Culture

Defining Organizational Culture

Organizational culture can be defined as the collective behavior of people within an organization and the meanings behind their actions.

Learning Objectives

Define culture and it’s conceptual development within the context of organizations and innovation

Key Takeaways

Key Points

  • Culture is inherently intangible, and a static definition of culture struggles to encapsulate the meaning and implications of its role in an organization.
  • One way to define culture is simply as the overarching mentality and expectation of behavior within the context of a given group (e.g., an organization, business, country, etc.).
  • Corporate culture is usually derived from the top down (i.e., upper management sets the tone) and comes in the form of expectation and consistency throughout the organization.
  • Culture can be manipulated and altered depending on leadership and members. Instilling positive culture that promotes effective employee behavior is a manager’s primary task.
  • While there are many models for and perspectives on defining culture within an organization, models such as Geert Hofstede’s, Edgar Schein’s and Gerry Johnson’s are useful in properly framing a comprehensive definition.

Key Terms

  • culture: The beliefs, values, behavior, and material objects that constitute a people’s way of life.

Culture is inherently intangible, and a static definition of culture struggles to encapsulate the meaning and implications of its role in an organization. One way to define culture is simply as the overarching mentality and expectation of behavior within the context of a given group (e.g., an organization, business, country, etc.). Culture provides a guiding perspective on how individuals within that group should act, and what meaning can be derived from those actions. Expectation, traditions, value, ethics, vision, and mission can all both communicate and reinforce a given group culture. Above all else, culture must be shared internally; otherwise it loses its form.

Culture in Business

Corporate culture is usually derived from the top down (i.e., upper management sets the tone) and comes in the form of expectation and consistency throughout the organization. All employees and managers must uphold these cultural expectations to generate a working environment that correlates to cultural expectations. The shared assumptions should be implicit in behavior and explicit in the mission, vision and ethics statements of the organization. Consistency between expectation and action is key here.

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People working at Wikimedia: Even small things, such as the way an office space is set up, can set the tone for organizational culture.

Culture and Adaptability

Culture can be manipulated and altered, depending on leadership and members. Let’s take the simple example of a car dealership. Selling cars is usually a commission business, where the salesperson is a central success factor. Many car dealerships find that competition is an effective cultural component and embed that into the organization. This is easily accomplished with the right tools. A car dealership owner may hire specifically for competitiveness, making it clear that this is the type of individual they want to hire. The owner can create high variable salary and low fixed salary so that high performers are much more highly prized and rewarded than ineffective salespeople. The owner could give out awards at the end of each quarter to the most successful salesperson. The list could go on and on, but the important consideration here is how strategy and culture can be intertwined to evolve together.

Perspectives on Culture

Culture is a deeply important element of organizations and societies that is studied extensively in a variety of disciplines. This has generated more definitions of culture and how to go about empirically measuring it than could be touched upon in one overview. However, a few important perspectives for a business manager include:

  • Hofstede’s Cultural Dimensions Theory – Postulates that cultural differences to be aware of include different perspectives on power distance, masculinity (vs. femininity), individualism (vs. collectivism), avoidance of uncertainty, long-term orientation, and indulgence.
  • Schein’s Cognitive Levels of Organizational Culture – Edgar Schein believes that culture can be viewed most simply via artifacts (e.g., facilities, dress code, etc.), more acutely through values (e.g., focus on quality, loyalty or other central values) and most complexly through tacit assumptions (i.e., unspoken rules of behavior and other intangible expectations that are very difficult to observe and measure).
  • Gerry Johnson’s Cultural Web – This includes the elements of culture, which is an important aspect of how we define it. Johnson underlines the paradigm, control system, organizational structure, power structure, symbols, stories, and myths as central determinants of what a given organizational culture stands for.

While each of these theories is complex, all together they help create a clearer picture of what exactly culture is and how it applies to managers and organizations.

The Impact of Culture on an Organization

Culture is a malleable component of an organization that can adapt and evolve through influences to create value.

