Post Graduate Diploma in Management

(Infrastructure Management)
PGDM ( IM ) : 2016-18
Trimester II

Organizational Behavior II ( OB 502 )

Assignment :
3Ms Organizational Culture

Submitted To:
Prof. Jallavi Panchamia

Dated: January 8, 2017

Name Roll No.

Keyur Patel 25
M.Saad Attarwala 26
Mohmed Safvan 27
Parth Shah 28
Recruit the right people, provide them with the right environment to work and let
them do their thing.

Abstract:

The case examines the organizational culture at 3M and the way in which it facilitated innovation
at 3M. The policies and mechanisms adopted by 3M's management to encourage the spirit of
innovation in its employees are also discussed.

The case takes a close look at 3M's environment of innovation; the culture of knowledge sharing;
and the reward system. It also discusses the steps implemented by the new CEO, James McNerney,
to accelerate growth at 3M. The impact of cultural change at 3M on the spirit of innovation is also
discussed.

Companys Background:

3M was set up in 1902 in Two Harbors, US by five businessmen as the Minnesota Mining and
Manufacturing. Its first venture was mining corundum. With $30 billion in annual sales, 3M
employs 88,000 people worldwide and produces more than 55,000 products,
including: adhesives, abrasives, laminates, passive fire protection, dental and orthodontic
products, electronic materials, medical products, car-care products, electronic circuits, and optical
films. 3M has operations in more than 65 countries including 29 international companies with
manufacturing operations and 35 companies with laboratories. 3M products are available for
purchase through distributors and retailers in more than 200 countries, and online directly from
the company.
In 1904, due to a new abrasive replacing corundum, 3m decided to go into manufacturing of
sandpaper. In 1907 received its first shipment of garnet and started sandpaper production. 3M
became debt free and reported its first dividend of 6% per share in 1916. In the 1920s it introduced
waterproof sandpaper and scotch masking tape and also entered the English market. It also
established labs and sales and marketing networks across Europe. In 1937, 3M decided to invest
5% of its sales in R&D to encourage innovation. In 1946, it got listed on the NYSE.
In 1949 it 3M offered its employees stock options. 1951, the Technical Forum was set up to
encourage the technical staff to share ideas. It also used to invite Nobel Prize winners to forum
meetings to discuss their research findings. In 1963, the Carlton Society to honor technical
employees for their achievements. The Technical Circle of Excellence and Innovation to honor
employees was also set up to honor employees whose innovations had considerable influence on
the companys products, processes or programs. Furthermore, its Pathfinder Program honored
sales, marketing, logistics and finance and production teams for developing innovative methods
for launching new products in the market.
In 1977, 3M launched Challenge 81 a program that aimed at achieving 25% of the companys
annual sales from products that had been in the market for less than 5 years. In the 1990s it was
increased to 30% and total years reduced from 5 to 4.
In the 1970s and 80s 3M diversified into medical, radiology, energy control and other various
fields. In 1980,it introduced Post it Notes, one of its most successful products.
In 1984, 3M launched a new program to support innovation The Genesis Program. It was all
about optimizing the innovative spirit at 3M. It provided financial support to employees to
encourage entrepreneurship for projects in the research stage. In 1986, 3M came up with Alpha
grants for non-technical people who wanted to bring in innovations in administration, marketing
and other non-technical areas.
In 1999, to increase pace of growth 3M was organized into six business segments Industrial,
Transportation, Graphics and Safety, Health Care, Consumer and Office, Electro and
Communications, and Specialty Material.
In 2001 James McNerney took over as the Chairman and CEO of 3M and announced several
initiatives to revive the stagnating growth of the company. He initiated cost cutting measures,
rationalized purchases and implemented process improvement programs in the company. He
reportedly cut down the no. of research projects from 1500 to 700. He further fired over 6500
employees. He also shifted from a seniority based pay structure to a performance based pay
structure which diverted the focus of the employees from experimentation to a more result oriented
approach.
Analysts cautioned that the changes brought about by McNerney might harm the 100-year old
culture at 3m that fostered innovation and sustained its growth over the years.
OB Theories Linked with 3Ms Culture:

Openness: It is defined as a spontaneous expression of feelings and thoughts and the

sharing of these without defensiveness. It applies in both directions, receiving and giving
of ideas, feedback and feelings. In 3Ms organizational culture openness is quite high. This
can be inferred from case which mentions that 3M setup a Technical Forum was set to
encourage the technical staff to share ideas. It also used to invite Nobel Prize winners to
forum meetings to discuss their research findings.

Experimentation: It means using and encouraging innovative approaches to solve

problems, using feedback for improvement and encouraging creativity. Experimentation
was quite was quite high in 3M. It gave its employees the freedom to conduct research in
areas of their choice. By thus nurturing the talents of its employees and fostering a climate
of innovation, 3M became one of the most innovative companies in the world. In 1980s,
3M formed a 16-member Innovation Task Force to examine the innovative spirit in the
organization.

Confrontation: It can be defined as facing, rather than shying away from problems. It also
involves taking up challenges. This factor was quite high in 3M. 3M encouraged
employees to work on problems that challenged their intellect.

Autonomy: It is the freedom to plan and act in ones own sphere. It also means respecting
and encouraging individual and role autonomy. The degree of Autonomy in 3M was quite
high. It gave its employees the freedom to conduct research in areas of their choice even if
that research was not related to their official projects. Furthermore, 3M employees were
allowed to spend 15% of their working hours on independent projects.

