotiating to meet their concerns. However useful this model is to overcome the resistance, it has got some short falls and it could also be generally viewed as a vague model. It will be very time consuming for the top management to use educative measures, participative and involvement methods to overcome this resistance especially in instances where there is an urgent need for change. Also negotiation can encourage the individuals to strike deals and future problems may arise from those who feel they were manipulated into accepting the change. In the explicit and implicit coercion, the person implementing the change must be powerful for this method to be effective. It is therefore very likely that the top management of Aldi is going to be met with resistance if they are to change their culture, however should be ready to overcome this resistance from the individuals and groups by taking into consideration some of these models mentioned above. Recommendations Thomas J. Peters and Robert H. Waterman, opined that some of the riskiest work we do has to do with altering the Organisation’s culture. Emotions run high and almost everyone feels threatened. However this is absolutely necessary because if Organisations do not have strong notions of themselves as it is reflected in their values, myths, stories and legends, people’s only security comes from where they live in the organisation. If this is threatened and in the absence of some grander corporate purpose, then the closest thing they have to meaning in their business lives has been threatened. I strongly agree with this as the employees and other stakeholders of Aldi, have become very comfortable with the current culture that they do not see the need for change despite the increasing change in the business and economic environment . f these changes becomes very threatening, then the entire Organisation will be threatened. The following recommendations could benefit Aldi ‘s new culture. i. Aldi could take a major step of diversifying its product range and trying other products depending on the market and environment. Aldi could do a survey and research on the needs and requirements of customers in different area and also carry out some benchmarking with its competitors to identify and implement new products. An example of this could be illustrated by Tesco, who diversified their product range, introducing products like tesco mobile which is successful and generating more profits for its shareholders. ii. Secondly , Aldi’s top management should also endeavour to take actions on their recruitment process, by recruiting from out of the Organisation, therefore bringing into their organisation, new skills, knowledge and initiatives which could help to enhance their innovative strategies and create some competitive advantages. ii. Aldi could also focus less on their cost efficiency technics and focus more on customers satisfaction. By exceeding customers expectations, it is more likely to create customer value for money and also create loyalty. If loyalty is created, then the customers could be willing to buy at any increased prices due to a reputation already perceived. Aldi can also provide customer satisfaction by trivial things such providing shopping bags to their customers. iv. Aldi could also become more customer focused by introducing loyalty cards and systems such as the points collection system done by competitors such as Sainsburys’ nectar cards, and the Tescos’ club card which was first introduced by Tesco and is one of the main reason why Tesco became top retail groceries stores in the UK. Above are a few recommendations which Aldi could adopt as a new culture to be able to become unique and gain some competitive priorities. Conclusion Ann Cunlife (2008) stated that Organisational culture is important for four reasons; it shapes the image that the society has for an organisation, it influences organisational performance, it provides direction for the company, and it helps attract and retain motivated staff. This is very important in the growth of organisations and the culture of an organisation will determine and influence their performance and the achievement of their goals. This implies that organisations at some point need to ensure that their current culture is good enough to enable them achieve their goals , improve their performance and maintain growth. This might often lead to change which will not be an easy task but is a necessary task. Aldi will not take a single day to change its culture as the culture did not occur in a day’s time. It is therefore very important for the top management to understand that a change in culture should not be done rapidly as this is going to lead to a disaster and disorder. However time should be taken and this change and ideas should be discussed and communicated properly to the various stakeholders before a gradual adoption of the new culture is carried out. A radical change of culture could never be effective as it could be illustrated in the Barclays/’ Lehman case study which led to several staffs departure during the merger. References Mullins L, Management and Organisational Behaviour, 9th Edition, Pearson Education. Buchhannan D, Huczynski A,(2003), Organisational behaviour: Emerging Realities for the workplace Revolution, 2nd Edition. Johnson, G. , Scholes, K. , Whittington, R. (2006). Exploring Corporate Strategy. Essex: Pearson Education. Robbins, S. .. , Judge, T. A. (2007). Organisational Behaviour. New Jersey: Pearson Prentice Hall. Buelens, M. , Broeck, H. V. , Vanderyden, K. , Kreitner, R. , Kinicki, A. (2006). Organisation Behaviour. Berkshire: McGraw Hill Education. Anon. (2009). Edgar H. Scheins Model of Organizational Culture . Retrieved September 3rd, 2011, from Business mate. org: businessmate. org/Article. php? ArtikelId=36 Anon. (2010). Frederick herzberg motivational theory. Retrieved September 3rd, 2011, from Businessballs: businessballs. com/herzberg. htm Anon. (2003, October Thursday 09). Critical succss Factor for Change. Retrieved September 3rd, 2011, from AMEinfo. com: ameinfo. com/29295. html Area manager’, http://uk. aldi. com/recruitment/recruitment_2. html (accessed 12. 09. 11). www. aldi. co. uk accessed on 04/09/2011