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IMPLEMENTATION OF MARKET ORIENTATION IN A SMALL

BUSINESS ENTERPRISE: USING KOTTER’S EIGHT STEP

MODEL TO CHANGE ORGANIZATIONAL CULTURE

Master thesis, MscBA, specialization Human Resource Management

University of Groningen, Faculty of Management and Organization

Januari 13th, 2010

JORIM DEN HERTOG

Student number: 1384430

Gerrit van der Veenstraat 116-2

1077 EP Amsterdam

tel.: +31 (0)6-52638338

e-mail: jorimdenhertog@gmail.com

Supervisor/ university

B. Nijstad

Supervisor/ field of study

J.D. Hartog

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Abstract

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List of contents Abstract 2 List of contents 3 Introduction 4 Theoretical background 6 o Market orientation 6

o Kotter’s eight step model 11

Study 1 17 o Methodology 18 o Results 20 o Discussion 26 o Conclusion 27 Study 2 29 o Methodology 30 o Results 32 o Discussion 39 o Conclusion 42 General discussion 43

o Implications for future research 44

o Implications for Prinsen 45

o Shortcomings and recommendations 47

o Conclusion 48

References 49

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Introduction

Whether organizations grow or shrink, change is always the key word. Change could mean the formalization of processes, the radical change of a culture, the reinforcement of a strategy, etcetera. A necessity to change can be caused by internal factors (tensions in work relations, low job satisfaction, change of management) or external factors (economic tendencies, changing customer demands). Many organizations try to change in order to solve internal and external problems or to take advantage of opportunities, but few succeed (Schneider, Brief & Guzzo, 1996). Because change is a time consuming process with many facets, it requires a change strategy that takes into account common errors en barriers. With his eight-step model, Kotter (1995) provides a clear overview of the different steps in the process of change, adaptable to every organization. The current study tries to investigate the merits of Kotter's model for the implementation of a market orientation within an organization.

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implementation. Kotter’s eight-step model is used as the basis for a planned implementation of market orientation in a small building company. The cultural situation of this company is particularly interesting, because at the time of this study the company just merged out of two departments within one mother company.

The goal of this study was to investigate whether Kotter’s model is suitable for

implementing market orientation on small organizations. This often used model was expected to be suitable because it adapts the projected change to the situation and characteristics of the organization. Investigating the company in real time, during 9 months, was expected to give a clear view on the process of the implementation of market orientation, as well as the

organizational characteristics that could hinder this implementation. First, this study gives a theoretical overview on market orientation with its definition and consequences. Also, it gives a overview on the implementation of change in organizations, with a wide focus on Kotter’s model. Secondly, an exploratory study was conducted to get an insight into the organizational characteristics of the company. The culture of the company, the identification of the

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Theoretical background

Market orientation Definition

Market orientation has been defined in many different ways in the several decades the term is in use. The definitions share a customer focus, external orientation, responsiveness to

customers and focus besides customers also on other stakeholders (Jaworski & Kohli, 1996). However, some definitions are focused on processes and activities (Day, 1994; Kohli & Jaworski, 1990; Narver & Slater, 1990), while others look at culture and attitudes (Avlonitis & Gounaris, 1999; Beverland & Lindgreen, 2007; Deshpandé, Farley & Webster, 1993; Harris & Piercy, 1999; Slater & Narver, 1995). Also some definitions focus solely on

customers (Day, 1994; Harris & Piercy, 1999; Narver & Slater, 1990; Slater & Narver, 1998), whereas others focus on different stakeholders in the market (Deshpandé et al., 1993; Slater & Narver, 1995).

A basic definition of market orientation is provided by Kohli and Jaworski (1990: 3): ‘customer (or market) orientation is centred on the generation and dissemination of, and responsiveness to, market intelligence’. Narver and Slater (1990: 21) define market

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‘Market orientation is the culture that (1) places the highest priority on the profitable creation and maintenance of superior customer value while considering the interests of other key stakeholders; and (2) provides norms for behaviour regarding the

organizational development of and responsiveness to market information.’

The first aspect of the definition of market orientation is visible in market orientation’s three pillars: (1) customer satisfaction, (2) coordinated marketing and (3) profitability (Kotler, 1988). These characteristics form the heart of the goal of market orientation. Profitability is to be achieved through coordinated marketing that is focussed on satisfying the customer. However, several scholars nuanced these pillars.

(1) The term ‘customer satisfaction’ appears to be aimed at discovering the opinions of the customers and adapting to those. Therefore, Kohli and Jaworski (1990) argued that it is, in practice, better to replace customer satisfaction with ‘market intelligence’. The term ‘customer satisfaction’ focuses only on the current, expressed needs of customers, while ‘market

intelligence’ is a broader term, containing, besides satisfying current customer needs, also future customer needs and exogenous market factors. Market intelligence should give an organization a ‘head-start’ on market competitors (Slater & Narver, 1995).

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(3) The third pillar of market orientation, profitability, was not recognized as such by a majority of managers (Kohli & Jaworski, 1990). These managers viewed profitability as a consequence, rather than an aspect, of market orientation.

The second aspect of Slater and Narver’s(1995) definition of market orientation concerns the practical (behavioural) implementation of a costumer orientation. Market oriented

organizations are focussed on learning from external and internal factors in order to achieve maximum customer value (Jaworski & Kohli, 1996; Mavondo, Chimanzi & Stewart, 2005; Sinkula, 1994). While the concepts of market orientation used by scholars are different in details (choice of words, narrow or wide focus, etcetera), scholars agree that it concerns an ongoing cycle of intelligence generation, intelligence dissemination and responsiveness (Avlonitis & Gounaris, 1999; Kohli & Jaworski, 1990).

Consequences

Market orientation has a positive effect on business performance (Cravens & Guilding, 2000; Deshpandé & Farley, 2004; Rodriguez Cano, Carrillat, Jaramillo, 2004): externally oriented organizations perform better than internally oriented organizations (Deshpandé & Farley, 2004). These findings were confirmed by a meta-analysis of 114 studies by Kirca,

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commitment (Jaworski & Kohli, 1993) and has a positive influence on (interfunctional) teamwork (Atuahene-Gima, 1996).