Personal Growth was encouraged in 3M through the 15% rule. According to the 15%
rule, 3M employees were allowed to spend 15% of their working hours on independent
projects. Also numerous awards were setup to reward the technical as well as non-technical
staff for innovations which further led to their personal growth. 3M also approached a Dual
Ladder approach which enabled technical employees to move up the career path without
comprising their research/professional interests.

Innovation and Risk Taking was quite high in 3M, this fact can be attributed to the fact
that experimentation was encouraged in 3M. Also, 3Ms success was attributed by its
commitment to innovation. 3M fostered a climate of innovation.

Initially, Outcome orientation was low in 3M because experimentation was encouraged

in 3M. It gave its employees the freedom to conduct research in areas of their choice even
 if that research was not related to their official projects. But in the later stages, Outcome
Orientation was high because Delivering Results was one of the leadership attributes
recognized by 3M management.

Team Orientation was high. Initially, 3M was organized into various product divisions.
As these divisions increased in size, there was a slowdown in innovation. To increase the
pace of new product launches, McKnight introduced the philosophy of divide and grow. In
line with this philosophy, new business were spun off and new management teams were
devoted to the spun off unit. As a result, these new units were to grow quickly.

Stability was high because focus was on innovation. And in turn innovation led to growth.
3M had a Strong Organizational Culture because its employees identified themselves
with the companys commitment to innovation. It has also been mentioned that when the
Tartan Track market got saturated, it was not a letdown for the 3M employees but instead
it motivated them to start a new project and innovate further.

Resistance to change: When McNerney made changes in 3Ms pay structure, it was
opposed. Earlier 3M had a seniority based pay structure, under which employees who had
put in more years of service were paid better. McNerney introduced a performance based
pay structure. Under the system, Employees were graded on their performance and good
performers were promoted irrespective of seniority. Analysts were apprehensive about the
outcome of such changes. They felt that McNerneys 3M acceleration program and six
sigma initiative might dampen the spirit of innovation.

The new CEO James McNerney used his legitimate power to cut down research projects
from 1500 to 700. In addition, he also announced he would lay off around 6500 employees
to cut costs.

Reward versus Punishment: 3M followed a policy of rewarding the most innovative

technical as well as no-technical employees. This can be inferred from the various awards
and recognition that 3M used to confer upon its employees. It established the Golden Step
award which was conferred on employees whose ideas turned into successful products.
Also. It also established the Technology Sharing Awards which was conferred on
employees who successfully developed new technology and shared it with other divisions.
Also, in a honor sharing society Carlton Society, membership was awarded to the most
innovative of the employees. This membership further stimulated the development of new
technology.
Questions and Answers:

1) Since its early years what strategy did 3M adopt to foster a culture of innovation in
the organization? How far do you attribute the success of the company to its culture?
Ans. 3M adopted the following strategies foster a culture of innovation in the organization:
15% Rule - 3M employees were allowed to spend 15% of their working hours on
independent projects. This rule resulted in the development of many innovative products
at 3M.
Genesis Grants Under this strategy employees were provided around $50,000 financial
support for their research for developing prototypes and conducting market tests.
Dual Ladder - Approach which enabled technical employees to move up the career path
without compromising their research/professional interests.
Own Business Opportunities 3M gave employees the opportunity to run their projects
depending on the sales. This stimulated internal entrepreneurship at 3M.
Technical Forums Technical forums were established to give employees the opportunity
to present their technical papers and exchange ideas with others.
New Product Forums These forums were established to enable all divisions to discuss
new ideas.
The total success of 3M can be attributed to its culture which emphasized on innovation.
Due to its culture which focused on risk taking an innovations 3M was able to establish a
presence in 60 countries with sales amounting to $16.332 billion. It also has more than 55,000
products in its portfolio and applies for over 500 patents every year.

2) The top management of 3M launched many initiatives to foster a culture of innovation

in the company. Which of these initiatives proved to be critical to the companys
uninterrupted success for over a hundred years?
Ans. The following proved to be critical in the companys uninterrupted success for over a
hundred years:
Own Business Opportunities
15% Rule
Genesis Grants
Setting up of a Technical Forum
Setting up of Pathfinder Program
Investing 7% of total sales in R&D
3) Many analysts pointed out that the new initiatives implemented by 3Ms new CEO
James McNerney would have a negative effect on 3Ms culture. Do you think the new
initiatives would negatively affect 3Ms culture? Justify your stand.
Ans. According to us McNerneys initiatives will have a negative impact on 3Ms culture
because he reportedly cut down the no. of research projects from 1500 to 700,which would
serve to discourage people from experimenting or carrying out further research projects. He
further fired over 6500 employees which would serve to reduce the trust of the employees on
the organization. He also shifted from a seniority based pay structure to a performance based
pay structure which diverted the focus of the employees from experimentation to a more result
oriented approach. Also team orientation was discouraged because employees had to come up
with individual development plans.
Also, many employees felt that the implementation of Six Sigma initiative would dampen the
spirit of innovation at 3M. This is reflected in the words of the famous business consultant,
Ryan Mathews, who stated that In a company thats really driven by creative thinkers-how
do you do Six Sigma and creativity? You cant. And if you force that model on an organization,
you are just bound to make it moribund.
McNerney further implemented a system in which the management took control and decided
which ideas had the potential for commercialization. This was shift from the previous
egalitarian culture to an elite culture, where only the people at the top control what gets done.
This could be summed up in the words of the inventor of Post it Notes, Arthur Fry, who stated
that There is a change in culture, and it is cause for concern.