Importance of Organizational Culture in Strategic Management

Culture plays an important part in our society. It refers to beliefs and codes of practice that makes a community what it is. It also plays the same role in organizations. A strong organizational culture will provide stability to an organization as it has significant influence on the attitudes and behaviors of organization’s members. Most of company’s top managers have a strong awareness that the culture of a company is crucial to everything they do and plays irreplaceable part in their success. However, not many companies can admit that they can describe their culture and fully understand how important it is in the success of their businesses.

There are various explanations and elements to define organizational culture. For some, it means top management beliefs and values about how they should manage the organization and conduct the business. For some, it is an evolutionary process relating to people that creates unique characters for the organization. However, in general, organizational culture has been defined as the pattern of fundamental assumptions or beliefs that a specific group has developed through learning to deal with its problems of internal assimilation and external adaptation, and that have been approved to work effectively, and therefore it can be taught to new members as the correct way to perceive, feel and behave in relation to those problems.

The Importance of Organizational Culture in Strategic Management

Considering the importance of organizational culture and its impacts in strategic management is very essential. As organizational culture and strategies are both social processes, many strategists argue that culture and strategies are connected. Cultural dimension plays a vital role in all aspects of an organization. It is so impacting that it can determine the success and failure of an organization. In leadership concept, organizational culture has been identified as one the important components that strategic leaders can use to develop dynamic organization. Culture reflects the way in which people in an organization set objectives, manage their resources and perform their tasks. Culture also affects people behavior unconsciously. Even in those organizations where the ideal of organizational culture do not receive much explicit attention, how people think, feel, value, believe and behave in a company are generally influenced by ideas, beliefs and perception of a cultural nature. Organizational leaders achieve success by constantly sending clear signals about their priorities, beliefs and values. Once culture is established and accepted, they become a strong management tool for leaders to communicate and energize their members with beliefs and values to do their jobs in a strategy supportive manner. When leaders succeed in promotion ethical culture in the organization, they will also become successful in organizational growth and consequently are competitive to their rivals. Therefore, it is very important to develop a strong culture in the organization as well as strategies that are suitable to the culture in order to be strengthened by it. If a particular strategy does not match with the organization culture, it could be almost impossible to accomplish expected outcome from the planned strategy.

Organizational Culture, Vision and Mission in Strategic Management

One of the perspective to look at how organizational culture supports strategic management is through its influence on organization’s missions and visions. Missions and visions play an important part in company’s strategic management. A written mission statement is one of the most common way that managements use to communicate with their staffs about strategic direction. Generally, missions and visions state the company’s purpose and values which provides ideals and direction for the company as it interacts with the marketplace. This will not only give a sense of purpose to internal and external stakeholders but also help them in resource allocation decisions which is very for carrying out company’s strategy management. However, in order to have an effective missions and visions, managements need to connect them to organizational culture. In fact, one of the way to see an organization’s culture through its reflection in core values. Core values are the set of belief or ideology by which an organization operates. They are the foundation of organizational culture. In this fast paced era when everything is changing, core values are still constant. The organization may develop new strategies, policies or even significantly restructure; however, the fundamental identity of the company still remains intact. These values are the essential, foundation principles that will guide the organization’s vision, mission and strategies as well as define and differentiating the organization from its competitors. They create a foundation of attitudes and practices that every members have to agree to follow in order to support the vision and long term success of the organization. They also provide reference points and goals which allows organization to shape and strengthen its business. As internalized perception and beliefs can motivate staff’s performance to exceptional levels, an effective strategic leaders need to understand and develop their intended implemented strategies that are suitable to organizational culture in order to pursue the vision of organization’s leaders. Until organization decides what those cultural values are, and how they will interact with each other, it’s very difficult to do anything else, whether setting goals, establishing measurements, solving problems or even making decision effectively.

One example about how organizational culture can support company’s vision and mission is Facebook. Facebook mission is described as ‘a cutting edge technology that constantly taking on new challenges in the worlds of milliseconds and terabyte. Their vision for the company is to create a fast changing and innovative company. They do not aim for perfection that requires a long time in order to launch the product but they weigh heavily on being able to make and ship products quickly, get customer’s feedback and continue to innovate it. In order to encourage creativity and innovation within the company, Facebook’s culture created by Zuckerberg is a relaxed, unstructured and open culture. Employees can come and go as they please, with no standard work schedules which results in more employee freedom. If employees need to chill out, they can play video or table-top games. Collaboration and teamwork are encouraged to be in an informal communication and atmosphere. They also constantly encourage people to keeping things fresh, innovative and interesting, to be bold in experimenting new ideas, without any meddling from above. All of these have fostered for a fun-loving, casual and creative working environment which makes their staffs satisfied while achieving their goal to be a rapid innovative technology company.

Organizational Culture as Competitive Advantage in Strategic Management

Another reason that makes culture become a determinant of business success or failure is due to its contribution in organization’s competitive advantage. Creating and sustaining competitive advantage in a particular industry is always the major concern in organization’s strategic management. This is because competitive advantage will help the organization to differentiate itself from its competitors while strengthening its position in the market place. Culture can contribute positively to the competitive advantage of companies. It can be a great tool for organization to increase their level of performance which makes it become more competitive in market place. Culture is the underlying attitudes and beliefs that can strongly influence individual and group behavior. When members in an organization share the same beliefs and values, they can understand what kind of attitudes they expect themselves and other people to show in working place as well as how they need to behave and react in particular situation in order cooperate well with each other. As they understand what the company is trying to accomplish, it will motivate them to work for a higher purpose which in turn helps to set an organization apart from the competition. Managements can also use organizational culture as an effective tool to dictate, control and manage employee behaviors in their strategic management. In fact, this is a more powerful way of managing employee than company’s rules and regulations. Leaders in the company can use culture to influence, educate and shape their staff’s mindset and attitude to gain their support in following the company’s plan and procedure while reducing resistance in the organization. Having a strong, positive and strategy-supportive culture will affect the energy, enthusiasm, working habits and operating practices of employees which will not only booster the efficiency and effectiveness in the department but also attract many people to work in the organization while reducing their staff turnover, hiring and training cost which results in yielding a competitive advantage.