Other scholars, however, did not find a direct effect of market orientation on business performance (Greenly,1995;Han, Kim & Srivastava, 1998; Jaworski & Kohli, 1992).But, the study of Han et al. (1998) for example showed that an indirect effect is found through

technical as well as administrative innovations. Market orientation has a positive effect performance through innovation (Atuahene-Gima, 1996; Mavondo et al., 2005). The market intelligence provides organizations with knowledge about the customer’s future desires, thus more product advantage and quality for the customer, leading to more superior customer value, and higher sales and profit performance (Atuahene-Gima, 1996).

Besides mediating factors, there are also factors that have a moderating influence on the relationship between market orientation and performance. Organizations that operate in sectors with much interactions with clients (service firms) are more effective in implementing market orientation than organizations (like manufacturers) that encounter clients less often (Rodriguez Cano et al., 2004).Rodriguez-Cano and her colleagues (2004) also found that the competitiveness of the environment influences the market orientation-performance relation. In competitive environments, market oriented firm secures a better market position than firms that are not market oriented, by having a competitive advantage through superior performance (Rodriguez Cano et al., 2004).

Implementing change

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only influenced by a strong change culture, but also by the way management acts (Mottola, Bachman, Gaertner & Dovidio, 1997). If management’s way of acting is perceived as just, than through identification (as a mediating variable) there is a positive relation of perceived justice on employee adjustment to the newly merged firm and its culture (Amiot, Terry & Callan, 2007). When employees identify with the organization, they tend to support and align with its activities, while deriving satisfaction from it (Ashforth & Mael, 1989).

Organizational culture and performance is affected by the social structure of the organization. Insights in this can be obtained by using a social network analysis. A social network perspective is concerned with the structure and patterns of relationships between people, groups, or organizations (Tichy, Tushman & Fombrun, 1979). This perspective can be used to explain cultural features of the organization, such as where influence and knowledge are situated (Brass, 1984). People who have a central position in a network perform better (Sparrow, Liden, Wayne & Kraimer, 2001) and, because they have access to much internal and external information, have substantial influence on innovation behavior of the

organization (Tushman, 1977). Those so called ‘structural brokers’, who are situated centrally in the network, are to be included for change efforts to succeed (Merton, 1968).

The role of the management in the change process is very important. If an organization changes, the managers’ behavior in change and innovation is a guiding factor for the behavior of the employees (Kavanagh & Ashkanasy, 2006). If a manager does not behave according to the change or innovation, he will certainly have trouble motivating his personnel to change. Thus, managers have a very important, central decision in change. Kotter’s eight steps model (Kotter, 1996) presupposes that there is unity within the management about the problems and their consequences that are faced by the firm.

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people the possibility to not only fit better within the organization, but also experience more ownership, satisfaction and trust, leading to a more effective customer orientation (Bouma, 2009). Decentralization and intra-connection in organizations make participation of

employees possible, it gives them more possibilities to criticize ambiguous or missing parts in change strategies, which has a positive influence on change success (Waddel & Sohal, 1998). Critique and resistance are negative terms, and employees often show resistance because of the uncertainties and potential outcomes that change can cause. However, Waddell and Sohal (1998) argue that change processes need constant re-evaluation, and that resistance could be helpful with this, instead of hindering. Being communicative, cooperative and open to critique can bridge the gap between management plans on culture change and the willingness of employees to change their attitudes (Hofstede, 1998).

Implementing market orientation

Scholars on market orientation argue that these organizational characteristics that benefit change (being communicative, cooperative and open to critique) also hold for the

implementation of market orientation. Successful implementation of market orientation is argued to require a supporting context wherein management, organizational culture and structure, and resistance play a crucial role. The role of (top) management seems to be critical, because market orientation is facilitated by the emphasis placed on it by the top management (Jaworski & Kohli, 1993). Jaworski and Kohli (1993) found that if managers are unwilling to take calculated risks, the organization is less likely to be responsive to the changing

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decentralized and intra-connected (Jaworski & Kohli, 1993; Harris & Piercy, 1999), delegate much to lower departments (Kohli & Jaworski, 1990), have much departmental freedom and interdepartmental communication (Jaworski & Kohli, 1993; Harris & Piercy, 1999), are well-coordinated and integrated (Harris & Piercy, 1999; Ruekert, 1992).

Kotter’s eight step model to organizational change

In this study, market orientation is implemented on a building company. For the implementation of market orientation a fairly complete, clear and often used strategy to implement organizational change was selected, the model of Kotter (1996). Kotter’s model for leading an organization to change consists of eight steps:

1. Establish a sense of urgency 2. Form a powerful guiding coalition 3. Create a vision

4. Communicate the vision

5. Empower others to act on the vision 6. Produce short-term wins

7. Consolidate improvements and produce still more change 8. Institutionalize new approaches

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allows this study to focus on the first four steps of Kotter's model. The final four steps will be very shortly elaborated in this section and will, in the general discussion, be discussed in the light of future implications and management decisions.

Step 1: Establishing a sense of urgency

A critical starting point in the change process is that people experience a sense of urgency in order to feel the need and motivation to change (Kotter, 1996). According to Kotter (1996), unfreezing requires bold and sometimes even risky behavior by management. He argues that there are several ways to ‘take people out of their comfort zone’. These measures could be for example the setting of very high goals, focusing on problems instead of ‘sweet talking’ or confronting people with unsatisfied customers or suppliers (Kotter, 1996). The management needs to select a just, on the long term constructive, way, to ‘uncomfort’ people.

Step 2: Forming a powerful guiding coalition

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Step 3: Creating a vision

Kotter argued that vision is needed to lead people, for three reasons: (1) to clarify the general direction, (2) to motivate action in that direction and (3) to coordinate swiftly and efficiently the actions of all the different actors (Kotter, 1996). A vision that will be formed should have the following characteristics: it should be imaginable, attractive, reachable, goal-centered, flexible and easy to communicate (Kotter, 1996). Hayes and Richardson (2008) added that the vision should be challenging. Therefore, the vision should include the objective of the change project, the scope and schedule, project completion criteria and measurements, potential risks and mitigating factors (Hayes & Richardson, 2008). Companies have used different strategies to create a vision. Vision on market orientation was created through brainstorm sessions within the guiding coalition (Steinert et al., 2007), separate meetings with the different departments within a company (Loeser et al., 2007), simply formalizing ways of working that were already in use (Tsuyuki & Schindel, 2008) and hiring outside consultants to guide the vision developing process (Grubbs, 2002). This last method proved to be insufficient because the outside consultants mostly copied management’s wishes.

