Organizational Culture

Organization Culture August 19, 2009 Group 4

Organizational Culture Introduction Basically, organizational culture is the personality of the organization. Culture is comprised of the assumptions, values, norms and tangible signs (artifacts) of organization’s members and their behaviors. Members of an organization soon come to sense the particular culture of an organization. Culture is one of those terms that are difficult to express distinctly, but everyone knows it when they sense it. For example, the culture of a large, profit corporation is quite different than that of a hospital which is quite different than that of a university. You can tell the culture of an organization by looking at the arrangement of furniture, what they brag about, what members wear, etc. -- similar to what you can use to get a feeling about someone's personality. Corporate culture can be looked at as a system. Inputs include feedback from, e.g., society, professions, laws, stories, heroes, values on competition or service, etc. The process is based on our assumptions, values and norms, e.g., our values on money, time, facilities, space and people. Outputs or effects of our culture are, e.g., organizational behaviors, technologies, strategies, image, products, services, appearance, etc. The concept of culture is particularly important when attempting to manage organization-wide change. Practitioners are coming to realize that, despite the bestlaid plans, organizational change must include not only changing structures and processes, but also changing the corporate culture as well. There's been a great deal of literature generated over the past decade about the concept of organizational culture -- particularly in regard to learning how to change organizational culture. Organizational change efforts are rumored to fail the vast majority of the time. Usually, this failure is credited to lack of understanding about the strong role of culture and the role it plays in organizations. That's one of the reasons that many strategic planners now place as much emphasis on identifying strategic values as they do mission and vision.

Key Characteristics of Corporate Culture Innovation and Risk Taking: The degree to which employees are encouraged to be innovative and take risks.

Attention to Detail: The degree to which employees are expected exhibit precision, analysis and attention to detail. Outcome Orientation: The degree to which management focuses on results or outcomes rather than on the techniques and processes used to achieve those outcomes. People Orientation: The degree to which management decisions are take into consideration and the effect of outcomes on people within the organization. Team Orientation: The degree to which work activities are organized around teams rather than individuals. Aggressiveness: The degree to which people are aggressive and competitive rather easy going Stability: The degree to which organizational activities emphasize maintaining the status quo in contrast to growth.

Some Types of Culture There are different types of culture just like there are different types of personality.

Authoritarian Culture There is centralization of power with the leader and obedience to orders and discipline are stressed. Any disobedience is punished severely to set an example to others. The basic assumption is that the leader always acts in the interests of the organization.

Participative Culture Participative culture tends to emerge where most organizational members see themselves as equals and take part in decision-making.

Mechanistic Culture The mechanistic culture exhibits the values of bureaucracy. Organizational jobs are created around narrow specializations and people think of their careers mainly within these specializations. There is a great deal of departmental loyalty and interdepartmental animosity. This sort of culture resists change and innovation.

Organic Culture In this case, authority hierarchy, departmental boundaries, rules and regulations, etc. are all frowned up. The main emphasis is on task accomplishment, team work and free flow of communication. The culture stresses flexibility, consultation, change and innovation.

Sub-cultures and Dominant culture Each department of an organization may have its own culture representing a subculture of the system. An organizational culture emerges when there is integration of all the departments into a unified whole. Researcher Jeffrey Sonnenfeld identified the following four types of cultures.

Academy Culture Employees are highly skilled and tend to stay in the organization, while working their way up the ranks. The organization provides a stable environment in which employees can develop and exercise their skills. Examples are universities, hospitals, large corporations, etc.

Baseball Team Culture Employees are "free agents" who have highly prized skills. They are in high demand and can rather easily get jobs elsewhere. This type of culture exists in fast-paced, high-risk organizations, such as investment banking, advertising, etc.

Club Culture The most important requirement for employees in this culture is to fit into the group. Usually employees start at the bottom and stay with the organization. The organization promotes from within and highly values seniority. Examples are the military, some law firms, etc.

Fortress Culture Employees don't know if they'll be laid off or not. These organizations often undergo massive reorganization. There are many opportunities for those with timely, specialized skills. Examples are savings and loans, large car companies, etc.

Importance of Organizational Culture Employees should to be engaged in their work. They yearn for work that is enjoyable, meaningful and engaging. When they are engaged they are safer on the job, more productive and more willing and able to delight customers. It is for these basic reasons that organizational culture matters. It is the right thing for an organization to do - to think about the work environment, working relationships and “how employees do things here.” Focusing on building and sustaining an organizational culture is one way of showing that people are the organization’s most valuable asset.

