Organisational culture and organisational climate are complementary but are different psychological aspects. Organisational climate is the perception of practices, policies, procedures, and routines within the organisation. It is the generalized description of “the way it is around here” and reflects a shared understanding of how things are. It includes perceptions about reward systems, structures, leadership, autonomy, and job design (Bowden & Russo, 2017).
In contrast, organisational culture encompasses the norms and expectations that shape workplace behaviours. Culture is the pattern of shared assumptions that have worked well over time and are considered appropriate. As such it should be disseminated and passed on to new entrants as the correct way to perceive, think, behave, and feel in response to the problems and challenges the organisation faces. It is the combination of the characteristics and values, sets of behaviours and actions that make up how things are done in an organisation. A healthy culture provides the impetus, the parameters and the tools that guide people within an organisation to act in alignment with the organisational strategy and objectives in a consistent manner.
Culture is defined as a mixture of values, sets of beliefs, communications and explanation of behaviour that guides people. A key feature of culture is that behavioural norms transmitted to new members of the organisation must be stable enough to have been tried out and refined over time to achieve a measure of success and acceptance within the organisation. While climate reflects organisational conditions that members experience, culture reflects the shared values and beliefs that generate and reinforce behaviours that create the climate and shape organisational outcomes (Awad & Saad, 2013).
Culture and Performance:
The performance of employees is inevitably elevated by the organisational alignment of employee values. The performance measurement system helps in improving the balance between the organisation’s culture and the effective achievement of employee goals and objectives (Ittner & Larcker, 1998). Performance and culture have always been interrelated. Corporate culture is directly linked to increased performance. This is, however, only sustainable when the culture can adapt to the dynamic shifts in the environment, both externally and internally.
According to Collins (2014), there are four types of organisational cultures in the private sector. The first is the competitive strand, which is driven by personal achievement. Its premised on competition, and sales performance. This type of culture has the potential to cause unintended consequences such as mini cultures or sub-teams. The second type is based on order and alignment. It is supported by highly hierarchal organisational structures where individual achievement is frowned upon. The third type is the creative one. The emphasis here is on shattering the mould in a highly collaborative manner. The last type is the collaborative, teamwork-driven culture, that fosters deep and longer-lasting relationships between stakeholders.
So, to examine low digital transformation sales at Microsoft outside of understanding the culture that prevails inside the organisation would be insufficient. Therefore, changing an organisation’s culture requires an investment of time and effort and a commitment to seeing change initiatives which are driven by leadership (Bowden & Russo, 2017).
The Role of Compensation and Reward in Digital Transformation:
In this era of globalization, the workplaces’ frames of reference of the previous ages no longer appear relevant. Their paradigms have been carefully revised to fit the 21st century. Changes in the internal and external environment, shifts in strategic foci and operating models make it pertinent for organisations to introduce new motivational tools to employees (Roberts, 2003). Companies today have morphed, making it important for the leadership to roll out new methodologies and for developing stable business relationships between employees and the organisation to achieve the objectives and at the same time meet the continually changing needs of both parties.
Several organisations have acquired sustained progress by complying with their organisational strategy through well-balanced compensation, as well as a reward and recognition programme for their employees. To effectively execute an organisational strategy such as digital transformation, the motivation of employees and their productivity is critical where effective compensation, reward and recognition become the basis. The entire success of an organisation is based on how an organisation keeps its employees motivated and in what way they evaluate the performance of employees for job compensation. The perceptions that employees have about their reward structure influence their attitude towards the implementation of the organisational strategy, and their commitment to stretching themselves in the pursuit of the organisational goals (Babakus et al., (2003).
Although rewards are one of the important elements to motivate employees to contribute to better organisational health and functionality, there are other means to reward employees that do not just focus on financial rewards. Some of these include praise, a pat on the back from their leadership team, an opportunity to take on important tasks, or programmes/assignments of change, and getting into exclusive programmes. Research on leader power has found that supervisor reward positively correlates with employee task performance, productivity, satisfaction, turnover, and organisational citizenship behaviours (Covey, 2007).
Compensation includes expenses such as profit share, bonuses, overtime and rewards that include financial and non-financial rewards such as travel facility, house benefits and car facility against hired services of employees (Wright, Gardner, & Moynihan, 2003). The remuneration determination process is crucial and can be a source of strife, contention and anxiety in most companies. The process is concerned with rewarding people by their value within the organisation (Murphy, 2015).
Employees are likely to give their maximum when they have a feeling of trust and that their efforts will be rewarded by the organisational leadership (Aktar et al., 2012). There is a multitude of factors that affect employee performance such as job security, the conditions under which they work, the relationship between employer and employee, and growth and development opportunities. With all these factors that affect and contribute to employee performance, the motivation that comes with rewards is critically important (Kwasira & Njoroge, 2015). Rewards are classified either extrinsically or intrinsically. Extrinsic rewards are tangible, usually, in the form of a salary or bonus. Intrinsic rewards are intangible by nature and are more psychological, subjective and internal to the person deriving them.
Once the pay exceeds a subsistence level, intrinsic factors become stronger motivators, and staff motivation requires intrinsic rewards such as satisfaction at doing a good job and a sense of purpose and contribution to a vision greater than themselves. It was also established that financial rewards are not the most motivating factor and, if it is financial rewards only, it could have a de-motivating effect among employees (Srivastava, 2001).
