13.5 Research findings

We shall now consider how organizational identity was defined and constructed in the sample firms, and the differences in this respect between state-owned and privately owned ventures . The main identity characteristics perceived by members of the firms were as follows :

• ˜ Perfection and ˜ high-quality products were more frequently cited in private enterprises than in state-owned ones.

• ˜The enterprise s trademark and ˜the enterprise s position in the market were more frequently cited in state-owned enterprises than in private ones.

• ˜Highly qualified personnel was more frequently cited in private enterprises than in state-owned ones.

• ˜Job security was more important in state-owned enterprises than in private ones.

Thus quality and qualified personnel were at the centre of private firms identity, while the enterprises trademarks and job security were ranked highly in state-owned firms.

We shall now address hypothesis 1: Polish enterprises possess a dual identity: one constructed for Polish customers and the other for foreign ones ˜construed external identity . The most important identity characteristics for all firms in relation to foreign customers and competitors were perfection and high-quality products, followed by low product price and reliability. All four characteristics were more important in private firms than in state-owned ones.

Construed external identity in relation to Polish customers was almost identical to that for foreign customers, with perfection and high-quality products ranking top, low product price second and the firm s trademark and its position in the market third. Hence hypothesis 1 is disproved: Polish enterprises do not have a dual external identity in relation to Polish and foreign customers. This may be due to the fact that to some extent the firms had adapted to operating under global conditions. The internal image of Polish enterprises was positive and the characteristics most frequently cited “ perfection and high-quality products indicate that Polish enterprises are heading into the right direction and adopting international operating standards.

The second research goal was to determine the way in which the sample firms responded to threats to their identity (the general feeling that their identity was being undermined). As stated earlier it is commonly believed that such threats emanate from the following: privatization , acquisition by other firms, including foreign ones (Famielec et al ., 1999, pp. 126 “31), restructuring, strong international competition (Aniszewska, 1999), criticism of firms by ecological organizations, and criticism of firms by the press and others. The hypothesis tested here is: there is a trend among Polish firms to cling on to their old identity when faced with a threat.

Our results show that organizational identity had changed in 51.7 per cent of the firms since 1990. The data also shows that most enterprises (70.4 per cent) had not experienced a threat to their identity. What threats had been felt had been stronger in state-owned enterprises than in private firms. The more that privatization had caused changes in identity, the more it had been perceived as a threat (correlation coefficient 0.16, p < 0.05 “ see Appendix 13.1). However privatization was also seen as offering a chance to change the firm s identity, although this was not always fully realized (0.18, p < 0.09). Identity changes tended to take place in younger firms, with the correlation between firm age and identity change between 1990 and 1998 reaching 0.25 (p < 0.01). The main elements of threat were stiff competition from foreign firms and the necessity of restructuring the firm.

Hence we can verify the hypothesis: there is a general tendency among Polish firms to maintain their existing identity. External pressures do not always arouse anxiety or prompt reflection on possible changes to organizational identity, so there is no direct correlation between a general feeling of threat and identity change (Aniszewska, 1999), rather this change is produced by other factors. In general, threat to identity correlates positively with changes to the organizational structure and strategy, indicating that threats cause changes to be made to the firm s operations but not to its identity. Crises, an adverse economic situation, privatization or continuing public ownership may pose a threat to the identity of firms, but they do not necessarily cause an immediate change to the existing identity. However younger firms have inherited a smaller burden from the past (for example the pre-1990 organizational culture and structure) and are therefore more likely to change their organizational identity (Appendix 13.1).

We shall now test the third hypothesis: privatization is linked to a tendency to change organizational identity. The data on structural variables show variations between state-owned and private enterprises. Identity characteristics such as job security, the firm s trademark and its position in the market were cited more frequently in state-owned enterprises than in private ones. Conversely characteristics such as perfection, high-quality products and qualified personnel were cited more frequently in private firms than in state-owned ones. Many of the top managers of the sample firms claimed that their employees were generally proud of these identity characteristics (60.5 per cent), although 51.7 per cent of the respondents said that certain characteristics had changed. Fewer changes had occurred in state-owned enterprises than in private and privatized ones.

