2.5 Organizational and Corporate Cultures
Learning Goal
I can explain the influences on organizational and corporate culture.
Introduction
The term organizational culture describes the values, attitudes and beliefs of the people working in an organization that control the way they interact with each other and with external stakeholder groups. Organizational culture is commonly understood as ‘the way we do things around here’. It's how people within the organization view the world and respond to it.
Organizations have distinct cultures. This is true of businesses and other organizations such as schools and colleges. The culture of a tech company will be very different to that of a nursing home. Some schools’ culture is driven by the need for better test scores while others believe that educating the ‘complete person’ is more important. The culture of an organization gives it a sense of identity and is based on the values, attitudes and beliefs of the people who work in it, especially senior management.
Values, attitudes and beliefs have a powerful influence on the way staff in a business act, make decisions and relate to others. They define what is ‘normal’ in an organization, so it is possible for the same person to act in different ways in different organizations.
2.5 ESSENTIALS
KEY TERMS
organizational culture
power culture
role culture
task culture
person culture
entrepreneurial culture
CASE STUDY
Influences on Organizational Culture
Senior management may influence the culture of the organization through:
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mission and vision statements – these inform staff about what the business is trying to achieve
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the appointment of senior staff – they are likely to share the same values, attitudes and beliefs as the directors of the business
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the organization’s ethical code of conduct – this lists the ‘dos’ and ‘don’ts’ that must be observed by staff when dealing with external stakeholders
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strategies on social and environmental issues – these will provide a clear guide to the organisation’s social and environmental values and beliefs
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the example they set, e.g. how they treat subordinates and make decisions.
The industry the business operates in will also influence the values and beliefs of the organization. For instance, the culture of a weapons manufacturer or a tobacco company is likely to be very different to that of a workers’ cooperative or a business operating homes for the elderly.
The legal constraints, social norms and cultural values of countries vary markedly and these are likely to be reflected in the culture of organizations that are based there.
CAN YOU...
Explain what influences the organizational culture of a workplace?
Learning Goal
I can describe different types of culture and analyze their effects on motivation and organizational structures
Types of Organizational Culture
Power Culture
Power culture is associated with autocratic leadership. Power is concentrated at the center of the organization. Decisions can be made swiftly as so few people are involved in making them. Managers are judged by results rather than the means they used to obtain them. Autocratic leadership and hierarchical structures are features of organizations with a power culture.
Handy uses the analogy of a spider’s web – the spider at the center of the web has all of the power and the web has little purpose without the spider. Motivational methods are likely to focus on financial incentives and bonuses to reward exceptional performance – and this can encourage risky and, in the longer term, inappropriate decisions.
Role Culture
Role culture is usually associated with bureaucratic organizations. Staff operate within the rules and show little creativity. The structure of the organization is well defined and each individual has clear delegated authority. Power and influence come from a person’s position within the organization. Decision-making is often slow and risk taking is frowned upon. Tall hierarchical structures are used in organizations with a powerful role culture. Handy uses the image of a substantial building to represent this form of culture – solid and dependable but not going anywhere fast.
Task Culture
Groups are formed to solve particular problems, and lines of communication are similar to a matrix structure. Such teams often develop a distinctive culture because they have been empowered to make decisions. Team members are encouraged to be creative and there may be a strong team spirit which can lead to a very motivating environment – based on meeting workers’ intrinsic needs.
Handy uses the image of a net to represent task culture – the net’s strength is derived from the many strands.
Person Culture
There may be some conflict between individual goals and those of the whole organization, but this is the most creative type of culture. There is no emphasis on teamwork as each individual is focused on their own tasks and projects. This type of culture might be found in a scientific research environment or in a professional partnership such as lawyers and architects. Individuals who thrive in this type of environment will often find it difficult to work effectively in a more structured organization.
Handy depicts this type of culture as a constellation of stars – each person is different from everyone else and they operate alone.
Entrepreneurial Culture
In this culture, success is rewarded, but failure is not necessarily criticized since it is considered a consequence of enterprise and risk taking. Although Handy did not specifically identify entrepreneurial culture, other theorists consider it to be important for certain types of organizations. This type of culture is usually found in flexible organizational structures. Motivation levels are likely to be high among people who enjoy the challenge of innovative risk taking.
CAN YOU...
Describe different types of culture and analyze their effects on motivation and organizational structures?