Learning Objectives

Identify the central components of an organization or company that result from the influence cultural dispositions

Key Takeaways

Key Points

  • Culture, particularly in large organizations that have a great deal of momentum, can be difficult to influence or change.
  • Understanding how to change an organizational culture requires some insight into what creates culture in the first place and how altering those components may impact meaningful cultural development.
  • Some examples of organizational facets that influence culture are mission and vision statements, control systems, organizational structures, power hierarchies, symbols, routines, and internal stories and myths.
  • When integrating culture change, it is important to update mission and vision statements, ensure buy-in from upper management, update control systems and power hierarchies, hire people representative of the desired culture (and remove those who are not), and update the corporate ethos.

Key Terms

  • paradigm: A system of assumptions, concepts, values, and practices that constitutes a way of viewing reality.
  • joint venture: A cooperative partnership between two individuals or businesses in which profits and risks are shared.
  • inertia: The property of a body that resists any change to its uniform motion; equivalent to its mass. Figuratively, in a person, unwillingness to change.

Culture, particularly in large organizations that have a great deal of internal momentum, can be difficult to influence or change. The size of an organization and the strength of its culture are the biggest contributors to cultural inertia. Big and strong organizational cultures will have a powerful tendency to continue moving in the direction they are already moving (momentum). Therefore, managers must understand not only how to create culture, but also how to change it when necessary to ensure a positive, efficient and ethical culture.

Cultural Factors

Understanding how to change an organizational culture requires some insight into what creates culture in the first place and how altering those components may impact meaningful cultural development. Gerry Johnson’s cultural web offers great clarity about how an organizational culture responds to and reflects influencing factors. These include:

  • The paradigm: The mission statement, vision, ethics statement, and other overt definitions of culture.
  • Control systems: The processes in place to monitor what is going on, such as an employee handbook.
  • Organizational structures: This comes down to the hierarchy, or who reports to whom and why.
  • Power structures: Similar to the organizational structure above, this pertains to who has the power to make decisions.
  • Symbols: Most organizations have brand images and other symbols which represent what the culture stands for (logos, etc.).
  • Rituals and routines: In the business setting this is simply the way in which group interactions are organized. One example is the weekly staff meeting.
  • Stories and myths: CEOs and other figureheads often have stories or legends associated with them; this generates culture through idolatry.

While these are only a few of the elements of culture, they capture a wide variety of components that managers can use to influence and change the general cultural predisposition.

Implementing Culture Change

Cummings and Worley identify a useful way to frame the stages or steps in integrating broad organizational change through cultural reform in six stages, which correlates well with the factors identified above. These stages include:

  1. Ensure clarity in the strategic vision. This means making sure that the mission statement, vision statement and overall strategy work together to create one strong culture statement. The vision in particular must describe the new culture forcefully and persuasively.
  2. Ensure buy-in from the top down. This means communicating (and often determining) specific aspects of needed culture change at the upper managerial level.
  3. Lead by example. Top management needs to exhibit the kinds of values and behaviors that they want to see in the rest of the company.
  4. Identify areas in the organizational structure and control systems which require updates to conform with the new or adapted culture. This includes altering employee handbooks, compensation strategies, hierarchy, decision-making authority and other central components of structure.
  5. Follow through on the mandate. Terminating employees who do not conform to the desired culture is difficult. But it allows you to bring in new talent that aligns better with your desired culture. Ensuring proper emphasis on the new culture in training materials is useful in this process.
  6. Finally, ensure that the ethical and legal implications of the adapted culture are understood, planned for and in line with corporate ethics.

Joint ventures and mergers and acquisitions usually require large cultural changes. When different cultures come together it is wise to expect some degree of culture-clash and differences of opinion. Managers, particularly upper management, must be aware of the implications of cultural change, the facets of organizational culture and the steps involved in altering it. While this model describes a long process that is generally more applicable to large cultural overhauls, the general strategy is useful for managers leading meaningful cultural change at all levels.

Types of Organizational Culture

While there is no single “type” of organizational culture, some common models provide a useful framework for managers.

