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Organizational culture refers to culture related to organizations including schools, universities, not-for-profit groups, government agencies, and business entities. Alternative terms include corporate culture and company culture. The term corporate culture emerged in the late 1980s and early 1990s.[1][2] It was used by managers, sociologists, and organizational theorists in the 1980s.[3][4]

Organizational culture influences the ways in which people interact, the context within which knowledge is created, the resistance they will have towards certain changes, and ultimately the way they share (or the way they do not share) knowledge.

Definition

Culture is the organization's immune system. – Michael Watkins

What Is Organizational Culture? And Why Should We Care? – Harvard Business Review

(Slightly differing) definitions abound, without consensus. Some examples:

The simplest might be from Deal and Kennedy who defined organizational culture as "the way things get done around here".[6]

According to Jaques, "the culture of the factory is its customary and traditional way of thinking and doing of things, which is shared to a greater or lesser degree by all its members, and which new members must learn, and at least partially accept, in order to be accepted into service in the firm".[7]

Schein defined it as including a shared "pattern of basic assumptions" that group members acquired over time as they learn to cope with internal and external organizationally relevant problems.[8]

Ravasi and Schultz characterized it as a set of shared assumptions that guide behaviors.[9] It is also the pattern of such collective behaviors and assumptions that are taught to new organizational members as a way of perceiving, thinking, and feeling.[10]

Schein,[11] Deal and Kennedy,[6] and Kotter[12] advanced the idea that cultures are diverse and may encompass subcultures linked to an individual management teams.[13]

Flamholtz and Randle suggested that organizational culture can be seen as "corporate personality".[14] They define it as it consisting of the values, beliefs, and norms which influence the behavior of people as members of an organization.[15]

Ravasi and Schultz[16] and Allaire and Firsirotu[17] claim that organizational culture represents the collective values, beliefs and principles of organizational members. It is influenced by factors such as history, type of product, market, technology, strategy, type of employees, management style, and national culture. Culture includes the organization's vision, values, norms, systems, symbols, language, assumptions, environment, location, beliefs and habits.[18][19][20][21] Gallup reported that just 22% of U.S. employees feel connected to their organization's culture.[22]

Hofstede defined organizational culture as "the collective programming of the mind which distinguishes the members of one organization from another."[23]

History

Jaques introduced the concept in his 1951 book The Changing Culture of a Factory.[24] The book was a published report of "a case study of developments in the social life of one industrial community between April, 1948 and November 1950".[7] The case involved a publicly-held British company engaged principally in the manufacture, sale, and servicing of metal bearings. The study concerned itself with the description, analysis, and development of corporate group behaviors.[25]

The concept of organizational culture did not begin to gain prominence in the business world until around the 1970s and was not officially felt until the 1980s. Building on insights from sociology and anthropology, organizational scholars argued that organizations could possess distinct cultures or sets of shared values, beliefs, and norms that guide the attitudes and actions of organizational members.[26]

Analysis

Researchers have proposed myriad dimensions individually and in combination as useful for analyzing organizational culture. Examples include external/internal, strong/weak, flexible/rigid, and many others.

Insularity

Culture can be externally focused, aiming to satisfy customers, investors, and partners. Alternatively, they can be internally focused, aiming to satisfy employees, comply with union-imposed rules, or to meet conduct standards around issues such as diversity, equity, and inclusion.[27] Many organizations lie between such extremes, attempting to balance the two sets of constraints.

Spirituality

Main article: Workplace spirituality

Spirituality in organizations have always played a major part in organizational culture, the term started to become popular in the 1920s when the labor was changing and becoming stricter in the requirements. Bringing employees' heart, mind, body, and soul to organizations is vital for both individual and organizational success.[citation needed] Spirituality in general however, is completely different from the 'workplace spirituality', some scholars define spirituality as a search for ones wellbeing. Workplace spirituality is the description of employees common connection to their job. Researchers have chosen to focus on three of them: meaningful work, sense of community, and alignment with organizational values.[citation needed]

Strength

Any type of culture can be strongly or only tacitly supported. A strong culture is characterized by reinforcing tools such as ceremonies and policies to instill and spread it.[28] The intent is to secure group compliance.[29]

Flamholtz and Randle state, "A strong culture is one that people clearly understand and can articulate. A weak culture is one that employees have difficulty defining, understanding, or explaining."[30] Weak culture creates little alignment, so that control must be exercised through explicit procedures and bureaucracy.

