Organizational Culture

Organizational culture is the set of values that states what an organization stands for, how it operates and what it considers important. Edgar H. Schein defines organizational culture as the pattern of basic assumptions that a given group has invented, discovered and developed while learning to cope with its problems of external adaptation and internal integration.

All the above definitions stress acceptable and unacceptable behavior of its members. For instance, one organization might value solidarity and loyalty to organization more than any other value whereas another organization might stress on good relations with customers. Such values are part of organizational culture in spite of not being formally written like rules and regulations of the organization. They do not usually appear in the organizational training program and in fact, many organizations have difficulty in expressing their cultural values. However, an organization’s values automatically enter every employee’s personal values and actions over a period of time. Organizational culture has a profound influence on individual employees because it is generally an accepted set of values rather than a written set of rules with which employees might not argue.

Organizational Culture

Culture is the knowledge used by people to interpret experiences, set priorities and guide their behavior. The beliefs and values of employees form the core of organizational culture. Culture is acquired by learning and experience. Culture is shaped by various organizational influences. For example, in some companies, employees are encouraged to take risk, while in others, playing safe is the accepted norm. In some companies, the work environment may be very informal with people operating on a first name basis, while in others, it can be very formal with great importance being attached to seniority, designation, etc. Some cultures lay a premium on getting the work done while others attach equal if not more importance to how the work is done.

Importance of  Organizational Culture

Culture plays a very significant role in any organization by communicating information about the overall acceptable and unacceptable behavior. Culture communicates whether the organization expects its managers to be aggressive or conservative in decisions-making, generous or moderate in supporting social causes and ruthless or kind in competitive dealings.

Some organizations have clear, strong and well-defined culture whereas: others have ambiguous, weak and poorly defined cultures. Most managers agree that a strong and clear culture is preferable to weak and vague culture because it helps to provide a common frame of reference for managerial decision-making and a wide variety of other organizational activities.

An organizational culture generally lakes shape over time and is often deeply influenced by the values of the organizational founders. As organizational culture evolves, various symbols, stories, heroes, slogans and ceremonies also come into being. These, then, serve to maintain and perpetuate the culture through subsequent generations of employees.

The values of an organization’s culture are strongly influenced by the values of its founder and top managers. People are often attracted to a company because they share its founder’s values, and many organizations select only such people for employment. Hence the cultures of different organizations tend to become more distinct and different over time.

Dimensions of Organizational Culture

Geert Hofstede, the famous Dutch scholar has identified four well-known dimensions of culture: power distance, uncertainty avoidance, individualism and masculinity.

  • Power distance: The extent to which employees feel that power is unevenly distributed across various levels of the organization from the top to the bottom. Power distance tends to be less in knowledge intensive industries such as computer software. In such industries, individual expertise is as important as seniority and designation.
  • Uncertainty avoidance: The extent to which people feel threatened by uncertainty.
  • Individualism: The tendency of people to be self-centered as opposed to collectivism where people care for each other. Individualism is a typical cultural trait found in investment banks. Americans are considered to be more individualistic, compared to the Japanese.
  • Masculinity: Refers to a strong emphasis on success, money and material objects as opposed to femininity, which emphasizes caring for others and quality of life.

Changing Organizational Culture

Change is most often needed when the organization has lost its effectiveness and is struggling to either carry out or change its strategic goals. The manager trying to change an organizational culture faces lots of difficulties. Because organizational culture embody the organizational values, which are embedded in organization’s soul that stays stable irrespective of the changes in leadership and environment.

It is, however, possible to change organizational culture, to improve the organization performance. For this managers must change employee’s ideas about what is and what is not appropriate behavior. They must create new role model and new stories to help employees understand the meaning of what is happening around them. One way to brine about such changes is to manage the symbols that are important to the organization. An organization’s suggestion box is a symbol of an organization’s openness to the ideas of the employees. Some organizations try to emphasize the importance of employees ideas by rewarding them for their suggestions. However, if the suggestion box remains just a symbol and organization never translates the suggestions into actions, the box will have little effect on organization morale.

Once successfully made, changes in the organizational culture will be as stable as the old culture was. However, any organization willing to change its culture must realize that such a change is never easy and cannot be brought about simply by ordering employees.

Short Case Study: How Ray Kroc Established McDonald’s Culture

In the fast food industry, quality control and standardization are very important. But as McDonald’s grew, founder Ray Kroc made extensive use of output control and behavior control to standardize both outputs and employee behaviors at the firm’s thousands of franchises. He established a comprehensive system of rules and procedures, and then trained managers in their use. Kroc used the franchising system itself as a form of control because, when the managers are the owners, the agency problems are solved, and they are more motivated to control quality. In addition, McDonald’s values are taught to employees and norms are strictly enforced by supervisors. McDonald’s includes even customers in its culture by offering family-friendly products and services.

Hint: This case study explains how McDonald’s culture is taught to workers and managers, how it was influenced by the founder’s values, and how it has become part of American culture, so that virtually every customer could explain the McDonald’s values.

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