Step 4: Communicating the vision

According to Kotter (1996), communicating the vision is a matter that needs the manager’s full attention. He argued that simply giving information to the employees clearly is

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opinions, but if people do not accept the program because they cannot discuss it, the actual change is likely to fail (Kotter, 1996). Kotter (2008) and Tsuyuki and Schindel (2008) added that communication should be ongoing, using as many platforms as possible (posters, emails, company newspaper, memos, short reminders at gatherings).

As Hayes and Richardson (2008) found at a software developing firm, people were excited about being clearly informed, and their feedback at gatherings helped the change process, but also provided the coalition with the confirmation that the vision was clear. In the welfare organization studied by Grubbs (2002), the information was developed in a one-sided way, but also shared in that way. The result was that after a while the actions of the employees were different from what the managers expected them to do. In their strife to change the organizations, the managers neglected the means to a successful change (Grubbs, 2002).

The final four steps

Step five, 'empowering others to act on the vision', entails the continuous process of discovering barriers to change, and overpowering them. These barriers can be the organizational structure, organizational habits or specific persons and their personal

characteristics. Habits or positions can be incorporated in the organization in a time span of years, and are therefore hard to overcome in a few weeks (Kotter, 1996).

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When short-term wins are produced, there is a big chance of falling back to

complacency. Critics to the change may call for a ‘well deserved’ break, possibly resulting in the termination of the change project. On these moments, Kotter (1996) argues, improvements must be consolidated and more change needs to be produced, not less change. New people, who are beneficial to the change process in their function and/or capacities need to be hired, management needs to lead basic affairs from the top, and needs to delegate change to lower levels (Kotter, 1996).

The final step is the institutionalization of the new approaches. Kotter (1996) argues that mostly changes in norms and values are placed at the end of a change process. This step requires a lot of patience, much talking and company results that support the adaptation of a new culture. The active changing of norms and values could lead to a higher turnover rate, because ‘the only way to change a culture is to change key people’ (Kotter, 1996: 157). Also promotion procedures should be in line with the change strategy, because otherwise the old culture will reassert itself (Kotter, 1996).

To sum up, market orientation is focused on placing the customer central in the

organization. Sufficient internal communication should give the organization the possibility to collectively produce the best quality for the customer. Because no research has been done on the actual implementation of market orientation, this study tries to investigate the

implementation in a real time, longitudinal setting. The goal of this paper is to investigate whether Kotter’s model is suitable for the implementation of market orientation. In the first study the organizational characteristics are explored, with the aim of describing the

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Study 1

The first study was of exploratory nature and, as mentioned above, aimed to describe the organization and detect possible blockades to the implementation of market orientation. This study focused on a small building firm, Prinsen Waterbouw BV, a daughter company of Dura Vermeer. Prinsen is a fairly specialized firm in small concrete work as well as building bridges, wharves, piers and platforms. On the market where Prinsen is operating, the government was and still is the biggest provider of assignments. In recent years the market has changed, partly influenced by the ‘building fraud’. This fraud was committed by many building companies around the year 2000; the companies divided public assignments among each other, resulting in a form of monopoly against the government. Nowadays, partly because of this fraud, public assignments are changing from a one-on-one market to a commercial market, where the cheapest constructor gets the job. However, apart from the lowest price, the government now more often demands high quality, and companies are being asked to show references from other completed projects in order to prove reliability. A company facing difficulties with the transition towards these demands, is Prinsen.

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Apart from the secretary department, Prinsen contains two departments. One department, the work preparation department, tries to obtain and prepare works through respectively calculation and planning/ordering of materials. The other department, the work execution department (work performers), is responsible for the actual realization of the works. This first study was of exploratory nature, and focused on the change process, culture,

identification, and (social) structure. The goal of this study was to investigate employees’ perceptions of the change process and the current culture of Prinsen, their identification with their pre- and post-merger employer, and the structure of the (in)formal social network.

Methodology

Open interviews were conducted with all employees working at the work preparing and work performing department of Prinsen in May and June 2009. Eighteen people were employed at this office at that time, only one secretary could not be interviewed because of illness. Also a dozen workmen were employed within Prinsen, but they were not interviewed because they form a completely different department that has no connection with the office and is not involved in strategy and process decisions. From now on with ‘employees’ of Prinsen only the office employees are meant.

The average age of the employees of Prinsen is 37,5, ranging from 26 to 61. Only one person is above 50 (61) and half of the employees is 36 years or younger. Thus, Prinsen is a relatively young organization. The job tenures are also relatively short; two-third of the employees have been employed less than two years at Prinsen, and five have been employed even less than a half year. The education level is relatively high, two-third of the employees has a college degree or higher.

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performing department. The work preparing department is formed by eight people, one manager and 7 employees. The work performing department consists of six people, one manager and 5 employees. Finally, two people are employed as secretaries.

Measures

To describe the organization and discover possible hindrances to the implementation, qualitative measures (open-ended questions) and quantitative measures (rating scales) were used. The interviews took one hour on average, and were held face-to-face. The topics of the interviews were culture, identification, and organizational change. With open-ended

questions, people were asked to describe the current organizational characteristics of Prinsen: the culture, climate, and the way they identified with, and felt affection for Prinsen at that moment. They were asked to describe their former (pre-merger) firm, and they were asked to compare the new and the old situation. In order to discover possible hindrances to the

implementation of change, questions were asked about whether or not the employees perceived any ongoing changes, and how those changes were perceived. People were asked about the (interdepartmental) cooperation within Prinsen, the strengths and weaknesses of Prinsen, points of improvement within Prinsen and the possibilities employees have to influence the change process.

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characteristics fit more or less with their organization using a scale from 1(does not fit) to 9(fits extremely well). However, the extreme values 1 and 9 could only be selected once, 2 and 8 could be selected twice, 3 and 7 four times, 4 and 6 seven times and 5 twelve times. Even with the reduced scale, it still took employees 15-20 minutes to distribute the values to the characteristics.

The way the employees identified with Prinsen, was measured using a scale containing six questions, developed by Mael and Ashforth (1992). The questions concerned personal identification with Prinsen, and affection for Prinsen. The questions could be answered using a 5 point scale, ranging from total disagreement to total agreement. The scale is designed in such a way that high and low values correspond respectively with high and low identification.

