Businesses Shape and Are Shaped by People
- Organizational culture is often unwritten but deeply influential.
- It shapes how employees behave and how the company is perceived internally and externally.
How Organizational Culture Forms and Evolves
- Leadership Influence: Business leaders set the tone by establishing values and expectations.
- Employee Behavior: Over time, employees reinforce or challenge these values through their daily actions.
- Company Policies and Traditions: Formal policies, rituals, and social norms shape the overall work environment.
- External Factors: Industry trends, customer expectations, and societal norms also play a role in shaping culture.
The Role of Individuals in Organizational Culture
- Adapting to Culture: New employees often adjust their behavior to align with existing norms.
- Challenging the Status Quo: Some employees push for cultural change, whether through innovation or questioning outdated practices.
- Reinforcing Norms: Long-standing employees and managers help sustain the company's traditions and values.
Note
Employees don’t just follow culture, they shape it through daily interactions and decisions.
Hofstede’s Cultural Dimensions: Understanding Business Across Borders
- Dutch social psychologist Geert Hofstede studied how national cultures impact workplaces.
- He identified six key dimensions that shape how people communicate, work, and make decisions in different cultures.
Hofstede’s Six Cultural Dimensions
| Dimension | Key Question | Cultural Impact |
|---|---|---|
| Individualism vs. Collectivism | Do people prioritize personal goals or group harmony? | Impacts teamwork, communication, and leadership. |
| Power Distance | Are hierarchies rigid or flexible? | Affects authority, management styles, and employee expectations. |
| Short-Term vs. Long-Term Orientation | Do people focus on immediate results or future planning? | Influences investment decisions and business strategy. |
| Masculinity vs. Femininity | Is competition valued over collaboration? | Shapes leadership styles and workplace priorities. |
| Uncertainty Avoidance | Do people prefer clear rules or flexibility? | Impacts risk-taking and innovation. |
| Indulgence vs. Restraint | Do people prioritize enjoyment or duty? | Affects work-life balance and employee motivation. |
1. Individualism vs. Collectivism
- Some cultures emphasize personal achievement (individualism), while others prioritize group success (collectivism).
- Individualistic cultures (e.g., USA, UK) value independence, personal rewards, and competition.
- Employees expect clear responsibilities and merit-based promotions.
- Collectivist cultures (e.g., Japan, China) prioritize teamwork, loyalty, and consensus.
- Employees may expect shared responsibilities and group-based rewards.
Example
A US-based company expanding to Japan might struggle if it rewards employees solely based on individual performance, rather than team contributions.
2. Power Distance: Hierarchies in the Workplace
- Power distance measures how much hierarchy is accepted in a society.
- High power distance cultures (e.g., India, Mexico) expect clear authority and top-down decision-making.
- Employees rarely challenge superiors.
- Low power distance cultures (e.g., Sweden, Denmark) encourage flat structures and open discussions between all levels.
Example
- In Germany, employees might challenge a CEO’s decision in a meeting.
- In Saudi Arabia, questioning leadership publicly may be seen as disrespectful.
3. Short-Term vs. Long-Term Orientation
- Some cultures focus on immediate gains, while others prioritize long-term sustainability.
- Short-term cultures (e.g., USA, UK) seek quick results, focusing on quarterly earnings and fast decision-making.
- Long-term cultures (e.g., China, Japan) emphasize future growth, building relationships, and long-term investments.
Example
Chinese companies often form long-term partnerships before making major deals, while American firms may push for quick contracts.
Masculinity vs. Femininity: Competition vs. Collaboration
- This dimension assesses whether a culture values competition and success (masculinity) or cooperation and well-being (femininity).
- Masculine cultures (e.g., USA, Japan) reward ambition, competition, and performance-based pay.
- Feminine cultures (e.g., Netherlands, Sweden) emphasize work-life balance, inclusivity, and social well-being.
Example
A Swedish company expanding to Argentina may need to adjust its collaborative leadership style to a more competitive business environment.
Uncertainty Avoidance: Risk vs. Structure
- Some cultures embrace uncertainty, while others prefer strict rules.
- High uncertainty avoidance cultures (e.g., Greece, France) prefer detailed planning, strict laws, and job security.
- Low uncertainty avoidance cultures (e.g., Singapore, USA) value flexibility, risk-taking, and innovation.
Example
Japanese firms invest heavily in detailed business plans, while Silicon Valley startups often pivot quickly with minimal planning.
Indulgence vs. Restraint: Work-Life Balance
- This dimension measures how much a culture values enjoyment and leisure.
- Indulgent cultures (e.g., USA, Brazil) encourage spending, personal happiness, and work-life balance.
- Restrained cultures (e.g., Russia, China) prioritize self-discipline, saving, and duty over pleasure.
Example
American firms offer perks like casual Fridays and flexible work hours, while Japanese firms expect long working hours and formal behavior.
Applying Hofstede’s Theory in Business
| Scenario | Cultural Dimension | Business Impact |
|---|---|---|
| Expanding into a country with strong teamwork values | Individualism vs. Collectivism | Adjust performance evaluations to reward team success, not just individual achievements. |
| Hiring in a country where hierarchy matters | Power Distance | Ensure clear authority structures and respect for seniority in management. |
| Launching a startup in a structured society | Uncertainty Avoidance | Have detailed plans and risk management strategies to gain trust. |
Hint
- Understand that how an individual acts, and reacts to an organizations culture is largely influenced by their lived experience.
- Where they come from, what they're used to.
Can Organizational Culture Be Changed?
- Organizational culture is not static but can be challenging to change.
- To successfully shift culture, businesses must:
- Identify the Problem: Understand what aspects of the culture need to change.
- Lead by Example: Senior managers must embody the new values they want to promote.
- Reinforce New Behaviors: Implement policies, training, and rewards that encourage cultural change.
- Communicate Continuously: Keep employees informed and engaged throughout the process.
Note
Culture change doesn’t happen overnight, it requires consistent effort and buy-in from employees.
Exam technique
- You might be asked to evaluate the impact of culture on business success.
- When answering this, consider:
- How does culture affect employee motivation and productivity?
- What happens when a company’s culture clashes with its external environment?
- How can multinational corporations balance different national cultures?