A strong culture is a talent-attractor - The organizational culture is part of the package that prospective employees look at when assessing the organization. Gone are the days of selecting the person you want from a large eager pool. The talent market is tighter and those looking for a new organization are more selective than ever. The best people want more than a salary and good benefits. They want an environment they can enjoy and succeed in. A strong culture is talent-retainer - How likely are people to stay if they have other options and don’t love where they are? The organizational culture is a key component of a person’s desire to stay. A strong culture engages people - People want to be engaged in their work. The culture can engage people. Engagement creates greater productivity, which can impact profitability. A strong culture creates energy and momentum - Build a culture that is vibrant and allows people to be valued and express themselves and it will create a very real energy. That positive energy will permeate the organization and create a new momentum for success. Energy is contagious and will build on itself, reinforcing the culture and the attractiveness of the organization. A strong culture changes the view of “work” - Most people have a negative connotation of the word ‘work’. When the organization creates a culture that is attractive, people’s view of “going to work” will change. A strong culture creates greater synergy - A strong culture brings people together. When people have the opportunity to (and are expected to) communicate and get to know each other better, they will find new connections. These connections will lead to new ideas and greater productivity - in other words, it will be creating synergy. Literally, 1 + 1 + right culture = more than 10. A strong culture makes everyone more successful - Any one of the other six reasons should be reason enough to focus on organizational culture. But the bottom line is that an investment of time, talent and focus on organizational culture will give all of the above benefits. Not only is creating a better culture a good thing to do for the human capital in the business, it makes good business sense too.

Culture – Input and Output Culture is learned. It is both a product of action and a conditioning element of future action, an input and an output. The internal environment consists of the social and technical systems of the organization. Thus, in part, culture is the product of these socio-technical systems. They consist of the decision-making, planning and control procedures of the organization, its technology, and the procedures for recruitment, selection and training; and are influenced by the common beliefs, attitudes and values of the members of the organization. The strategies, structures, procedures and behaviors adopted by management create a work environment. However, if managers have been members of the organization for some time they are themselves a product of the culture. As culture is both an input and an output, it is likely to be self-perpetuating and highly resistant to change. Figure 7.2 demonstrates how culture is both an input and output. Figure 7.2 (Adapted from Williams et al 1989)

Organizational Culture vs. National Culture Based on the research of Dr. Geert Hofstede, There are differences between national and organizational cultures. For global companies it is important to understand both, organizational and national culture, in order to impact organizational performance. In a recent ITAP seminar, Dr. Geert Hofstede discussed “Integrating Corporate Practices and National Cultural Values.” The topic is highly relevant to organizations operating in a volatile global economic environment. While economic turmoil creates challenges and failures, it also creates opportunities as evidenced in a large number of mergers and takeovers: Doosan and Bobcat, Lloyds and HBOS, Barclays and Lehman Brothers, Citigroup and Wachovia. The list is long. Many of these names have strong national brand identity. They are goliaths (giants) with offices in many economic centers around the world. How should they integrate to become one organization?

Our national culture relates to our deeply held values regarding, for example, good vs. evil, normal vs. abnormal, safe vs. dangerous, and rational vs. irrational. National cultural values are learned early, held deeply and change slowly over the course of generations. Organizational culture, on the other hand, is comprised of broad guidelines which are rooted in organizational practices learned on the job. Experts agree that changing organizational culture is difficult and takes time. What is often overlooked or at least underestimated when two or more companies merge is how the underlying personal values of employees impact how they perceive the corporate culture, etc. A person can learn to adapt to processes and priorities, and a person can be persuaded to follow the exemplar behaviors of leaders in an organization. But if these priorities and leadership traits go against the deeply held national cultural values of employees, corporate values (processes and practices) will be undermined. What is appropriate in one national setting is wholly offensive in another. What is rational in one national setting is wholly irrational in another. And, corporate culture never trumps (outdoes) national culture. The answer, then, lies not in abandoning efforts to unify organizations after a merger or cancelling efforts to build high performance culture, but in overlaying and harmonizing local interpretations of corporate practices to cultural norms. In organizational theory, culture is a commonly researched subject matter. A link is often drawn between a strong organizational culture and dominance in the market place. Culture is shaped by an organization’s unique history and situational growth. It can be defined as the values, beliefs, and expectations more or less shared by the organization’s members. It affects the way a company does business and makes known relevant employees, customers, suppliers, and competitors. Managers and upper level executives are responsible for instilling the values and norms into employees so they not only know what is expected of them, but are eager to perform in such a way as to benefit the company. “A top-rate administrator is able to create sources of meaning and identification by providing an atmosphere that is rewarding for its employees and customers.” Scott and Davis, 2007 A nation’s culture, similar to that of an organization, is comprised of the symbols, values, rituals, and traditions of the people living in a particular region. Language,

food, and family traditions are all rooted in national culture. How people behave in public verse, how they behave within their own home is also associated with values and standards of their nation. Cultures usually differ in relationships between the individual and society, ways of dealing with conflict, relationships to authority, and conceptions of class and gender. All of these things are comparable to organizational culture, just on a grander scale. Of Hamburger and Social Space: Consuming McDonald’s in Beijing - The article reviewed the development of the Western fast-food sector and the local responses of people in Beijing. The Chinese are recognized for their great traditions and rich culture and so, it was questioned whether McDonald’s would be able to translate its well established business model from the West into something suitable for people in the East. Even with all the doubt, McDonald’s was able to take Asia by storm with irrefutable success, but how? When globalizing the golden arches, did management try and adapt to the local culture or were they dependent on the locals adapting to its established organizational culture; which way did the flow of information go?