Researchers generally report that organizations having strong cultures are more successful.[31][32]

Cultural

See also: Cross-cultural differences in decision-making and Cross-cultural psychology

Organizational culture is used to control, coordinate, and integrate distinct groups across the organization.[33] Differences in national cultures must be addressed.[34] Such differences include organizational structure and manager/employee relationships.[35]

Groupthink

Janis defined groupthink as "a mode of thinking that people engage in when they are deeply involved in a cohesive in-group, when the members' strivings for unanimity override their motivation to realistically appraise alternative courses of action."[36] This is a state in which even if group members have different ideas, they do not challenge the group. Groupthink can lead to lack of creativity and decisions made without critical evaluation.[37] Hogg and separately Deanne et al. stated that groupthink can occur, for example, when group members rely heavily on a charismatic figure or where members evince an "evangelical"[38][39] belief in the organization's values. Groupthink can also occur in groups characterized by a friendly climate conducive to conflict avoidance.

The so-called five monkeys experiment

Since the late 1960s, the so-called 'Five Monkeys Experiment' that serves to exemplify the adverse effects of unquestioned traditions has become part of management lore.

...as we examine existing systems in an effort to install and upgrade to new systems, we find processes that make no sense but are executed nonetheless. Upon closer inspection, almost invariably, the person performing the process explains, "I don't know why I do this. It's just the way it's always been done.

— Fahrenheit advisors[40]

The alleged experiment included five monkeys that - even though they were replaced one by one in the course of the experiment - remembered initial random collective punishment for an indivuals action and kept sanctioning divergent behaviour from any monkey in the group:[41]

It appears that this story has been made up to great parts and twisted the original experimental setup to fit the purpose of highlighting the effects of encrusted traditions in organizations.[42]

Rigidity

Kotter and Heskett define an adaptive culture as characterized by managers who pay close attention to their constituencies, especially customers, initiating change when needed, and taking risks. They claim that organizations with adaptive cultures perform better.[12]

Bullying

Main articles: Bullying culture and Workplace bullying

Bullying manifests in workplaces that allow employees of higher status to harass those of lower status. This generally requires support or at least forbearance from company leaders.[43] Bullying can cascade down the organizational hierarchy as supervisors experiencing bullying display the same behavior to their subordinates.[44]

Healthcare

Care of delivery, ethical values, professionalism, and costs of care have largely influenced the culture of healthcare. Employees of the field are often faced with the demands of managing the tensions of patients in addition to providing care during long shifts.[45]

Indicators

Healthy cultures address members' concerns about the well-being of the organization. Whistleblowing, particularly when it damages a company's reputation, is considered to be a sign of a dysfunctional corporate culture, indicating that internal methods of addressing problems are inadequate.[46]

Role of communication

Promulgating a corporate culture requires effort, typically from leaders, but potentially throughout the organization. Among the many types of communication that affect organizational culture are:[47]

Intended effects

Numerous outcomes have been associated either directly or indirectly with organizational culture. A healthy and robust organizational culture is thought to offer various benefits, including:[50]

A Harvard Business School study reported that culture has a significant effect on an organization's long-term economic performance. The study examined the management practices at 160 organizations over ten years and found that culture can impact performance. Performance-oriented cultures experienced better financial results. Additionally, a 2002 Corporate Leadership Council study found that cultural traits such as risk taking, internal communications, and flexibility are important drivers of performance. Furthermore, innovativeness, productivity through people, and other cultural factors cited by Peters and Waterman in In Search of Excellence also have positive economic consequences.

Denison, Haaland, and Goelzer reported that culture contributes to the success of the organization, but not all dimensions contribute equally. Effects differed across nations, implying that organizational culture is rooted in national culture.[54]

Culture change

Cultures are not static and can evolve over time, either organically or through intentional change efforts by management.[55] Culture change may be attempted to reduce member turnover, influence behavior, make improvements to the organization, reset objectives, rescale the organization, and/or achieve specific results.[56]

Stages

Organizational cultures have been reported to change in stages. One group proposed five stages:[57]

Obstacles

Existing culture can hinder change efforts, especially where members understand the roles that they are supposed to play. Marquis et al. claimed that 70% of all change efforts fail because of the members. Organizational culture, and the structures in which they are embedded, often exhibit substantial inertia.[58]

Methods

Change methodologies include Peter Senge's concept of a "learning organization" expressed in The Fifth Discipline or Directive Communication's "corporate culture evolution".