Having the correct type of rewards and compensation program helps workers to grow both personally and professionally, mature and ultimately add value to most organisations (Murphy, 2015). One of the means that organisations can use to enhance employee motivation and performance is to provide performance-related compensation (Delaney & Huselid, 2006). A compensation and reward system is based on the expectancy theory, which states that employees are highly likely to be motivated to perform when they perceive that there is a strong link between their performance and the reward they receive (Fey & Bjorkman, 2001). It stands to reason that should there be a misalignment between the interest of the employee, the team, or the business unit, performance is likely to suffer, and organisational goals will suffer. Furthermore, employees whose achievements are rewarded individually are more committed to the organisation and more satisfied with the rewards. The relationship with the organisation was better and employees were more motivated to work (Mikuliċ, Šimuniċ & Nikoliċ, 2013).
Microsoft has a varied compensation structure and scheme. Salespeople are compensated differently from the other categories of employees. Salespeople are heavily compensated on orders already booked and these booked orders are not necessarily digital transformation deals. There is an option for salespeople to draw out their sales bonuses on a three-month basis if they reach their quarterly targets. Digital transformation deals tend to have a longer sales cycle than normal deals.
External Environmental Factors:
Whenever an examination of sales or revenue from an organisational perspective is conducted, the external environment cannot be left out of the equation, because organisations do not exist in a vacuum. The laws of economics dictate that there is demand for a product or service, for which sales or revenue is to be realized. External factors that may affect organisational revenue include the state of the economy, customer spending and priorities, the legislation and regulatory frameworks, existing and potential customer maturity and readiness, the industry and segment and finally the exchange rate in monetary terms (Welch, 1999).
The State of the Economy:
The following statistics speak to the state of the South African economy. The South African economy has been growing at less than 2% on average since the 2009 global economic meltdown (Naudé, 2014). The official rate of unemployment has recently been listed at above 27% (Stats SA, 2018). The JSE is said to be 300% overcapitalized, and this signals a lack of investment in the economy.
In the July–August 2019 time frame, manufacturing and mining continued to shrink, and the electricity supply declined, while retail sales growth slid. The country’s fiscal problems continue to climb, with rating agencies downgrading Eskom’s stand-alone credit rating into junk territory (Standard Bank, 2019). South Africa has moved from one political scandal to the next almost effortlessly – with that slowly chipping away at the confidence levels in the country. The perception of corruption both in the private and public sectors has not abated and some commentary (Corruption Index, 2019) estimates this to be holding steady. The oil price is on a steady increase, coupled with the weakened currency and the never-ending fuel price increases which drive up the cost of production and transportation of goods. The cost of doing business also increases and this means that organisations have less capital to invest in transformative projects.
The Maturity and Culture of Customers:
There are five crucial stages of digital transformation that customers are likely to be in which dictate the investment and resource allocation that an organisation is willing to commit to its transformation journey. These five stages are isolated, synchronized, strategic, integrated and agile business. In each of the stages, the shared values and structure of the organisation are important to drive the innovation and transformation agenda forward (Geschke (2019). In business-to-business transactions, the customer culture must be a digital one to drive sustained spending and investment.
One of the key attributes of digital culture is risk appetite (Rick, 2017). South Africans are generally risk-averse and this includes the South African government. Apart from a few mainstream companies that have enjoyed a perception of innovation such as First National Bank, Capitec Bank, Discovery, South African Revenue Service and SASOL, there is a general feeling that South African organisations would rather wait for concepts to be tried elsewhere in the world first. This could also be a function of skills and readiness to adopt change. The government of South Africa is one of the biggest sectors for Microsoft South Africa and this sector has been particularly resistant to change, sticking with inefficient processes and a slow pace in execution.
This paper employed a quantitative and qualitative hybrid approach to investigate and understand the causes of the challenge while using an Azure-hosted cloud questionnaire. A stratified sampling method was used to secure a representative population of 35 people within Microsoft South Africa. The questionnaire examined the respondents’ understanding of digital transformation, its strategy, and the contributing factors to the challenge.
The following findings emanated from this study:
- The roles of the respondents reflected diversity where sales and non-sales people were represented
- The tenure of each role was established to glean out whether each respondent had adequate experience in their roles
- 66% of the employees had sales responsibilities as this positively influenced revenue
- Compensation and the reward structure were based on revenue brought in, time utilization and/or a combination of utilization and commitment to certain objectives
- Majority of the respondents understood what digital transformation was
- Majority understood the Microsoft digital transformation strategy
- Culture influenced either the slowing down or the acceleration of digital transformation sales within Microsoft South Africa.
- 31% of the respondents disagreed and 29% agreed that the compensation structure hindered the acceleration of digital transformation.
- Organisational structure contributed to the hindrance of digital transformation.
- It was unanimously agreed that external factors of infrastructure, policy, customer readiness and the economy was responsible for the low digital transformation sales at Microsoft South Africa.
There was no preceding study that focused on Microsoft or any other digital transformation operating organisation in the South African context. Therefore this research played a significant role in filling the void in the South African context and should form part of further research in South Africa and the rest of the African continent.
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