To describe the social network of Prinsen, and to discover potential blockades to change, a social network analysis was performed. Employees were provided with a list of with all their colleagues’ names and were asked to indicate whether or not these persons: (1) are influential with respect to the firm’s direction and (2) are a source of advice for the

interviewed person. UCINET VI, developed by Borgatti, Everett and Freeman (2002), was used to compute network centrality of persons concerning influence/power and knowledge. Betweenness of every employee was calculated, as well as the number of people selected by the respondent (out degree) and the number of people who selected the respondent (in degree) concerning influence and advice.

Results

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lines. Also, Prinsen was described as a flexible company, capable of adapting to the customer and to the environment.

However, the question what needs to be improved at Prinsen rendered many different answers. First, the friendly atmosphere of Prinsen was said to have a negative effect on the efficiency of Prinsen. Many employees shared the opinion that Prinsen needs to become more businesslike, and that currently the time used for work is too long and not efficient enough. Some managers said that Prinsen is too relaxed, depending too much on old customers, while not planning in advance. Second, the personnel at Prinsen was said to be rather young and inexperienced, which would be negative for the organization’s competitive position. To empower these employees, the managers said those employees will need more coaching. However, (especially the experienced) people already indicated that extra time for coaching would be problematic since they claimed not having enough time for their core tasks.

Third, the communication and the exchange of feedback between the two departments should be improved. Currently, not much time is invested in contact moments. The performing department also criticized the preparation department for not being sensitive to the performers’ needs. Further, there is not always action upon feedback, which is why some performers would like to see work preparers to visit the work locations (more often). Finally, no leading culture could be extracted from the interviews, the reactions of the

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(six) people have a desire for a strong culture because they have a vision of the company in the long term (mostly the managers).

The employees did not report to perceive any complications during the merger. The work performers claimed that their work did not change at all, only communication was perceived to be easier because all office personnel was now located in Almere. The work preparers said no culture clash appeared, they experienced it only as a physical movement than a cultural merger. The reason no culture clash appeared could be explained by the absence of an active merger strategy that could have led to those clashes, and/or the fact that at the office in Almere only one work preparer was left at the time Amsterdam moved in.

Culture

The results of the OCP scale, displayed in Table 1, demonstrated that there was no strong leading culture at Prinsen. On a scale from 1(not fitting with Prinsen) to 9(fitting very well with Prinsen) and 5 being the scale midpoint, the characteristics perceived as congruent with Prinsen were 'being innovative'(6.22), 'enthusiasm for the work' (6.17), 'good reputation' (6.06) and 'focus on quality' (6.06), 'fairness' (5. 89), 'tolerance' (5.78) and 'informality' (5.78). The low number of high scores that could be awarded explains the fact that these numbers are not far above the scale midpoint (5). The standard deviations are rather high for the

characteristics that should correspond strongly with Prinsen's culture. ‘Good reputation’ and ‘fairness’ had a standard deviation of 1.7, ‘enthusiasm for work’ and ‘focus on quality’ even had a standard deviation of 1.8.

The characteristics that, according to the people employed at Prinsen, do not fit with its culture, are much clearer. Although the standard deviations are still close to 2, the

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with Prinsen, are: 'being aggressive (2.17), 'high rewards for good performance' (3.56), 'highly organized' (3.67), ' long working hours' (4.11), 'being reflective' (4.33).

Organizational characteristic M SD Range

Being innovative 6.22 1.44 3-9

Enthusiasm for the job 6.17 1.79 2-9

Emphasis on quality 6.06 1.80 2-9

Having a good reputation 6.06 1.73 4-9

Fairness 5.89 1.68 3-9

Being results oriented 5.78 1.80 4-9

Informality 5.78 1.40 2-8

Tolerance 5.78 1.22 4-8

Adaptibility 5.67 1.78 3-9

Being supportive 5.67 1.14 3-8

Being people oriented 5.61 1.54 3-9

Paying attention to detail 5.56 1.29 4-9 Opportunities for professional growth 5.56 1.15 4-8

Being distinctive 5.39 1.72 3-9

Autonomy 5.33 1.97 2-9

Being socially responsible 5.33 1.33 3-8 Taking identification responsibility 5.33 1.19 3-8 Praise for good performance 5.28 1.41 3-9

Being team oriented 5.17 1.69 2-9

Not hindred by many rules 5.06 1.80 1-9

Achievement orientation 5.00 1.68 2-8

Security of employment 5.00 1.28 3-7

Being competitive 4.94 1.16 4-8

Stability 4.83 1.20 3-7

High performance expectations 4.78 1.48 1-7 Sharing information freely 4.72 1.53 2-8

Being analytical 4.67 1.03 3-6

Decisiveness 4.67 .84 3-6

Confronting conflict directly 4.61 1.42 2-7 Quick to take advantage of opportunities 4.56 1.15 2-7 A clear guiding philosophy 4.56 .92 3-6 Developing friends at work 4.50 1.89 1-8

Being calm 4.50 1.38 2-7

Risk taking 4.44 2.06 1-8

Being rule oriented 4.44 1.69 2-8

Being reflective 4.33 1.53 2-7

Working long hours 4.11 1.81 2-7

Being highly organized 3.67 1.50 1-6

High pay for good performance 3.56 1.76 1-6

Being aggressive 2.17 1.72 1-7

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Identification

Mael and Ashfort’s (1992) scale of identification generated unreliable results, the Cronbach’s alpha was -.095. The answers on the different identification questions did not correlate

sufficiently. Because the six items generated such different values, it was not possible to make a selection of items in order to have a reliable scale. These questions, about perceptions with the company when it is praised or criticized, when used separately, also did not provide much valuable information. The separate average scores varied from 2,94 to 4,28, only the question whether people feel included (4,28) and are interested in others’ opinions about Prinsen (4,00), could be distinguished.

Social network

Different measures were used to qualify the aspects of the social network of Prinsen. ‘Betweenness’ was measured to determine a persons’ number of indirect lines from one person to another via this person (Wasserman & Faust, 1994). ‘Density’ was used as a measure to estimate ‘group cohesiveness’, it shows how knitted the network is (0% meaning no connections, 100% meaning that everybody is connected) (Wasserman & Faust, 1994).