Changing culture takes time. Members need time to get used to the new ways. Organizations with a strong and specific culture are harder to change.[59]

Prior to introducing a cultural change, a needs assessment can characterize the existing culture. This involves some mixture of employ surveys, interviews, focus groups, observation, customer surveys, and other internal research. The company must then describe the new, desired culture, and then design a change process.

Cummings and Worley offer six guidelines for cultural change, in line with the eight distinct stages mentioned by Kotter.[60][61]

Research and models, cultural dimensions

Several methods have been used to classify organizational culture. While there is no single "type" of organizational culture and organizational cultures vary widely across organizations, researchers have developed models to describe different indicators of organizational cultures.

Hofstede's National Culture Dimensions

Main article: Hofstede's cultural dimensions theory

Hofstede looked for differences between over 160 000 IBM employees in 50 countries and three regions of the world, searching for aspects of culture that influence business behavior. He emphasized awareness of international differences and multiculturalism. Cultural differences reflect differences in thinking and social action, and in "mental programs", a term Hofstede used for predictable behavior. Hofstede related culture to ethnic and regional differences, but also to the influence of organizations, professional, family, social and subcultural groups, national political systems, and legislation.[70]

He suggested that changing "mental programs" involves changing behavior first, which then leads to value change. Though groups such as Jews and Gypsies have maintained their identity through centuries, their values reflect adaptation to the dominant cultural environment.

Hofstede described national and regional cultural groupings that affect the behavior of organizations and identified four dimensions of culture (later five[71]) in his study of national cultures:

These dimensions help define the effect of national cultures on management, and can be used to adapt to local needs.[75]

Daniel Denison

Denison's model assessed culture along four dimensions. Each divides into three sub-dimensions:[76]

It separately assesses cultures along the dimensions of external/internal focus and flexible/stable evolution.

Deal and Kennedy

Deal and Kennedy characterized four types of organizations. Each focused on how quickly the organization processes along three dimensions:

Organization types

Artifacts, values, and tacit assumptions

Schein claimed that culture is the most difficult organizational attribute to change, outlasting products, services, founders and leadership and all physical attributes. His model considers culture as an observer, characterized in terms of artifacts, values and underlying assumptions.[11]

Schein's model considers attributes that can be experienced by the uninitiated observer – collectively known as artifacts. Included are facilities, offices, furnishings, visible awards and recognition, informal dress codes, member interactions with each other and with outsiders, and company slogans, mission statements and other creeds.

This model can enable understanding seemingly paradoxical behavior. For instance, an organization can profess high aesthetic and moral standards in terms of values, while violating those values should they conflict with tacit assumptions.

External adaptation and internal integration

Schein claimed that the two main reasons why cultures develop in organizations are external adaptation and internal integration. External adaptation helps an organization to flourish by affecting its culture. An appropriate culture holds the potential for generating sustained competitive advantage over external competitors.

Internal integration is an important function for establishing essential social structures and aiding socialization at the workplace. Culture-shaping factors include:[11][clarification needed]

Organizational structure, organizational culture

Organizational structure is linked to organizational culture. Harrison described four types of culture:[79]

Cultural web

Johnson described a cultural web, identifying elements that can be used to describe/influence organizational culture:[81]

These elements may overlap. Power structures may depend on control systems, which may exploit rituals that generate stories that may or may not be true.

Schemata

Schemata are knowledge structures derived from experience that simplify behavioral choices by providing a way to think about events. Schemata are created through interaction with others.[82]

Harris described five categories of in-organization schemata necessary for organizational culture:

These schemata represent an individual's knowledge of the organization. Culture results when individual schemata become shared across an organization, primarily through organizational communication, reflecting shared knowledge and meaning.

Reciprocity

Adam Grant, author of Give and Take, highlights norms of reciprocity in analyzing culture. He distinguishes giver, taker and matcher cultures.

In a study of the US intelligence system, giver cultures had the greatest group effectiveness.[83]

Frank claimed that "many organizations are essentially winner-take-all markets, dominated by zero-sum competitions for rewards and promotions". In particular, when leaders implement forced ranking systems to reward individual performance, giver cultures give way to taker or matcher cultures. Awarding the highest-performing individual within each team encourages a taker culture.[83]

Entrepreneurial

McGuire's model predicted revenue from new sources. An entrepreneurial organizational culture is a system of shared values, beliefs and norms, valuing creativity and tolerance, believing that innovating and seizing market opportunities are solutions to problems of survival and prosperity, environmental uncertainty, competition, and expects members to behave accordingly.[84][85]

Financial impact

Flamholtz identified and validated a model of organizational culture that drives financial results.[86] The model defines five dimensions:[87]

Flamholtz reported on the impact of organizational culture on financial performance.[88] He claimed that organizational culture is an asset in the conventional accounting sense.[89]

Variable, process

Smircich described two approaches to studying organizational culture: as a variable and as a process.[90] The former could be external or internal, encompassing values, norms, rituals, structures, principles, assumptions, and beliefs.[91] National culture influences that variable.