Creation of a Culture The founders of an organization generally tend to have a large impact on establishing the early culture. The organization’s culture results from the interaction between the founder(s) biases and assumptions and what the original members of the organization learn from their own experiences. 1. An organization’s culture comes from what it has done before and the degree of success it has had. The ultimate source of an organization’s culture is its founders. 2. The founders of an organization traditionally have a major impact on that organization’s early culture. •

They had the vision; they are unconstrained by previous customs or ideologies.

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The small size of new organizations facilitates the founders’ imposition of the vision on all organizational members.

1. Culture creation occurs in three ways: •

First, founders hire and keep only employees who think and feel the way they do.

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Second, they indoctrinate and socialize these employees to their way of thinking and feeling.

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The founders’ own behavior acts as a role model that encourages employees to identify with them and thereby internalize their beliefs, values, and assumptions.

1. When the organization succeeds, the founders’ entire personality becomes embedded in the culture of the organization.

Keeping a Culture Alive There are practices within the organization that act to maintain it by giving employees a set of similar experiences. Three forces play a particularly important part in sustaining a culture: selection practices, the actions of top management, and socialization methods. 1. Selection •

The explicit goal of the selection process is to identify and hire individuals who have the knowledge, skills, and abilities to perform the jobs within the organization successfully.

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The final decision as to who is hired will be significantly influenced by the decision maker’s judgment of how well the candidates will fit into the organization. This results in the hiring of people who have values consistent with those of the organization.

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Additionally, the selection process provides information to applicants about the organization. Selection, therefore, becomes a two-way street.

Example—applicants for entry-level positions in brand management at Procter & Gamble (P&G). Each encounter seeks corroborating evidence of the traits that the firm believes correlate highly with “what counts” for success at P&G. 1. Top management The actions of top management, what they say and how they behave, establish norms that filter down through the organization as to: ○

Risk-taking.

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How much freedom managers should give their employees.

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What is appropriate dress?

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What actions will pay off in terms of pay raises, promotions, and other rewards?

1. Socialization New employees are not fully indoctrinated in the organization’s culture. They are unfamiliar with the organization’s culture and are potentially likely to disturb the beliefs and customs that are in place.

Socialization The process through which the employees are proselytized about the customs and traditions of the organization is known as socialization. It is the process of adaptation by which new employees are to understand the basic values and norms for becoming ‘accepted’ members of the organization. Socialization is a process made up of three stages: pre-arrival, encounter, and metamorphosis. •

The first stage, pre-arrival, encompasses all the learning that occurs before a new member joins.

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In the second stage, encounter, the new employee sees what the organization is really like and confronts the possibility that expectations and reality may diverge.

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In the third stage, metamorphosis, the relatively long-lasting changes take place. The new employee masters the skills required for his/her job, successfully performs his/her new roles, and makes the adjustments to his/her work group’s values and norm.

How Employees Learn Culture Stories Stories typically contain a narrative of events about the organization’s founders, rule breaking, rags-to-riches successes, reductions in the workforce, relocation of

employees, reactions to past mistakes, and organizational coping. They anchor the present in the past and provide explanations and legitimacy for current practices: • •

For the most part, these stories develop spontaneously. Some organizations actually try to manage this element of culture learning

Rituals Rituals are repetitive sequences of activities that express and reinforce the key values of the organization, what goals are most important, which people are important, and which are expendable. Material Symbols The material symbols convey to employees who is important, the degree of egalitarianism desired by top management, and the kinds of behavior that are appropriate. Language Many organizations and units use language as a way to identify members of a culture or subculture. By learning this language, members attest to their acceptance of the culture and help to preserve it. New employees are frequently overwhelmed with acronyms and jargon that, after six months on the job, have become fully part of their language. Culture is transmitted to employees in a number of ways; for example, through stories, rituals, material symbols and language. The process of developing and sustaining organizational culture is illustrated by the following figure by Robbins: Figure 7.1 (Adapted from Robbins 1989, page 479)

Conclusion The future holds promise for companies that understand and nurture their cultures. Cultures are not only able to create an environment, but they also adapt to diverse and changing circumstances. As organizations begin to experience a revolution in structures, the study of culture and the implications for change will become more

important. Understanding of work group subcultures within an organization’s culture will influence strategies for changing organizational culture and overcoming resistance to change programs. Changing an organization’s culture may be extremely difficult, as the processes that support a particular organization or a departmental method of working are both interrelated and varied. Organizational culture is self-perpetuating and highly resistant to change. Changes may cause confusion, conflict and resistance. Managers need to understand the nature and role of culture and how it may be altered. When the role of culture is more clearly defined, managers can better understand its importance in managing organizational change and its impact on day-to-day decision-making.