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while others were also asked for advice by many persons (the financial accountant with 13 and the general manager with 11), he also asked many people for advice (9) compared with the financial accountant (3) and the general manager (3). Removing the PF manager from the analysis would result in 3,8% decline (34,8% to 31%) of the density of the network, while removing other persons would result in a decline of 1,8% and lower. Thus, the PF manager has the most central position within the advice network, and in this way is by far the person who knows where knowledge in the organization is located.

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The social network analysis on influence showed that the employees consider that the management team has by far the most influence. The four managers were selected by all other employees (16) to be of influence on Prinsen’s directions. The only remarkable position is that of the financial accountant of the firm. More than half of the employees (10) consider him to have influence on the decisions made within Prinsen.

Discussion

The present study investigated the organizational characteristics and possible blockades to change implementation. Concerning organizational characteristics, Prinsen is a relatively young organization that needs to grow towards maturity. This study demonstrated no strong, leading culture exists within Prinsen. There is a lack of business mentality within the

company, and although the employees consider Prinsen to be an open and friendly company, this, however, also has its downside on Prinsen’s professional attitude. The culture analysis as well as the open-ended question demonstrated that the employees do not consider Prinsen to be aggressive enough. Regarding possible blockades to change implementation, there is currently a lack of interdepartmental communication, especially the work performing

department considers the work preparing department to be too little aware of what is going on at the actual work. This lack of communication could have a negative impact on the flow of information within the company. The social network analysis demonstrated that the company consists of two subgroups (the work performing and work preparing department), and that one influential manager has a rather unhealthy, central position. His position and his background could become a major blockade to implement a new culture like market orientation.

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2. develop a strong, leading culture

3. reconsider departmental communication and influential positions 4. become a learning organization

First, the need to become more businesslike was very prevalent in the interviews. Prinsen was considered not to be efficient and aggressive enough. Employees at Prinsen had different reasons for considering this to be a point of improvement. Some argued that the organization cannot survive in the market if it does not change from a mostly quality focus to a more cost-effective focus. Others focused more on the working climate and the accountability of the employees, claiming that people (sometimes even pointing at themselves) do not perform their tasks efficiently. Becoming more businesslike was also considered to be needed in order to improve the handing over of work between departments. According to some work

performers the bureaucratic thinking of the work preparers results in moving the problems (cost cutting, late deliverance of goods) towards them, instead of discussing the problems with the performer earlier in the process in order to find the best and most efficient solution.

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Thirdly, the lack in development towards cultural change could (partly) be explained by the only manager left of the former Prinsen management. It is this manager, the head of the work performers, who has a strong, central position in the social network, and could therefore be a hindrance in leaving the old Prinsen culture behind. The position of this manager is risky if Prinsen wants to generate profound change in the organization. Therefore, Prinsen needs to generate more communication opportunities (meetings, evaluations) in order for people to share their, and find out others’ capabilities so the organization will become less dependent one specific persons. The development of the social network needs to be examined in the second study on Prinsen.

Finally, one way to mould Prinsen was suggested by one of the managers: ‘we need to become smarter’. Learning from each other could improve interdepartmental communication, and learning from the market could render a more businesslike approach. At present, there is no structured way of sharing knowledge and experience; departmental meetings are hardly used for constructive building of corporate intelligence. If Prinsen is to be ‘market intelligent’ (a feature of market orientation), it will need to structure interdepartmental communication, in order to share internal, and, following market orientation, even more important: external information.

Conclusion and implications

The present study demonstrated that the employees of Prinsen were aware that change was needed, but the personal willingness to change was unclear. If Prinsen was to change its culture, it needed to unfreeze first. Therefore, the second study investigated whether this awareness to change was enough to make employees willing to change. It did so by

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Study 2

The first study indicated that employees desired a culture change towards a business mentality, but also that possible blockades to this change existed (a lack of departmental communication and a manager with a highly influential position). Therefore, this second study focused on the actual implementation of, and the effects of the possible hindrances on, culture change towards market orientation. The reason why market orientation is both appropriate and challenging for a company like Prinsen, is that it is not common for building companies to have customer orientation incorporated within their vision. Many visions of building companies (BAM, Heijmans), and even the mother company of Prinsen, Dura Vermeer, centre their visions around their own strengths and capabilities, while many examples of companies in other markets (Philips, TNT, ING) display a strategy that is build around the customer’s current and future needs. In some informal conversations, managers of Prinsen indicated that they desire more proactivity in customer retention, therefore market orientation could be a suitable focus. On the other hand, it will be a challenge for the company to

implement such a non-common strategy in a building market with its strong inward focus. First, the way the first four steps of Kotter’s model were implemented is discussed. Second, employees’ opinions on the vision and its communication are investigated through interviews, as well as Prinsen’s development in the period of June to December 2009. Finally,

implementation of market orientation will be evaluated.

Implementing change at Prinsen

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First, a sense of urgency was assumed by the management of Prinsen. The reasons for this assumption were the weak competitive position on the wood market, the disappointing turnover (6 instead of 10 million), and the call for professionalization demonstrated by the employees in study 1, which was communicated in a staff meeting in June.

Second, the team that should drive the change, the coalition team, consisted solely of the members of the management team. Because Prinsen is a small, organic company where contacts between management and employees are frequent, the management team decided that it would be most practical if they would be the driving force for change instead of adding more members of the organization. Power, expertise and credibility, three of the four

necessary coalition team’s characteristics, were assumed to be present with this management team. Only experience with leading change was neither present in the management team, nor in the rest of the organization.

Third, forming of a vision is relatively unfamiliar within the building industry. Because the managers, like all the employees, were practically oriented, the vision needed to be tangible. To help the management team with forming a vision, examples of other

companies were provided. At the beginning of December 2009, the vision for Prinsen was agreed upon by the management.

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presented in front of the whole group what this vision means for Prinsen and for the customer, and how it is to be implemented.

Methodology

A second round of open interviews was conducted at the work preparing and work performing department of Prinsen in December 2009, in the week after the communication of the vision. Fifteen of the nineteen office employees were interviewed (two work performers could not be interviewed since they were deployed too far from the office, one work preparer was ill and one manager was on vacation). As with the previous study, the workmen employed within Prinsen were not interviewed because they are not sufficiently involved in the subject of this study. Therefore, in this study with ‘employees’ the office employees are meant.