The results show that privatization had little effect on identity: 22.0 per cent said that privatization had had no effect on identity; 8.6 per cent admitted that changes had occurred but only in certain characteristics, and only 6.5 per cent stated that privatization had changed the firm s identity entirely). These data indicate that in the view of top management, privatization alone was not sufficient to cause a change in organizational identity. It should be noted, however, that there were major differences between the definitions of organizational identity presented by private and state-owned enterprises, as well as differences between the satisfaction they derived from their identity. It appears that identity had tended to change less in private firms as the need for such change had not been as great as in the state-owned enterprises. Likewise the degree to which privatization had threatened the existing identity was less in private firms ( “0.13, p < 0.09). A correlation also exists between privatization and identity change between 1990 and 1998 (0.18, p < 0.09). With regard to hypothesis 3, therefore, it can be said that structural variables such as ownership form produced highly differentiated results. Although privatization was objectively connected to identity change the respondents did not perceived it as an important cause of change. We turn now to hypothesis 4: strong leadership is linked to a tendency to change the organizational identity when there is threat to the existing identity. According to 60.2 per cent of the respondents, strong leadership had had a significant effect on identity change, although the influence of strong leaders had been greater in private firms than in state-owned ones (0.17, p < 0.05) as managers of the latter were constrained by numerous social and organizational factors. The overall results were as follows:

• Strong leadership influence: 34.9 per cent.

• Rather strong influence: 25.3 per cent.

• Hard to say: 12.9 per cent.

• Rather weak influence: 4.3 per cent.

• Very weak influence: 2.7 per cent.

These results will be easier to understand when the variable ˜strength of organizational identity has been considered .

13.5.1 Strength of organizational identity

˜Strength of organizational identity concerns familiarity with the firm s history and the pride that is derived from its mission and position in the market, as well as employees identification with their firm. This concept was examined with the help of the following questions. (The indices used were a modified version of those in Gioia and Thomas, 1996, pp. 396 “7.)

• Does top management feel strongly about tradition and know the history of the firm?

• Do managers feel proud of the firm s goals and mission?

• Does top management feel that the firm holds a significant position in its sector?

• Does top management possess an explicitly defined set of goals to be achieved by the firm?

• Are there managers in the firm who know its history and tradition well?

• Does the firm have employees who identify strongly with it?

The answers to the above questions were measured according to a five-point scale. The most positive answers pointed to a strong identity, and all the results correlated quite strongly with one another. Almost all correlations were above 0.50 and the significance level was also very high: 0.001. The average strength of organizational identity amounted to 4.2 on the five-point scale (4.02 in state-owned enterprises and 4.25 in private firms).

We shall now look at the correlation of the variable ˜strength of organizational identity with other relevant variables. The stronger the organizational identity the more changes in identity were due to strong leadership (0.27, p < 0.01). Identity is created by top managers and only they are able to change it.

Strong identity also implies better and more open communication with the external environment and the firm s personnel, which is confirmed by the correlation between identity strength and the number of promotional instruments implemented (0.16, p < 0.05). This finding corresponds with the results obtained by Gioia and Thomas (1996, pp. 396 “7), who found that strong organizational identity influences the interpretation of organizational problems in respect of strategy as well as policy. Firms with a strong organizational identity are more proactive and more inclined to effect changes. Furthermore our data show that the stronger the influence exerted by leaders on changes, the larger the variations in identity between 1990 and 1998 (0.32, p < 0.01). Thus we can partially confirm our fourth hypothesis and state that strong leadership is linked to changes in identity, but only when the existing identity is strong. Threats to identity do not play any role in this relationship.

As implied above, the stronger the organizational identity the more promotional instruments are used (0.16, p < 0.05). Firms with a strong organizational identity are more inclined to be open to the external environment and to use such instruments as brochures , media interviews, press releases, press conferences, sponsorship, and so on. These instruments help to create an image and make the firm better known to the public and other stakeholders, which in turn tends to make employees proud of their firm (0.22, p < 0.01).

The sample firms frequently used the following kinds of promotional instrument: participation in trade fairs (21.8 per cent), brochures (20.9 per cent) and press releases (15.2 per cent). The least regularly used instruments performed a public relations function: open-door days (1.4 per cent) and press conferences (1.4 per cent). Internal instruments such as in-house news bulletins and broadcasts (0.7 per cent) were used extremely rarely. Polish firms are obviously less interested in internal communication with their employees than they are in external communication instruments, which tend to be more closely related to marketing than to public relations and creating an image. This assertion is supported by the fact that 80.1 per cent of the sample firms did not have a public relations department or a press spokesperson. Of the firms that did have PR departments, 11.4 per cent were state-owned and 19.2 per cent were private. Moreover 80.6 per cent of firms did not use PR agencies. Of those which did, 16.7 per cent were private and 9.7 per cent were state-owned. More firms with foreign capital investment used PR agencies (23.5 per cent) than did firms without (12.7 per cent).

In summary, foreign capital investment and private ownership produce a slightly stronger tendency to use PR agencies, but in general public relations is a minor consideration among Polish firms. With regard to marketing promotions, there are no major variations between the use of promotional instruments by state-owned and private firms.