Not only contribute to company’s competitive advantage, organizational culture also sustains the company’s competitive advantage. As a company starts to experience the superior financial performance, its competitors will also starts to seek to copy what they believe is the source of competitive advantage that generates the success of the company. After examining the relationship between culture and superior financial performance, culture is the factor that can help companies to generate sustained competitive advantage. A strong and valuable organizational culture is one of the most sustainable competitive advantages a company can have. This is because a valuable and rare cultures is very difficult to imitate. Giving enough time and money, competitors can duplicate almost everything what an has done. They can hire away some of the company’s best people. They can reverse engineer the company’s processes. However, when it comes to organizational culture, they can’t duplicate the organization’s culture. It is very hard for people to define culture clearly, especially in respect of its contribution to value of company’s product and service. Another reason for this is that culture is usually related to historical aspects of company development as well as to the vision, beliefs and inspiration from particular strategic leaders. Organizational culture is the uniqueness and the identity of an organization that will differentiate the company from its competitors. If companies know how to make use of culture in their strategic management, it will be a powerful tool for them to sustain their competitiveness and consistence in the market while helping them to achieve success in their strategy implementation. Even when rivals try to apply the firm’s cultural attributes, there will be no guarantee that they can produce the same culture or obtain superior financial performance just like what the company has achieved.

A good example to illustrate this point is Zappos company. Knowing that customers nowadays not only focus on good products but they also demand excellent service from the outlets, Zappos’s strategic plan is to build a long term brand that not just about shoes, clothing or online retailing but to be about the best customer service and the best customer experience. To be able to achieve this goal, Zappos believes that organizational culture is the only answer. They believe that if they can get the culture right, most of other stuffs such as great customer service, or passionate employees, or building great long term brand will naturally happen on its own. In order to make employees to deliver an excellent service, instead of just using rules and procedures like other companies to educate staffs, the managements in here have shaped their staff’s mindset and attitude by using culture to transmit their message to their staffs. Zappos have created a culture that encourages employees to “wow” each other by being yourself, as crazy or weird as possible, showing your care and love for other people, and just having fun in the workplace. As the employees start to be wowed by their colleagues, they will automatically want to do the same thing for other people, especially for their customers. This culture not only makes employees to be happy in their workplace but it also encourages staffs to be creative and enthusiastic in wowing their customers which results in increase in their repeated customers and their sale performance. This culture is something unique that people usually do not find in other companies which makes it attractive to their staffs as well as to other people to work in Zappos. It becomes a competitive advantage of Zappos which cannot be copied by other competitors. It makes Zappos become more competitive and differentiate themselves from their rivals in the market place.

Organizational Culture and Strategic Decision Making

Another perspective for managements to consider about the importance of organizational culture in strategic management is its impact on their strategic decision making. As it has been mentioned above, culture is the organization ‘s identity, values, beliefs that influences how people, from managements to employees, behave in the organization. Therefore, organizational culture is the heart of all strategy creation and implementation. Organizational culture provides the framework for the organization, which affects nearly all the organizational activities, from the execution of strategy to the acceptance and implementation of new processes. For managements, culture affects their behavior unconsciously. It affects the choice, incidence and application of the modes of strategy creation, which reflects the values and preferences of the strategic leader. Managements do thing in particular ways because it is implicitly expected behavior influenced by organizational culture. Culture also influences the selection of people for particular jobs, which results in affecting the way in which tasks are carried out and decisions are made. In addition, it influences the ability of a leader to deliver his or her ideal and vision to other members of the organization as well as gaining their support and commitment when it comes to applying new strategy in the organization. In order to have a successful strategy implementation, it requires the right attitude, approach and commitment from employees which can only be influenced by culture. When a strategy match with company’s culture, the culture will become a valuable ally in strategy implementation and execution. When it is not a part of the change strategy, management will usually find it difficult to implement the strategy successfully as well as achieving their target. It may be a wiser choice for managements to select a business or strategy that will fit their company’s organizational culture well in order to shift the firm toward a new strategy instead of accomplishing cultural change, which can be very difficult to achieve. Therefore, it is very important to identify the existing cultural dimensions of the organization in order to achieve successful strategy implementation. Organizational culture can be a powerful source to support company’s strategy but at the same time, it can also become a great barrier to leaders if they do not consider it carefully. By understanding the elements of organizational culture and its impact on people’s behavior, strategic leaders will be better equipped to make wise decision in making and implementing strategies to their organization.

One example about how culture influences strategic decision is Walmart. In Walmart, their philosophy is to offer customers a lower price than they can get in anywhere else. Its culture is based on low cost end of every transaction in order to make profit, not from the pricing end. With the principle of saving is important as pricing, the plan has always been to drive costs out of the system in the stores, from the manufacturers’ profit margins, and from merchandise brokers and other middlemen, all in the service of driving down prices at the retail level, in order for Walmart to sell more, increasing the amount of business with the vendor. In order to keep their expense low, Walmart limits its store locations to rural communities with a maximum population of 10,000. This will not only hold down real estate costs but also protect the company from heavy competition in metropolitan areas. They also try to find healthy suppliers that can provide timely deliveries at low prices. Managements in here also constantly check their competitors price to make sure that Walmart offer the best drive. All of these strategic decisions support the main principle and target which is saving costs as much as possible in order to offer lowest prices in the market.

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