Apart from the personnel changes, no other noteworthy changes appeared at Prinsen. Because two new people were hired (a work performer and a work preparer) and one person left, still two-third of the organization was employed less than two years at Prinsen. There were also no structural changes in the education level, this remained relatively high with two-third of the employees having a college degree or higher.

The structure of Prinsen had not changed since the first study, except for the fact that one work preparer was promoted to the function of head of the work performing department, he will be named the ‘new PF manager’ from now on. Thus, there were at that time two people leading the work performing department. With an extra work performer hired, the work performing department consisted of 8 employees, including the two heads of the

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Qualitative measures

The interviews took a half hour on average, and were held face-to-face. The subjects of the interviews were the evaluation of the last half year, and the vision that was communicated by the management. The employees were asked to evaluate the last half year from an economic, organizational and social perspective. Subsequently, they were asked to explain the new vision and their opinion about it. The way the vision was communicated, and whether the management was perceived to be credible and unanimous, was also addressed. Additionally, the managers were asked to estimate the willingness and trust the employees have in the vision, in order to compare their answers with those of their subordinates.

Quantitative measures

Besides open-ended questions, a social network analysis was performed. Employees were provided with a list of with all their colleagues’ names and were asked to indicate whether or not these persons are a source of advice for the interviewed person. UCINET VI, developed by Borgatti, Everett and Freeman (2002), was used to compute network centrality of persons concerning influence/power and knowledge. Betweenness of every employee was calculated, as well as the number of people selected by the respondent (out degree) and the number of people who selected the respondent (in degree) concerning influence and advice.

Results

The development of Prinsen

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Prinsen’s economic position was evaluated to be in need of improvement by eight persons, including all four of the interviewed managers. Prinsen was said to be competitive on the concrete market, but far from competitive on the wood market. The company managed to accept only one work on the latter market in 2009. Therefore, all managers indicated the failed wood projects will be evaluated projected in January 2010.

The structure of Prinsen has improved over the last half year, according to seven employees. They indicated that the tasks are clearer and that the work processes are more streamlined. However, these and other employees and managers indicated that a lot is still to be done. The recommended departmental meetings have not taken place since the summer break, mostly because of bad planning. Also the cooperation between the work preparing and work performing department has not reached satisfactory level, according to three of the four interviewed work performers. They indicated that they still perceive a lack of mutual

knowledge between the two departments. This was not mentioned by any of the work preparers. The addition of another head of the work performing department was experienced to be an improvement by four people, six people did not perceive a difference. However, some employees sensed a lack of cooperation between the two managers, confirmed by the two managers themselves. They said to be aware that it is visible that their ways of working do not align, resulting in tensions. On the other hand, no one perceived an effect on the quality of the works of the work performing department.

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The opinions of what is to be improved at Prinsen differed greatly. Some said Prinsen needs structure, others said Prinsen cannot cope with situations when people are away for a longer time, for example through sickness, and others said there are still ‘grey’ areas where no one takes responsibilities. Some (3) argued that Prinsen needs expansion in knowledge, while others (2) said strategic choices must be made, because currently most of the income comes from concrete projects, while Prinsen is originally a wood company.

Market oriented vision

The vision of Prinsen that was accepted in December 2009, is: ‘Water is becoming more and more important in the Netherlands. Prinsen bridges water by expertise and superior customer focus’. This vision, based on market orientation, is the result of conversations with the management team with the goal of finding an approach that can guide the organization, and, doing so, creates one culture. In the meeting where the vision was communicated and

discussed by the employees, some practical issues related to a ‘superior customer orientation’ were very prevalent:

- Openness and transparency - To think like the customer thinks

- Effort in building (new) relationships with customers - Team work

- Flexibility

Initial reactions to the vision were positive, five employees even claimed to be enthusiastic about being market oriented, but some comments on the word ‘superior’ were signaled. Thirteen of the fifteen interviewed employees found this vision to be clear, and two third of them were able to explain the vision in their own words. The explanations varied from

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of the meeting. This confirms the expectation of the managers that the employees would perceive this vision to be clear.

The vision was perceived to be clear by twelve of the respondents. Some said it does not cover all Prinsen does, but that adding more words would make it blurry. Customer orientation itself was not claimed to be new according to six employees; they claimed that it corresponds with the way Prinsen was already operating. Four employees said that the form in which this vision appears is new for Prinsen, because it makes Prinsen’s way of working more formal and structured.

There were only positive opinions on customer orientation, the employees were all very positive on placing the customer central, however, two comments were prevalent. First, half of the interviewed persons said that the word ‘superior’ is very demanding to Prinsen and very promising to the customer. Some said it promises cheap products, but no one could find an alternative for the word ‘superior’. The second comment was that a superior customer focus can only be reached with maximum cooperation of all the employees.

Whether market orientation would make Prinsen stronger, was answered positively by eight people. They said it could certainly guide the company towards a stronger market position and a better relationship with the customer. Four employees, however, indicated that they did not expect the vision to be have this effect. They said internal change is needed, and that an external focused sentence will not do the work when there is no change in the way work is approached.

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The implementation of the vision has a different place on people’s agendas at Prinsen. Some said the vision needs to be implemented slowly but instantly, whilst others considered it to be subordinate to the regular affairs. Most employees, even one manager, held a lenient view towards the implementation of the vision. None of the managers even had a plan in mind on the implementation of the vision. The only idea that was mentioned by two of the

managers was that it should be the new baseline in conversations and meetings. The way individuals suggested to implement this market orientation in their own work, displayed some interesting results. All people of the work preparing department either said they did not need to adjust their way of working towards the vision, or they talked about the adjustment of their department or the organization as a whole. On the contrary, the members of the work

performing department all indicated that they need to improve their personal work attitudes. They mentioned that their communicative, administrative and/or social skills need adjustment in order to be customer focused.

The unanimity of the management on the content of the vision was questioned by six people, while five people were positive. The reason for these doubts was that some people said that at this point they did not expect the managers to be on one line concerning the vision. In line with these expectations, two of the managers indicated that they thought not all of the employees would consider the management to be unanimous, while one manager was positive. The managers that were negative on the employees’ viewpoints explained this by comparing the different work attitudes of the managers. According to them it is clear that the actions of the managers do not align with the vision.

