What is Organizational Culture?
Organizational culture
Organizational culture refers to the shared values, beliefs, and practices that shape how members of an organization interact and work.
It acts as the "personality", of a business, influencing everything from decision-making to employee behavior.
Why is Organizational Culture Important?
- Influences Employee Behavior
- Culture shapes how employees interact, solve problems, and make decisions.
- A culture that values innovation encourages employees to take risks and think creatively.
- Guides Decision-Making
- Culture acts as an unwritten guide for employees, helping them understand what is acceptable and expected.
- For example, a company prioritizing customer satisfaction will make decisions that enhance the customer experience.
- Drives Organizational Performance
- A strong culture aligns employees with the organization's goals, improving efficiency and productivity.
- Conversely, a weak or toxic culture can lead to poor performance and high turnover.
- Google is known for its culture of innovation, which encourages employees to experiment and learn from failures.
- This culture has driven the development of groundbreaking products like Gmail and Google Maps.
- However, don't assume culture is set.
- These days, Google is often looked at as a "bloated" company, allowing newer, faster moving AI startups such as OpenAI and Anthropic to catch up to them.
How is Organizational Culture Demonstrated?
- Stories
- Stories about past employees or events highlight what the organization values.
- For example, stories of employees going above and beyond for customers show a focus on customer service.
- Rituals
- Regular events or practices reveal what is important to the organization.
- A company that holds weekly brainstorming sessions likely values collaboration and creativity.
- Rewards System
- The way employees are rewarded reflects the organization's priorities.
- Bonuses for teamwork suggest a focus on collaboration, while individual sales targets highlight competition.
- Physical Environment
- The layout and design of the workspace can indicate cultural values.
- Open-plan offices with casual meeting spaces suggest a culture of openness and communication.
Look for clues in the organization's stories, rituals, rewards, and environment to understand its culture, and use these clues to support your analysis.
Charles Handy's Gods Of Management
- Charles Handy, a management scholar and theorist used greek gods to categorize four facets of culture.
- Organizations can have more than these four facets, but each god is meant to represent specific values.
1. Power Culture
- Characteristics:
- Centralized decision-making by a few key individuals.
- Quick decisions and strong leadership.
- Drawbacks:
- Can become inefficient as the organization grows.
- Employees may become overly reliant on leaders.
A small startup led by a charismatic founder may operate under a power culture, where the founder makes all major decisions.
2. Role Culture
- Characteristics:
- Hierarchical structure with clearly defined roles and responsibilities.
- Emphasis on rules and procedures.
- Drawbacks:
- Can be inflexible and slow to adapt to change.
- Innovation may be stifled.
Government agencies often operate under a role culture, where strict procedures ensure consistency and predictability.
3. Task Culture
- Characteristics:
- Team-based approach focused on solving specific problems.
- Value placed on expertise and collaboration.
- Drawbacks:
- Coordination can be challenging.
- May struggle with long-term planning.
Consulting firms often use task culture, forming teams of experts to tackle client projects.
4. Person Culture
- Characteristics:
- Individuals operate independently, often in specialized roles.
- Collaboration occurs when needed, but autonomy is prioritized.
- Drawbacks:
- Lack of consistency and coordination.
- Difficult to manage in larger organizations.
Universities or law firms may exhibit person culture, where professionals work independently but share knowledge when necessary.
Schein's Model of Organizational Culture
Edgar Schein's model instead breaks down culture into three levels.
1. Artifacts
- Visible elements like office layout, dress code, and employee behavior.
- These are the most observable but least deep aspects of culture.
A company with open offices and casual dress likely values transparency and informality.
2. Norms and Values
- Guiding principles that influence how employees act and make decisions.
- These may be explicitly stated or implicitly understood.
A company that values teamwork may reward group achievements over individual accomplishments.
3. Underlying Assumptions
- Deeply embedded beliefs that are often unconscious and taken for granted.
- These are the hardest to change but form the foundation of the culture.
An organization may assume that $\text{customer satisfaction is our top priority}$, influencing all its decisions and actions.
Schein's model emphasizes that artifacts are the visible expression of deeper norms, values, and assumptions.
Influences on Organizational Culture
- History of the Business: Founders' values and early successes often shape the culture.
- Leadership: Current leaders set the tone for what is valued and expected.
- Society and External Environment: Social trends, such as a focus on sustainability, can influence organizational culture.
- Ownership Structure: Family-owned businesses may prioritize relationships, while publicly traded companies may focus on shareholder value.
Don't assume that stated values always match the actual culture. For example, a company may claim to value integrity but reward unethical behavior.
Cultural Clashes When Organizations Change
Cultural clashes occur when two or more conflicting cultures exist within an organization. These clashes can arise from:
1. Mergers and Acquisitions
- Different organizational cultures may struggle to integrate.
- Lack of communication and planning can exacerbate conflicts.
The merger between Daimler-Benz and Chrysler failed partly due to cultural differences, such as contrasting decision-making styles.
2. Rapid Growth
- As organizations expand, their existing culture may become less effective.
- New employees and structures can create conflicting subcultures.
A startup with a power culture may need to transition to a role culture as it grows to manage complexity.
3. New Leadership
- A new leader may introduce a culture that clashes with the existing one.
- Employees may resist changes that challenge deeply held beliefs.
A democratic leader replacing an autocratic one may face resistance from employees accustomed to top-down directives.
Consequences of Cultural Clashes
- Divided Workforce: Employees may form opposing groups, leading to conflict and dissatisfaction.
- Resistance to Change: Employees may resist new initiatives, slowing progress.
- Poor Performance: Misalignment between teams can reduce productivity and increase errors.
- Increased Costs: High turnover and training expenses can strain resources.
- Decline in Business Performance: Rising costs and falling revenues can harm profitability.
To prevent cultural clashes, organizations should invest in communication, training, and alignment of values during major changes.
- What are the three levels of Schein's model of organizational culture?
- How might a power culture differ from a task culture in decision-making?
- Can you think of a real-world example where cultural clashes led to a business failure?
