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    Organizational Culture
    Organizational Culture
    Organizational Culture
    Ebook353 pages4 hours

    Organizational Culture

    By Alan S. Gutterman

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    In addition to their formal structure and the rules and standard operating procedures used to support and operate the structure, organizations also rely heavily on their organizational culture as an important tool in controlling and coordinating the activities of their members (e.g., executive, managers and employees), formulating communications among those members, and providing incentives and reasons for them to act in ways that the leaders of the organization considers to be necessary in order to achieve and sustain organizational effectiveness and comply with the requirements and expectations of the organization's external environment.  A number of definitions of organizational culture have been offered; however, if managers and employees are consulted they may simply respond that culture is "how we do things around here".  There is obviously truth to such a statement but it would be a mistake to ignore the breadth and scope of the issues that are influenced by cultural norms and values—how activities within the organization are carried out, how members communicate with one another, who is accepted into the organization and who is ostracized, and what is the organization's overall morale.  The culture of a particular organization is created and maintained by its members, particularly the founders and senior managers, based on a variety of influencing factors and they are also the ones who can change and transform the culture when they are convinced that such actions are necessary in light of the then-current environment that the organization is facing.  This book provides an introduction to research work relating to organizational culture and practical guidance on how manage organizational culture.

    LanguageEnglish
    PublisherSustainable Entrepreneurship Project
    Release dateMar 16, 2019
    ISBN9781386331964
    Organizational Culture
    Author

    Alan S. Gutterman

    This book was written by Alan S. Gutterman, whose prolific output of practical guidance for legal and financial professionals, entrepreneurs and investors has made him one of the best-selling individual authors in the global legal publishing marketplace.  His cornerstone work, Business Transactions Solution, is an online-only product available and featured on Thomson Reuters’ Westlaw, the world’s largest legal content platform, which includes almost 200 book-length modules covering the entire lifecycle of a business.  Alan has also authored or edited over 80 books on sustainable entrepreneurship, leadership and management, business transactions, international business and technology management for a number of publishers including Thomson Reuters, Practical Law, Kluwer, Oxford, Quorum, ABA Press, Aspen, Euromoney, Business Expert Press, Harvard Business Publishing and BNA.  Alan has extensive experience as a partner and senior counsel with internationally recognized law firms counseling small and large business enterprises in the areas of general corporate and securities matters, venture capital, mergers and acquisitions, international law and transactions and strategic business alliances, and has also held senior management positions with several technology-based businesses including service as the chief legal officer of a leading international distributor of IT products headquartered in Silicon Valley and as the chief operating officer of an emerging broadband media company.  He has been an adjunct faculty member at several colleges and universities, including Berkeley Law, Santa Clara University and the University of San Francisco, teaching classes on corporate finance, venture capital and law and economic development,  He has also launched and oversees projects relating to sustainable entrepreneurship and ageism.  He received his A.B., M.B.A., and J.D. from the University of California at Berkeley, a D.B.A. from Golden Gate University, and a Ph. D. from the University of Cambridge.  For more information about Alan and his activities, please contact him directly at alangutterman@gmail.com, follow him on LinkedIn (https://www.linkedin.com/in/alangutterman/) and visit his website at alangutterman.com.

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      Organizational Culture - Alan S. Gutterman

      1

      Introduction to Organizational Culture

      In addition to their formal organizational structure and the rules and standard operating procedures used to support and operate the structure, organizations also rely heavily on their organizational culture as an important tool in controlling and coordinating the activities of their members (e.g., executive, managers and employees), formulating communications among those members, and providing incentives and reasons for them to act in ways that the leaders of the organization considers to be necessary in order to achieve and sustain organizational effectiveness and comply with the requirements and expectations of the organization’s external environment. 