13.5.2 Identity type

Two types of organizational identity can be distinguished: a utilitarian type (U) and a normative type (N). The utilitarian type is oriented towards the market, competition and profit. The normative type is focused on organizational symbols and culture, and on hierarchical rules and procedures. These concepts were investigated by means of the following questions:

• Should, according to top management, your firm compete aggressively with other firms? (U)

• Are symbols, formal meetings and ceremonies important for the functioning of your firm? (N)

• Are salaries usually fixed by the management board for particular departments according to the annual performance of those departments? (U)

• Are financial profits the only measure of success for your firm? (U)

• Is concentration on explicitly formulated executive procedures a mission of your firm? (N)

• Is there a common conviction in your firm that attention should be paid to marketing, advertising and public relations? (U)

• Do cuts or increases in salaries depend on the performance of particular departments or sections? (U)

• Is cost effectiveness the main criterion for changes in the firm s activities and administration? (U)

• Are economic effects the most important criteria determining the fulfilment or otherwise of the firm s mission? (U)

• Are strict procedures, formal rules and subordination to a hierarchy important elements in the success of your firm? (N)

The answers to the above questions were measured on a five-point scale (using indices adapted from Gioia and Thomas, 1996, pp. 396 “7). Correlations between the results of the above questions were also examined.

The average value of the utilitarian identity was 3.41 (state-owned enterprises 3.25, private firms 3.45) on the five-point scale, and that of the normative identity was 2.82 (state-owned enterprises 2.76, private firms 2.83). Thus it can be stated that the sample firms possessed a rather utilitarian identity (market-oriented), but the strength of this identity was not great, particularly in state-owned enterprises.

We shall now look at the correlation between the utilitarian identity and other variables (Appendix 13.1). The stronger the utilitarian identity, the more promotional instruments were used (0.22, p < 0.01). Enterprises oriented primarily towards the market, profit and cost effectiveness were more open, communicated more fully with their stakeholders and wished to convey their image to the maximum number of customers. The opposite was true of firms with a normative identity “ the higher the value of the normative identity indicator, the fewer promotional instruments were used ( “0.31, p < 0.001). These firms were less open towards the external environment and did not necessarily wish to communicate with it.

It appears that it is easier to be utilitarian when the financial situation is favourable “ the better the financial situation of the sample firms, the more utilitarian their organizational identity (0.16, p < 0.05) and the larger the budget for promotion and PR (0.13, p < 0.09).

Our results also show that the longer the length of service of top management (the average was 12 years), the more utilitarian the firm s identity (0.17, p < 0.05). This is a very interesting finding because managers with long years of service in planned-economy organizations are often stereotyped as being resistant to change and innovation, and as lacking a market orientation. In fact the reverse is often true and experienced managers can be flexible, open to change, have a strong marketing and profit orientation, and see the value of advertising and public relations. Moreover they know their firms better and can respond better to the demands made by the market. They also have a better understanding of the constraints on action for their firms in given sectors. The positive correlation between length of service and utilitarian identity is confirmed by two further correlations. The longer the length of service, the more changes were made to the firm s organizational structure (0.24, p < 0.05) and the more likely it was that a new corporate growth strategy was introduced (0.17, p < 0.05). Frequent changes in top management mean that managers are not well acquainted with their firms and are slower to adapt to new market situations.

13.5.3 Formulating a new corporate strategy

This section addresses our fourth and fifth hypotheses. Hypothesis 5 “ the stronger the organizational identity the smaller the chance of formulating a new organizational strategy “ was not confirmed by the correlations (Appendix 13.1) and can therefore be rejected. However a change in organizational identity between 1990 and 1998 was correlated with new strategy formulation (0.17, p < 0.09), so there is some relationship between strategy and identity change.

With regard to hypothesis 6 “ type of organizational identity (utilitarian versus normative) determines the likelihood of a firm formulating a new organizational strategy “ strategies had been formulated by 49.8 per cent of the sample firms and the utilitarian type of identity was significantly correlated with this variable (0.19, p < 0.05).

Actions of a utilitarian nature can be observed in the strategies employed by the sample firms: market-oriented activities (38.8 per cent), restructuring and reorganization (30.0 per cent) and investment (14.9 per cent). Market-oriented activities featured more prominently in private firms (43.6 per cent) than in state-owned ones (38.8 per cent). The connection between market orientation, strategy change and utilitarian identity is confirmed by the positive correlation between ˜chance of formulating a strategy and ˜number of promotional instruments used (0.28, p < 0.01). The correlation between ˜restructuring and reorganization and ˜chance of formulating a strategy is also very strong (0.46, p < 0.05). Changes had taken place in 54.8 per cent of the firms, with restructuring as a strategic activity being more important in state-owned enterprises than in private firms. Investment was also an important element of strategy. Thus with regard to hypothesis H6 we can state that utilitarian identity is connected with the formulation of new strategies.