Learning Objectives

Differentiate between varying organizational culture tendencies, specifically within the context of Hofstede’s cultural dimensions theory

Key Takeaways

Key Points

  • While there are many ways to divide and define culture into “types,” Geert Hofstede, Edgar Schein, and Charles Handy provide three basic theoretical frameworks.
  • Hofstede postulates six dimensions of culture based on a study conducted at IBM offices in 50 different countries. These include power distance, uncertainty avoidance, individualism (vs. collectivism), masculinity (v.s femininity), long-term orientation, and restraint.
  • Edgar Schein organizes culture into three types: artifacts (tangible cultural displays), values, and assumptions.
  • Charles Handy identifies four types of organizational culture: power, role, task, and person. Each type of culture has strong implications on types of organizational structure.

Key Terms

  • cultural: Of or pertaining to culture.
  • normative: Of, pertaining to, or using a norm or standard.

Several methods have been used to classify organizational culture. While there is no single “type” of organizational culture, and cultures can vary widely from one organization to the next, commonalities do exist, and some researchers have developed models to describe different indicators of organizational cultures. We will briefly discuss the details of three influential models on organizational cultures.

Hofstede’s Cultural Dimensions

While there are several types of cultural and organizational theory models, Hofstede’s cultural dimensions theory is one of the most cited and referenced. Hofstede looked for global differences in culture across 100,000 IBM employees in 50 countries in an effort to determine the defining characteristics of global cultures in the workplace. With the rise of globalization, this is particularly relevant to organizational culture.

Through this process, he underlined observations that relate to six different cultural dimensions (originally there were five, but they have been updated in response to further research):

  • Power distance: Power distance is simply the degree to which an authority figure can exert power and how difficult it is for a subordinate to contradict them.
  • Uncertainty avoidance: Uncertainty avoidance describes an organization’s comfort level with risk-taking. As risk and return are largely correlative in the business environment, it is particularly important for organizations to instill a consistent level of comfort with taking risks.
  • Individualism vs. collectivism: This could best be described as the degree to which an organization integrates a group mentality and promotes a strong sense of community (as opposed to independence) within the organization.
  • Masculinity vs. femininity: This refers to the ways that behavior is characterized as “masculine” or “feminine” within an organization. For example, an aggressive and hyper-competitive culture is likely to be defined as masculine.
  • Long-Term Orientation: This is the degree to which an organization or culture plans pragmatically for the future or attempts to create short-term gains. How far out is strategy considered, and to what degree are longer-term goal incorporated into company strategy?
  • Indulgence vs. Restraint: This pertains to the amount (and ease) of spending and fulfillment of needs. For example, a restrained culture may have strict rules and regulations for tapping company resources.

Edgar Schein’s Cultural Model

Edgar Schein’s model underlines three types of culture within an organization, which, as a simpler model than Hofstede’s, is somewhat more generalized. Schein focuses on artifacts, values, and assumptions:

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Schein’s model: Diagram of Schein’s organizational behavior model, which depicts the three central components of an organization’s culture: artifacts (visual symbols such as office dress code), values (company goals and standards), and assumptions (implicit, unacknowledged standards or biases).

  • Artifacts: The simplest perspective on culture is provided by the tangible artifacts that reveal specific cultural predispositions. How desks are situated, how people dress, how offices are decorated, etc., are examples of organizational artifacts.
  • Values: Values pertain largely to the ethics embedded in an organization. What does the organization stand for? This is usually openly communicated with the public and demonstrated internally by employees. An example might be a non-profit organization trying to mitigate poverty. The values of charity, understanding, empowerment, and empathy would be deeply ingrained within the organization.
  • Assumptions: The final type of culture, according to Schein, is much more difficult to deduce through observation alone. These are tacit assumptions that infect the way in which communication occurs and individuals behave. They are often unconscious, yet hugely important. In many ways, this correlates with Hofstede’s cultural dimensions. For example, a culture of avoiding risk wherever possible may be an assumption which employees act upon without realizing it, and without receiving any directives to do so. High power distance could be another, where employees intuit that they should show a high degree of deference to their superiors without being specifically told to do so.