Learning Goal
I can analyze the consequences of culture clashes within and between organizations.
Consequences of Culture Clashes
Many businesses have turned themselves around, converting potential bankruptcy into commercial success. Very often this transformation has been achieved by changing the culture of the business. The existing culture of a business can become inappropriate and clash with new objectives needed to achieve growth, development and success.
Some examples:
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A traditional family firm which has favored members of the family for promotion into senior posts converts to a public limited company. New investors demand more transparency and recognition of natural talent from recruited employees. A different leadership style may lead to a clash with the existing culture of the business – hence the need to change existing values and beliefs.
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A product-led business needs to respond to changing market conditions by encouraging more staff involvement. A team or task culture may need to be adopted.
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A recently privatized business, formerly run on bureaucratic principles, needs to become more profit orientated and customer focused. An entrepreneurial culture may need to be introduced for the first time.
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A merger or takeover may result in one of the businesses having to adapt its culture to ensure consistency within the newly created larger business unit. The danger of culture clashes as a result of mergers and takeovers is very real, particularly when the inte-gration involves companies from different countries. The culture clash between the management team at Mercedes (German) and Chrysler (US) is often used as an example of how cross-border integration some-times fails.
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Declining profits and market share may be the consequences of poorly motivated staff and a lack of interest in quality and customer service. A person culture may help to transform the prospects of this business.
CAN YOU...
Analyze the consequences of culture clashes within and between organizations?
Changing Organizational Culture
Changing the value system of a business and attitudes of all staff who work for it is never going to be an easy task. The process could take several years before all staff and processes have been fully ‘converted’. It means changing the way people think and react to problem situations. It can mean directly challenging the way things have been done for years. It can also involve substantial changes of personnel, job descriptions, communication methods and working practices.
The key common elements in effective cultural change are:
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Concentrate on the positive aspects of the business and how it currently operates and enlarge on these. This will be much easier and more popular with staff than focusing on, and trying to change, negative aspects.
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Obtain the full commitment of people at the top of the business and all key personnel. If they cannot or will not change, it might be easier to replace them altogether. Unless the key personnel model the behaviour they expect to see in others, change will be very difficult to achieve.
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Establish new objectives and a mission statement that accurately reflect the new values and attitudes that are to be adopted – these also need to be communicated to all staff.
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Encourage ‘bottom-up’ participation of workers when defining existing problems or when devising new solutions. The biggest mistake could be to try to impose a new culture on workers without explaining the need for change or without giving them the opportunity to propose alternative ways of working.
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Train staff in new procedures and new ways of working to reflect the changed value system of the business. If people believe in the change and understand the benefits of it, then it will become more acceptable to them.
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Change the staff reward system to avoid rewarding success in the ‘old ways’ and ensure that appropriate behaviour that should be encouraged receives recognition. People need to be reassured that if they adjust to the new approach, then they will gain from it.
Evaluating Organizational Culture
The significance and power of an organization’s culture to drive people’s behavior and attitudes should not be underestimated. The impact of culture goes beyond the desire of most people to conform with accepted values. The following examples reinforce the importance of organizational culture:
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The values of a business establish the norms of behavior of staff – what is and what is not acceptable in certain situations. For example, is it acceptable in this organization to offer bribes to attract large contracts ‘as long as we are not found out’?
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Culture determines the way in which company managers and workers treat each other. For example, if the chief executive is open and receptive to new ideas and proposals from senior managers, then this approach is likely to filter through the whole organization – to its potential long-term benefit.
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A distinctive organizational culture can support a business's brand image and relationships with customers. For example, The Body Shop almost invented the ‘ethical trading’ culture. Will this approach to business now change after its takeover by L’Oréal?
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Culture determines not just how decisions are made – with the participation of staff or by top managers alone – but also the type of strategic decisions that are taken. For example, the culture of the UK National Health Service in target setting and giving rewards for meeting short waiting times within Accident and Emergency departments is, it is claimed, encouraging hospital managers to decide to leave patients in ambulances for up to two hours. How different would it be if doctors were actually making these decisions?
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Organizational culture has been clearly linked to the economic performance and long-term success of organizations. Businesses dedicated to continuous improvement with staff involvement have been shown to be more profitable in the long term. Toyota is the prime example of success based on this principle.
CAN YOU...
Analyze how an organization’s culture drives behavior and attitudes and describe how to change it?