Driskill and Brenton claimed that culture could be understood as shared cognition, systems of shared symbols, and as the expression of unconscious processes.[91]

Organizational communication

The organizational communication perspective views culture as falling into three types:[citation needed]

Rosauer observed organizational culture to be emergent – an incalculable state that results from the combination of various ingredients. In "Three Bell Curves: Business Culture Decoded",[92] he outlined three ingredients that he claimed guide business culture:

Improving these areas brings leadership, employees, work and customers together, improving culture and brand.[92]

Other

Other frameworks include:

Instruments

Organizational Cultural Profile

O'Reilly, Chatman and Caldwell developed a model based on the belief that cultures can be distinguished by values. Their Organizational Cultural Profile (OCP) is a self-reporting tool that distinguishes eight categories:

The instrument can measure how culture affects performance, as it discerns persons most suited to an organization and such organizations have an effective culture. Takeda claimed that such instruments can measure both person-situation fit and person-culture fit.[98] Such measurements assess the level of  compatibility between employees and companies. Employee values are measured against organizational values to predict employee turnover.[99][100]

Organizational Culture Assessment Instrument

Cameron and Quinn developed the Organizational Culture Assessment Instrument (OCAI) that distinguishes four culture types, based on the Competing Values Framework.[101]

Competing values can be assessed along dimensions of flexibility/stability and internal/external focus – they reported these to be the most important in influencing organizational success. These dimensions enable a quadrant of four culture types:

Clans

Clan culture is flexible/internally focused. They produce a friendly workplace where leaders act paternally. Clan cultures are associated with positive employee attitudes and product/service quality.[102] A core belief in clan cultures is that the organization's trust in and commitment to employees facilitates open communication and employee involvement.

Adhocracy

Adhocracy culture is flexible/externally focused. It offers a dynamic workplace with leaders who stimulate innovation.

Market

Market culture is stable/externally focused. It produces a competitive workplace with hard driving leaders. Market cultures are strongly related to innovation and financial effectiveness. The primary belief underlying market cultures is that clear goals and contingent rewards motivate employees to perform.

Hierarchy

Hierarchy culture is stable/internally focused. It offers a structured workplace where leaders act as coordinators.

Organizational Culture Inventory

Cooke defined culture as behaviors that members believe are required to fit in and meet expectations. The Organizational Culture Inventory measures twelve behavioral norms grouped into three culture types:[103]

Constructive cultures

Organizations with constructive cultures encourage members to achieve their potential, enhancing motivation, satisfaction, teamwork, service quality, and sales growth. Constructive norms are evident in environments where quality is valued over quantity, creativity over conformity, cooperation leads to better results than competition, and effectiveness is judged at the system level rather than the individual level. Such cultural norms are consistent with empowerment, total quality management, transformational leadership, continuous improvement, re-engineering, and learning organizations.[12][104][105]

Passive/defensive cultures

In Passive/Defensive cultures, norms reflect expectations for members to interact with people in ways that will not threaten their own security.

Members feel pressured to behave in ways that may not match their beliefs about how to be effective. People are expected to please others (particularly superiors) and avoid interpersonal conflict. Rules, procedures, and orders outweigh personal beliefs, ideas, and judgment. Unresolved conflict and turnover are prevalent, and organizational members report less motivation and satisfaction.

Aggressive/defensive cultures

In aggressive/defensive cultures more emphasis is placed on tasks than people. People focus on individual needs at the expense of the group. The aggressive/defensive style creates stress, and people using make decisions based on status as opposed to expertise.[106]

Organizations with such cultures encourage/require members to appear competent, controlled, and superior. Members who seek assistance, admit shortcomings, or concede their position are viewed as incompetent or weak. These organizations emphasize finding errors, weeding out "mistakes" and encouraging internal rather than external competition.[106]

Net Promoter Score

Sirota Survey Intelligence[107] has been gathering employee data worldwide since 1972. The Lean Enterprise Institute[108] and Reichheld/Bain/Satmetrix conduct research relating to Net Promoter Score (NPS).[109] NPS is "a widely used market research metric that typically takes the form of a single survey question asking respondents to rate the likelihood that they would recommend a company, product, or a service to a friend or colleague."[110][111]

COVID-19 impact

The pandemic led many organizations to incorporate limiting spread into their cultures as a collective responsibility. Responses focused on requiring vaccines, hygiene, and masking.

