Organizational Culture

As people work together to accomplish goals, groups develop into organizations.

As goals become more specific and longer-term, and work more specialized, organi
zations become both more formal and institutionalized. Organizations tend to tak
e on a life of their own and widely held beliefs, values, and practices develop,
differentiating one organization from another and often affecting the organizat
ion's success or failure. In the early 1980s, management scholars began attempti
ng to describe these belief systems, which they referred to as organizational or
corporate cultures.
Interest in organizational cultures was further created by William Ouchi's 1981
best-seller, Theory Z: How American Business Can Meet the Japanese Challenge. Ou
chi considered organizational culture to be a key determinant of organizational
effectiveness. In 1982 two other best-sellers, Terrance Deal and Allan Kennedy's
Corporate Cultures: The Rites and Rituals of Corporate Life and Thomas Peters a
nd Robert Waterman's In Search of Excellence, supported the idea that excellent
companies tended to have strong cultures.
An organizational culture is defined as the shared assumptions, values, and beli
efs that guide the actions of its members. Organizational culture tends to be sh
aped by the founders' values, the industry and business environment, the nationa
l culture, and the senior leaders' vision and behavior. There are many dimension
s or characteristics of organizational culture that have been defined. For examp
le, a research study conducted by J.A. Chatman and K.A. Jehn in 1994, identified
seven primary characteristics that define an organization's culture: innovation
, stability (maintaining the status quo versus growth), people orientation, outc
ome orientation, easygoingness, detail orientation, and team orientation.
Large organizations usually have a dominant culture that is shared by the majori
ty of the organization and subcultures represented by groups of individuals with
unique values or beliefs that may or may not be consistent with the dominant cu
lture. Subcultures that reject the dominant culture are called countercultures.
Strong organizational cultures are those where the core values of the dominant c
ulture are strongly believed by the great majority of organizational members. A
strong culture tends to increase behavior consistency and reduce turnover. Howev
er, strong cultures may be less adaptive to change, may create barriers to diver
sity, and may create barriers to successful acquisitions and mergers.
CULTURAL FIT BETWEEN ORGANIZATION AND MEMBERS
There are many practices within an organization that tend to keep a culture aliv
e and measure the cultural fit between the organization and its employees. Many
of the human resource practices such as selection, performance appraisal, traini
ng, and career development reinforce the organization's culture. Organizational
beliefs also tend to influence the work norms, communication practices, and phil
osophical stances of employees. Organizations use a process called socialization
to adapt new employees to the organization's culture. If employees do not adapt
well, they feel increasing pressure from supervisors and from coworkers who are
better acculturated. They might stay and fight, stay and become isolated, or le
ave the organization, voluntarily or involuntarily, and look for a different org
anization whose culture they fit better.
In contrast, employees who understand and share the organization's values have a
better basis for making choices that match the firm's goals. Many organizations
compete through innovation. When most employees understand and support the orga
nization's expectations, less time is spent explaining, instructing, and buildin
g consensus before trying something innovative. Moreover, the error level will b
e lower in most cases. Employees who are well acculturated also find their work
more meaningful: They are part of, and contributing to, something larger than th
emselves. Thus, a good cultural fit between employees and the organization contr
ibutes to employee retention, organizational productivity, and profit.
MEANS OF CONVEYING CULTURE
Organizations often convey cultural values explicitly by means of mission statem
ents or corporate credos, or to a lesser extent through slogans, logos, or adver
tising campaigns. Leaders and managers also show what the organization values by
what they say and do, what they reward, who they make allies, and how they moti
vate compliance. Other elements of culture appear tacitly in symbols and symboli
c behavior: For instance, meeting protocols, greeting behavior, allocation and u
se of space, and status symbols are a few areas where organizational norms often
develop. Culture can regulate social norms as well as work or task norms.
The new-employee orientation typically offered by organizations conveys selected
cultural elements of which management is both aware and proud. Some cultural el
ements might be initially unpalatable, however, and some others might be hard to
put into words. For instance, an orientation would rarely say outright that the
culture rewards neglect of one's personal life and demands a 60-hour work week,
although these expectations are not unknown in corporate life. Perceptive new e
mployees learn about tacit cultural elements through observation and through que
stioning trusted employees or mentors. This is not one-time learning; employees
must continue to watch for signs that the rules are changing.
These organizational rules include explicit policy statements, but also a much l
arger and less evident set of unwritten organizational expectations. Attentive e
mployees figure them out sooner than others. They listen to the metaphors, image
s, and sayings that are common in the organization. They watch, for example, the
consequences of others' mistakes to reach conclusions about appropriate behavio
r.