Charles Handy’s Four Types of Culture

Charles Handy put forward a framework of four different types of culture that remains relevant today. His four types include:

  • Power culture: In this type of culture, there is usually a head honcho who makes rapid decisions and controls the organizational direction. This is most appropriate in smaller organizations, and require a strong sense of deference to the leader.
  • Role culture: Structure is defined and operations are predictable. Usually this creates a functional structure, where individuals know their job, report to their superiors (who have a similar skill set), and value efficiency and accuracy above all.
  • Task culture: Teams are formed to solve particular problems. Power is derived from membership in teams that have the expertise to execute a task. Due to the importance of given tasks, and the number of small teams in play, a matrix structure is common.
  • Person culture: In this type of culture, horizontal structures are most applicable. Each individual is seen as valuable and more important than the organization itself. This can be difficult to sustain, as the organization may suffer due to competing people and priorities.

While there are many other ways to divide and define culture, these three offer a good window into the literature surrounding cultural types.

Core Culture

Core culture is the underlying value that defines organizational identity through observable culture.

Learning Objectives

Identify the general definition and characteristics of a healthy core culture, alongside how this translates into observable culture.

Key Takeaways

Key Points

  • Core and observable culture are two facets of the same organizational culture, with core culture being inward-facing and intrinsic and observable culture being more external and tangible (outward-facing).
  • In essence, core culture defines the values and assumptions of an organization, as described by Edgar Schein’s Model of Organizational Culture.
  • Core culture is made up of the intangible values and ethos that define an organization’s cultural framework. Observable culture is the external reflection of this cultural perspective.
  • Management is tasked with both the creation and consistent application of core culture at the organizational level.

Key Terms

  • Core Culture: The underlying value that defines the organization’s identity through observable culture.

Core Culture and Observable Culture

Core and observable culture are two facets of the same organizational culture, with core culture being inward-facing and intrinsic and observable culture being more external and tangible (outward-facing). Core culture, as the name denotes, is the root of what observable culture will communicate to stakeholders. Core culture is more ideological and strategic, representing concepts such as vision (long-term agenda and values), while observable culture is more of a communications channel (i.e., stories, logos, symbols, branding, mission statement, and office environment).

Edgar Schein and Core Culture

One useful theoretical framework to consider when differentiating between core and observable culture is Edgar Schein’s Organizational Culture Model. This mode simply and efficiently illustrates the cultural facets of a given organization as an upside-down triangle.

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Schein’s model of organizational culture: Diagram of Schein’s organizational behavior model, which depicts the three central components of an organization’s culture: artifacts (visual symbols such as office dress code), values (company goals and standards), and assumptions (implicit, unacknowledged standards or biases).

The broader base at the top of the inverted pyramid represents artifacts, the simplest and most physical (i.e., observable) elements of a given culture. This includes the way desks are situated in an office (collaborative or individualistic?), the colors and shapes used in the logo, the general dress code, etc.

The next level is values, which bridges the gap between observable and core culture. Values are explicitly and observably stated in organizational literature (i.e., the employee handbook and mission statement), but also implicitly executed in individual behaviors. While it is observable when the CEO makes a public statement for shareholders or when the promotional team writes a press release, it is also derived directly from discussions of what the core culture is. This is where observable culture begins to transform into core culture.

The final component identified by Schein is parallel with the concept of core culture: assumptions. The assumptions made by the individuals within an organization are so intimately tied to the core organizational culture that they are virtually unrecognizable. In many ways, one could equate core culture with an individual’s subconscious. While our subconscious so often drives our conscious behavior, we rarely realize it. Core culture has the same relationship with observable culture: core culture is created first, and ultimately drives the visible cultural aspects of the organization.

Creating Core Culture

Organizational culture, both observable and core, is created first at the managerial level. Leaders must define not only what it is they are working towards, but also how the organization will come to define itself during the process. The core culture created by leadership sets the tone for employee behavior and assumptions in the future.

Upper management must decide which values and ethos will constitute the core of the organizational culture, and then instill this internally, in their employees, and communicate it externally, to stakeholders (via observable culture). Management is tasked with both the creation and consistent application of core culture at the organizational level.