Concerning trust, there were only two people with doubts about whether the

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vision. The other two managers did not expect the employees to doubt the conviction of the management on the content of the vision.

The capability of the management in implementing the vision in the organization was confirmed by nine people, with four others being positive with the remark that time will tell what the actual quality of their performance will be. A lack of experience of these managers on changing organizations appears to be raising doubts. This was also mentioned by one of the managers, while the other managers did expect the employees to doubt the capabilities of the management in implementing the vision within the organization.

The way of communicating the vision was unanimously experienced as being clear. Opinions varied from ‘excellent’ to ‘very clearly explained’. However, half of the people mentioned that without continuity in communication the vision the enthusiasm will soon fade away. This was acknowledged by both managers and employees. The possibility in the

meeting to suggest practical ways of implementing the vision, however, was not interpreted as being a form of influence on the vision itself by two third of respondents. They claimed that the vision was already decided upon, as was confirmed by the managers who were present at the meeting. Interestingly, the employees did not perceive this to be negative. They said they were not interested in brainstorming on a vision, they thought it was a managers’ task. The managers expected this, and added that it would not be useful to have more people joining such a process. After the meeting, the managers shared the opinion that the employees are willing to ‘go for’ the vision.

Social network

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study, from 0,51 to 0,42. This means that the advice being asked within the organization has become more widespread, thus less centered on few key persons (Wasserman & Faust, 1994).

Figure 2: Social network on advice seeking (2). PF = Work Performer, PP = Work Preparer

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manager from 11 to 13 and the PP manager from 10 to 12. Thus, in light of advice seeking the ‘old’ PF manager has become less of a structural hole, which makes the organization less vulnerable.

The clusters that are visible in figure 2 do not differ much from the clusters visible in figure 1 of study 1. The position of PP 1 can be explained by the fact that he was ill and thus could not be asked who he asked for advice. The position of PF 6 can be explained by the fact that he was recently hired and spent most of his time in the work preparers office, preparing the work he has to perform. The work performers and work preparers are rather clustered with their own department, and a less defined cluster with secretaries and a new work performer completes the network. Because the ‘old’ PF manager is a source of advice for more work preparers than the new PF manager, he has a position rather in between of both departments, while the latter belongs to the work performing cluster.

The differences in betweenness have also become larger. Since PP 5 left the

organization, the differences have enlarged. Currently, the PF manager’s betweenness is one and half times higher than that of PF 2, and twice as high or more than the rest of the network. The network as a whole has become less centralized since study 1, while in June 2009 the centrality was 10,4%, in December 2009 this was 15,4%. This means that more people have become connecting actors.

It should be noted that in this study 2 out of 20 people(10%) could not be asked who they ask for advice, while in the previous study 1 out of 19(5,3%) could not be asked. This shows that the above results most likely would have been even stronger if these percentages had been equal.

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The results of the second study showed positive signs regarding the implementation of market orientation. However, some structural problems also became visible. The first step of Kotter’s model of changing an organization, building a guiding coalition, was implemented by simply putting the complete management team forward. According to both managers and employees, this team should be capable of leading Prinsen to change. However, managers and employees said they do not perceive the management team to be unanimous in living out the vision. Also, expertise in change (a necessary characteristic of a change coalition) was not perceived to be present among the managers

The second step, establishing a sense of urgency, has not been largely emphasized by the management team. Nonetheless, two third of the respondents said Prinsen needed a vision. The easy acceptance of the vision by the employees demonstrated that a sense of urgency for having a vision was present. However, the depth of this desire for a vision remains vague. Therefore it is hard to estimate the effort the employees are willing to place into the change process

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The fourth step in Kotter’s model is communicating the vision. The way management communicated their choice for market orientation was perceived by the employees to be very positive. Although the interactive approach was mentioned to be pleasant, it seems that the desire of the employees does not lie in thinking along, or being influential. On the contrary, the employees said they were happy to put these matters in the hands of their managers.

At what level the organization currently is market oriented, is hard to tell. Because of the small size and the flatness of the organization, (market) information flows easily through the organization. Many employees indicated that they already work with a customer focus, and the market oriented vision was also not perceived to be new. In the ‘vision’ meeting, the people expressed that it is important to think like the customer and to get to know him. However, the interviews showed that a lack of time hinders the employees in establishing and deepening customer contact.

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communicate well (as in the case of Prinsen), it makes Prinsen less trustworthy towards the customer.

The social network analysis showed that in the past half year, the organization has become more heterogeneous in advice seeking. Although the PF manager still remains a broker in the network, the augmentation of advice relations makes Prinsen less dependent on his position. There are much more indirect contacts, the organization has become more dense and is less dependent on key persons for information, and the position of the management team as a whole concerning being advised has strengthened. This position of the management shows potential for the implementation of the market orientation, since it shows that together they can reach every employee. Through the advice contacts they can guide every employee in implementing the vision; therefore, unanimity of the management is essential for one organization wide focus.

Conclusion

The results of the second study show that market orientation is accepted within Prinsen, but some structural problems block the transition towards this customer focus. Within

management, a lack of unity exists, as well as disagreement on the importance of market orientation. These problems are visible for the employees, and form a potential hazard for the change process. The social network analysis confirmed the key positions the managers also occupy in the informal network, which emphasizes the need for management to self-evaluate its work attitude. Finally, it was interesting to see that a distinction between the two

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next section. To sum up, it seems that the people of Prinsen do not oppose change, but the conclusion that the organization is unfrozen cannot be justified. The skepticism towards the word ‘superior’ and not seeing necessity to change in order to become market oriented (by the work preparing department) demonstrate that a strong desire to break the pattern is not

present. Therefore, the organization needs to revise the first steps, thus unfreeze the

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General discussion

The two studies in this paper demonstrated that Kotter’s model appears to be suitable for the implementation of market orientation. Kotter’s model make meantime evaluation possible, its foundation on Lewin’s (1951) change model (unfreezing-changing-refreezing) gives an organization like Prinsen the possibility to evaluate the measure of readiness to change (measure of ‘defrost’) before taking steps of changing and refreezing. This (constant)

evaluation that characterizes Kotter’s model is important because market orientation demands specific organizational characteristics (highly intra-connected, highly coordinated,

decentralized, etc). The first four steps of Kotter’s model clearly demonstrated in the case of Prinsen that more unfreezing is necessary in order for the other four steps (establishing and formalizing change) to be successful. The organization is partly ready to change, but to make the change even more successful, the organizational characteristics (management unity, interdepartmental communication, management change plans) found in both studies need to be considered. Since the first study the communication between both departments was perceived to be too low. Also, management was found to lack unity as well as concrete plans to implement the change. The second study showed that Kotter’s model does not have a direct solution for small organizations where a lack of experience in change is available.