In Asia, mask-wearing was part of several national cultures predating the pandemic.[112] This was driven by experience with prior flus in Asia, such as Spanish flu, Hong Kong flu, Avian flu, and Swine flu, in addition to SARS, as well as various affronts to air quality such as volcanic eruptions.[113]

Somers categorized cultures based on whether the need of the individual or the group was foremost. He used behaviors such as mask-wearing to measure collectivism vs individualism.[114] Cultures otherwise rated "strong" were relatively resistant to change during the pandemic.[115] However, strong cultures that emphasized innovation were more willing to change.

Mandated interventions could be seen by members either as attempts to protect them or to as attempts to exert control despite limited effectiveness, depending on how they were presented.[116]

Digital tools such as videoconferencing, screen-sharing, file sharing, shared document authoring, digital whiteboards, and chat groups became widely accepted, replacing in-person meetings. The reduced amount of face-to-face communications may have impacted organizational cultures. New members, lacking face time with others, experienced difficulty in adapting to their organization's culture. The loss of face-time affected existing employees as well, directly weakening cultures, in addition to the indirect effects that strengthened or weakened cultures as organizations reacted in various ways to the pandemic. Some members felt disengaged and expandable rather than essential, alienated, and exhausted.[117]

Sull and Sull reported that employees rated their leadership higher given honest/open communication, integrity, and transparency more than in preceding years. Also, employers and leaders giving more attention to employees' welfare had a positive impact on cultural adherence.[118] Chambers claimed that this was a short-term response rather than a culture change.[119]

Deloitte argued that employees displayed greater sense of purpose, inspiration, and contribution. Also, leaders became more tolerant of employees' failure because of a significant increase in experimentation and risk-taking.[120]

Daum and Maraist claimed that sense of purpose relates to customers and the society of which employees are part. They compared hospitals and retail shops. The former had a greater sense of purpose during the pandemic, while the latter had less.[121]

Critical views

Criticism of "organizational culture" began in the early 1980s.[4] Most criticism comes from writers in critical management studies who for example express skepticism about functionalist and unitarist views. They stress the ways in which these assumptions can stifle dissent and reproduce propaganda and ideology. They suggest that organizations do not embody a single culture (diversity), and cultural engineering may not reflect the interests of all stakeholders.

Parker suggested that many of the assumptions surrounding organizational culture are not new. They reflect a long-standing tension between cultural and structural (or informal and formal) versions of organizations. Further, it is reasonable to suggest that complex organizations might have many cultures, and that such sub-cultures might overlap and contradict each other. The neat typologies of cultural forms found in textbooks rarely acknowledge such complexities, or the various economic contradictions that exist in capitalist organizations.[122]

Smircich criticized theories that attempt to categorize or 'pigeonhole' organizational culture.[3][123] She applied the metaphor of a plant root to represent culture, saying that it drives organizations rather than vice versa. Organizations are the product of their organizational culture, which shapes behavior and interaction. While Schein's underlying assumptions are that beliefs, perceptions, thoughts, and feelings are taken for granted and can be observed and considered the ultimate source of values and action. However, such assumptions undermine attempts to categorize and define organizational culture.[124]

See also: Complexity theory and organizations

Legal liability

In the US, corporate culture can legally be found to be a cause of injuries and a reason for fining companies, such as when the US Department of Labor Mine Safety and Health Administration levied a fine of more than US$10.8 million on Performance Coal Co. following the Upper Big Branch Mine disaster in April 2010. This was the largest fine in the history of this agency.[125]

Subcultures

Groups within the organization may act according to their own subcultures that are not fully aligned with that of the organization as a whole. For example, computer technicians will have expertise, language and behaviors gained independently of the organization, but their presence can influence the culture of the larger organization.

Shadow side

Egan and Tate speak of organizations having a "shadow side",[126] which Egan defined as:

All those things that substantially and consistently affect the productivity and quality of the working life of a business, for better or worse, but which are not found on organisation charts, in company manuals, or in the discussions that take place in formal meetings.[127]

Tate describes the shadow side as the "often disagreeable, messy, crazy and opaque aspects of [an] organisation's personality".[126]

See also

References

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Notes

Further reading