Organizations also communicate values and rules through displayed artifacts. For
example, in some organizations, the CEO's office displays many symbols of wealt
h, such as expensive original art or antiques. In others, the CEO's workspace is
very Spartan and differs little from that of other executives and higher-level
managers. In the former case, a manager with other sources of income might be ab
le to afford similar status symbols but would be unwise to display them since th
is might be perceived as competing with the CEO. In the latter case, display of
personal wealth by people in general would probably be counter to organizational
values.
Even the way a physical plant is laid out communicates cultural messages: Is it
an open area where everyone can see everyone? Are there cubicles? Are there priv
ate offices? Is it easy or difficult to move and communicate between functional
areas? Have ergonomics and convenience been considered or ignored? Are there ade
quate neutral spaces for people to meet to make decisions and solve problems? Do
the break rooms and lunch rooms invite or discourage use?
SOME COMPONENTS OF CULTURE
The idea that organizations have cultures came originally from ethnography, the
study and description of human social cultures. Researchers in organizational cu
lture have borrowed some of that language. Individuals in societies took on spec
ific "roles," such as ruler, priest, historian, or teacher. In organizations, si
milar roles emerge. The historian or storyteller, for instance, is usually a lon
gtime employee who narrates inspirational stories about the company's early year
s or its evolution. Embodied in the stories are many of the core values that per
meate the organization. This "organizational folklore" includes oft-repeated sto
ries about the founder, a long-term CEO, a dramatic firing, or an individual who
rose through the ranks very quickly owing to some attribute highly valued by th
e firm. The stars of an organization are comparable to a social culture's heroes
. An organization's success stories yield "role models" for the ambitious.
Organizations develop "rites and rituals" comparable to traditional activities w
ithin an ethnic culture. Whereas some organizations might emphasize award ceremo
nies, others might de-emphasize explicit recognition and affiliation behaviors.
Still others might foster "management by walking around," whereby managers spend
frequent one-on-one time away from their desks giving praise or criticism to in
dividuals. As another example, lunch with the president might be a longstanding
tradition, although the amount of actual communication will vary from organizati
on to organization according to unwritten rules about who talks to whom.
Although all organizations have both formal and informal communication networks,
organizational culture strongly affects the content, reliability, and influence
of the informal network or "grapevine." When information through formal channel
s is scarce, the grapevine carries heavier traffic. Leaders aware of culture's i
mportance try to find ways to tap and monitor the grapevine and sometimes use th
e grapevine by adding information to it.
CULTURE CHANGE
An organization's culture is composed of relatively stable characteristics that
are based on deeply held values that are reinforced by many organizational pract
ices. However, an organizational culture can be changed. Cultural changes are mo
st likely to occur when there is a dramatic setback such as a financial crisis o
r when there is a turnover in top leadership. Also, younger and smaller organiza
tions and organizations with a weak culture are more amenable to change.
Deliberate and major culture change occurs by executive fiat, by implementation
of a plan, or a combination of these means. When leadership changes or when exis
ting leadership commits to change, employees learn that the old assumptions whic
h they were comfortable are no longer safe. After a merger or acquisition, for e
xample, "how we do things here" will change, sometimes quickly and radically. A
wise leadership team implements a planned culture-change process. The process us
ually consists of a series of two-way communications that elicit the prevailing
assumptions, reassure employees that the changes can benefit them, introduce (so
metimes gradually) the new vision, and work to gain employees' commitment and su
pport. Leaders also must model the new culture for others and change the organiz
ation's structure and management practices to support the new culture. If the le
aders skip the process or do an inadequate job, employees at all levels experien
ce stress, confusion, and anger. When change is introduced so as not to arouse f
ear and resentment, however, transition may be relatively smooth.
A 1992 research study by J.P. Kotter and J.L. Heskett showed that long-term fina
ncial performance was highest for organizations with an adaptive culture. One ex
ample of when organizations must adapt their culture is when organizations becom
e multinational. With the increase in global organizations, it has become clear
that national cultures impinge on organizational cultures. Besides language diff
erences, employees bring to the job many radically different assumptions about s
uch aspects as the dignity of work, the proper relationship between employee and
supervisor, the value of initiative, the treatment of unwelcome information, an
d the voicing of complaints. Organizations with international customers, and eve
n more, those with global operations have needed to learn how to adapt to a mult
icultural environment. Failure to adapt jeopardizes an organization's chance of
success abroad.
To summarize, organizational culture is the shared assumptions, beliefs and valu
es held by most members of an organization. Culture is conveyed in both explicit
and implicit ways. Newcomers to an organization must quickly assimilate a great
deal about the culture. Veteran employees must remain aware of cultural change
too, especially when the leadership changes. A strong culture that is aligned wi
th the organization's strategic context and is adaptive to environmental changes
can enhance an organization's long-term financial performance.