The social network analysis proved to be of assistance in determining the

organization’s social network and its possible effects on change. It demonstrated in the first study that one manager could be a possible hindrance to change, and although other

managers’ positions became stronger, he still had the strongest advisory position in the network. These findings thus show that, especially in small organizations, social network analysis proved to be able to provide interpretable, usable information on the informal

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employees when the managers use their informal, advisory contacts. However, it also showed the importance of managements’ attitudes, because managers’ behavior could also have unintended influence that could damage the change process. If social network analysis in an organization would show that people turn to other persons than managers for advice, another approach, like a more formal one, could be recommended. Thus, social network analysis can render valuable information when implementing change towards market orientation. The culture analysis also proved to be of assistance to describe the organization’s characteristics. However, because the OCP originally is meant to be used for statistical comparison, other methods could perhaps be more appropriate.

Although in both studies a professional, customer focused organization wide culture appeared desirable to the employees, many employees and managers said that market

orientation is something for the long term, because daily issues demand their attention. This is in contrast with the concept of market orientation, for it is not a separate discipline but a guiding direction within organizational practices. When even managers misperceive the concept of market orientation, a successful implementation is not to be expected. Apparently, when market orientation is communicated, examples of practical situations in combination with market orientation should be provided, instead of only explaining the concept of market orientation. In this way, especially for industries like the building industry, it becomes tangible for the employees.

Implications for future research

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employees directly with customers’ opinions. In this way, not only support for the need for market orientation is generated, but also complacency is tackled. Future research could investigate the relationship between customer reviews and a sense of urgency towards customer orientation.

For small organizations like Prinsen, management needs some reinforcement in leading change. In large organizations there are more possibilities of finding experienced change agents, or there are finances to hire them. In small organizations, the managers who need to drive the change need to be supported. In Kotter’s model, the vision is seen as the essential building block for change, but especially small organizations need tangible strategies to implement such a vision, as became visible in the case of Prinsen. More needs to be

researched on preparing mangers of small organizations for their double role as both manager and change agent.

In the second study, both departments demonstrated a different view on implementing market orientation. The work preparers approached market orientation from a more lenient point of view; they seemed to perceive it to be more distant from their department. On the other hand, the work performers were more active in their point of view; they made the change process seem tangible by expressing ways to change their work attitude towards market orientation. The concept of market orientation appears to be clear to people who interact a lot with customers, but to people who work with internal customers (colleagues) it seems to remain distant. More research is to be done on how employees with mostly internal clients can adopt a market orientation.

Because of the recent merger of Prinsen, it did not have a strong company culture. The initial reactions of the respondents showed that a new vision was not only accepted by

everyone, but also welcomed by most of the people. Apparently, recently merged

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fact that this vision did not make a distinction between the old and the new firm. In organizations where one of the merged parts already was market oriented, a more hostile approach from the other part could arise. Future research should investigate if market

orientation in recently merged organizations is accepted more easily when it is a new concept than when it was already prevalent in one of the merged parts.

Implications for Prinsen

Prinsen has found some bumps in the road towards a customer focused culture. These

blockades need to be removed before the final four steps can be successful. First, management unity is a key necessity for the success of change, but within Prinsen it is quite clear some cooperation problems exist. It seems that there is not much mutual communication concerning work attitudes. Considering that all managers shared the opinion that the management team is sufficiently capable, it is very remarkable that the two PF managers do not see each other as sources of advice. Thus, unity in the management should be high on Prinsen’s agenda.

Also, the management team needs to put effort in creating a greater sense of urgency towards a customer focus, and also needs to stress the importance of the word ‘superior’. Currently, the management team is not unanimous in their priorities around customer

orientation, and this is visible in the rest of the organization. The management should develop a strategy that combines the many daily issues with the vision, and they should show unity in implementing it towards their subordinates. Above all, they should show a mentality of trying to become an example in customer focus.

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more active approach towards the customer can be promoted, for instance making employees visit the customer instead of calling, and making service calls with the customer some time after finishing a work. Also, the two departments need to communicate and interact more in order to empower each other in the customer focus. In this way the work performing

department, having a clearer idea of how to implement market orientation, can lead the work preparing department towards a superior customer focus.

Producing short-term wins (step 6) is very important and should be very clear. If the suggestions of step five lead to positive results, than those successes need to be made public and perhaps even celebrated if they are unambiguously an effect of market oriented working. Management should also seek opportunities for short-term wins, for example special projects where customer focus could make a difference.

The final two steps, consolidating improvements and producing more change (step 7), and institutionalizing new approaches (step 8), display the necessary continuance of the new vision. Although these steps are intended for the long term, already people need to be hired who align with the vision, and future managers, whether they are internally promoted or externally hired, should be champions in customer focus.

The example of Prinsen shows that in small organizations, possible blockades can become visible quite early in the process. Small organizations are more often decentralized, and can therefore be vulnerable to personal characteristics. The absence of unity in the management, and the lack of cooperation between the two departments, shows that implementing a vision goes hand in hand with organizational structure, because many

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Shortcomings and recommendations

This study on the implementation of market orientation on Prinsen showed that market orientation is a contingent approach that needs to be adapted to many situational

characteristics. Because of the small size, it was possible to get a complete view of how the organization handles the implementation of market orientation. The longitudinal character (9 months), the two rounds of interviews at the beginning and the end of the investigation period and the social network analysis also provided a good insight in the way the organization is developing. Because Prinsen was recently merged and (therefore) its culture is heterogeneous, this study showed that in small organizations with a weak culture, people, instead of

procedures or strategies, are the drivers of change. The chance of following the actual process of the implementation of market orientation, and actively adapting it to the development of the organization, gave this study its unique character. The use of a social network analysis made it possible to show that the implementation of market orientation in a small, weak culture organization is a process of constant adaptation to personal characteristics and organizational circumstances.

While this study provides several useful insights on the implementation of market orientation, the qualitative, small-sized data collection leaves out the possibility of

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