Ch3

Influences on
Organisational
Culture

Study guide

The formal and informal organisation

Organisational culture

Their relationships
impacts
Definition
Factors
various theories

Stakeholders of business organisation

Internal and external stakeholders

Main stakeholder groups and their objectives
Interactions and conflicts between different
stakeholders

1 What is culture?

Culture is the ways of behaving,

understanding, that are shared by a group of
people.
Spheres of culture:

Nation, region
Gender
Social class
Profession or occupation
Type of business
organisation

Elements and levels of culture

(Schein)
Observable behaviour

Values and beliefs

Behaviour
Artifacts
Attitudes
Including slogans, strategies and goals

Assumptions

Most difficult to understand and change

*The link between culture and leadership is very

strong.

2 Organisational culture

The collection of traditions, values, policies,

beliefs and attitudes that constitute a
pervasive context for everything we do and
think in an organisation. (Mullins)
A pattern of beliefs and expectations shared
by the organisations members, and which
produce norms which powerfully shape the
behaviour of individuals and groups in the
organisation. (Schwartz & Davies)
*The way we do things around here.
(Handy & ACCA)

Manifestation of culture

How formal the organisation structure is

Communication
Office layout
Type of people employed
Symbols
Management style
Freedom for subordinates
Attitudes to quality
Attitudes to risk
Attitudes to customer
Attitudes to technology

What shapes organization culture?

Organizations founder
History
Leadership and management style
Organizations environment

* The cultural values can be used to guide process,

motivate employees, drive changes or preserve the
status quo.
Kaplan:6 factors
Size, technology, diversify, age, history, ownership

3 Culture and structure (Handy&

Power culture
Role culture
Task culture
Person culture
Harrison)
(club
(bureaucracy
(existential
(Athena)
/Zeus)

/Apollo)

/Dionysus)

Power and
Bureaucratic and
influence stem from rational
a key central figure organization,
emphasis on
hierarchy and status

No dominant or
clear leader, experts
are important
persons

To satisfy the
requirements of the
individuals in the
organization

Few formal
procedures & rules

Formal rules and

procedures, duties

Performance is
judged by results

Depends on talent
of individuals

Informal structure
Functional basis

Formal structure

Team-based,
horizontally or
matrix structured

Management are
often in lower status

Suited to smaller
entrepreneurial org.
where people get on
well.

Efficient if org. are

large and
impersonal in a
stable environment

Reflected in project
teams and task
forces, suited to
rapidly changing
environment

Found in a small,
highly participatory
org.

Culture and structure

Types of culture do not necessarily equate to

specific organisation types.
Some styles of organisation culture may
accompany particular organisation structure.
It is quite possible for different cultures to
prevail in different parts of the same
organisation.

*Pilot paper: p36 #4

*question bank: p562 #7

Culture and managerial activity

Strategic management suits power culture.

Tactical management suits task culture.
Operational management suits role culture.
Type of activity

Organizational level

Policy-making
activity

Top
Top management
management

Innovative
activity

Middle
Middle management
management

Routine
activity

Operatives
Operatives

Type of culture

Power
culture
Task
culture
Role
culture

The impact of national culture

Power distance
(Hofstede
model)

Uncertainty avoidance

Preference for security, order and control; need for

written rules and consensus; tolerant for risk

Individuality

Unequal distribution of power; extent of centralisation;

subordinates participation in decision-making

Preference for living and work in individualist;

emphasis on autonomy, individual initiative; concern
on personal relationship

Masculinity

Distinct social gender roles; different values

*Confucianism vs. dynamism- attitude to change over

the long term

Main dimensions of difference between national cultures

Power distance

Uncertainty avoidance

High UA: Latin, near east, Germanic and Japan

Low UA: Anglo and Nordic countries

Individualism

High PD: Latin, near east, less developed Asian countries

Low PD: Germanic, Anglo and Nordic countries

High individualism: Anglo, more developed Latin and Nordic

countries
Low individualism: less developed Latin, near east and less
developed Asian countries

Masculinity

High Masculinity: Japan, Germanic and Anglo countries

Low Masculinity: Nordic countries

4 Informal organization

An informal organization exists side by side

with the formal one.
It is loosely structured, flexible and
spontaneous.
Its mechanisms:

Social relationships and groupings

Informal communication
Behavioural norms
Power/influence structures

Influences on organisations

Informal organisation may be beneficial or

detrimental to the organisation:

Benefits:

Employee commitment
Knowledge sharing
Speed
Responsiveness
Co-operation

Problems:

Social groupings may act collectively against organisational

interests
Informal communication may be inaccurate
May be too important in fulfilling employees needs
Informal work practice may cut corners

Minimise the problems of

informal organisation

Meeting employees needs as far as possible

via the formal organisation
Harnessing the dynamics of the informal
organisation
Involving managers themselves in the
informal structure

* Question bank: p562 #8

Group norms

A work group establishes norms to which all

members of the group are expected to
conform.
Individuals may react to group norms in the
following ways:

Compliance
Internalisation
Counter-conformity

Norms may be reinforced by:

Identification
Sanctions

5 Stakeholders goals and objectives

Stakeholders are those individuals or groups

that potentially have an interest in what the
organisation does.
Types of stakeholders:

Internal stakeholders

Connected stakeholders

Employees, management

Primary stakeholders

Shareholders, customers, suppliers, financiers

External stakeholders

P132 another approach

Secondary stakeholders

Community, government, pressure groups

Stakeholders and interests

internal

Managers and
employees

connected shareholders
bankers
suppliers

external

customers
government
Pressure groups
Professional bodies

Job security, pay,

promotion, benefits,
working conditions
Shareholder wealth, risk
Security on loan
Profitable sales, payment,
long-term relationship
Goods as promised
Jobs, tax, legislation
Pollution, rights, etc.
Members ethics

Stakeholders conflict

Since their interests may be widely different,

conflict between stakeholders can be quite
common.
Conflict between managers and shareholders
is a typical example

Vehicle for managerial skills

Dividend stream, value of shares

Conflict can be detrimental to the companys

stability

Stakeholder dependency

A firm might depend on a stakeholder group

at any particular time

Degree of dependency can be analysed by:

Bankers, customers, etc.

Disruption, replacement, uncertainty

Relationship between company and

stakeholders is a function of parties relative
bargaining strength

Stakeholder mapping (Mendelow)

low

high

Level of interest

low
A
Minimal efforts

B
Kept informed
e.g. community
representatives

power
C
Kept satisfied
e.g. institutional
shareholders
high

D
Key players

Implication for the organisation

Stakeholder mapping is used to assess the

significance of stakeholder groups

The framework of corporate governance should

recognise stakeholders level of interest and
power
Sometimes, repositioning of certain
stakeholders may be appropriate
Blockers and facilitators of change should be
identified

Stakeholder groups may choose loyalty, exit and

voice.

Strategic value of stakeholders

Firm can make strategic gains from

managing stakeholder relationships

Employee loyalty and customer loyalty

Continuity and stability in relationships with
employees (customers, suppliers) and
capability of responding to changes.

Measuring stakeholder satisfaction

Measuring the stakeholder satisfaction may

be difficult, cause its difficult to quantify
Employees

Government

Staff turnover; pay and benefits relative to

market rate; job vacancies
Pollution measures; promptness of filing
annual returns; accident rate; energy efficiency

Distributors

Share of joint promotions paid for; rate of

running out of inventory

Pilot paper: p36-37 #7,8

Question bank: p562 #9