      According to Tatarusanu et al., the concept of organizational culture began to emerge in the 1970s when researchers in the US and Europe were particularly interested in understanding the sources of the comparatively higher performance of Japanese companies including the question of whether or not the organizational culture in those firms provided a specific competitive advantage.[1]  Subsequent studies took on the difficult question of defining and measuring organizational culture and examining the role that organizational culture, and changes in organizational culture, played in successful implementation of important managerial transformation initiatives such as reengineering programs, total quality management and technological innovations (i.e., resource planning systems, flexible production technologies).[2]

      A number of definitions of organizational culture have been offered; however, if managers and employees are consulted they may simply respond that culture is how we do things around here.  There is obviously truth to such a statement but it would be a mistake to ignore the breadth and scope of the issues that are influenced by cultural norms and values—how activities within the organization are carried out, how members communicate with one another, who is accepted into the organization and who is ostracized, and what is the organization’s overall morale.  The culture of a particular organization is created and maintained by its members, particularly the founders and senior managers, based on a variety of influencing factors and they are also the ones who can change and transform the culture when they are convinced that such actions are necessary in light of the then-current environment that the organization is facing.

      Organizational culture should not be underestimated and, in fact, in most cases it is a stronger force than any other set of internal laws—rules and procedures—applicable to the members of the organization.  However, in order for culture to have the desired impact it is important for the founders and senior managers of an organization to understand as early as possible that culture is one of the fundamental tools available to them to create a working environment in which organizational members are encouraged and motivated to cooperatively engage in collaborative behavior. Moreover, a failure of organizational leaders to understand the cultural values and norms that exist within the organization can doom their attempts to change the goals and strategy of the organization if the proposed changes are not consistent with the culture.

      Research has indicated that the culture of an organization has a strong influence on how the organization tackles problems and questions, sets strategy and creates the structures that determine the work activities and relationships of organizational members and also on how members behave when carrying out their organizational activities.[3]  There is also evidence that organizational culture plays a big part in defining the competitive position of the organization in its environment and the way in which the organization is perceived by external stakeholders. For example, it has been argued that organizational culture is a key factor in whether or not an organization can achieve and maintain an entrepreneurial orientation[4], which has been defined as a strategic focus on risk-taking, proactive pursuit of new opportunities and new product or process innovation.[5]  Organizational culture is an important determinant of the level of risk-taking that a firm is willing to tolerate.[6] Organizational culture can itself become a core competency for an organization and can be used to distinguish it from competitors in the minds of customers. Good examples are firms such as Disney and Southwest Airlines, each of which are widely known as companies with an innovative organizational culture that continuously works to improve the experience that customers have with their activities and their members. Culture should not be underestimated and, in fact, in most cases the organizational culture is a stronger force than any other set of internal laws—rules and procedures—applicable to the members of the organization.

      While the importance of organizational culture has been widely recognized, it is a difficult and complex subject and careful review and analysis is required in order to identify the essential cultural values and norms and determine how they impact the behavior of managers and employees. There is no single culture that is universally appropriate for all organizations and there is clearly substantial diversity with respect to the dominant cultural attributes among successful and effective organizations. For example, the core cultural values at a relatively conservative company, such as General Motors in the early 1980s, might include loyalty, hierarchy, and conformity and expected behaviors from managers and employees in that environment might include deferential respect for authority; open expressions of loyalty to the company and strong discouragement of opposition; and conservative choices with respect to dress and office furnishings. In contrast, an upstart company created by founders disenchanted with the culture and practices of traditional companies might emphasize a very different set of core values such as rewarding productivity and performance over acts of deference and conformity, encouraging employees to act independently and challenge decisions and beliefs rather than simply continue to act based on blind loyalty, adopting contemporary styles of dress and office decoration, and designing and maintaining flat organizational structures to facilitate rapid decision making.[7]  In addition, a strong culture is not necessary better or more effective than a weak one. The real point of measurement is whether or not the culture fits well with the overall strategic goals and objectives of the organization and the key challenge for senior management is identifying the particular cultural elements that are most important and focusing on how appropriate changes can be made to drive the organization in the direction necessary to execute new strategies.

      Definitions of Organizational Culture

      Not surprisingly, there is no generally accepted definition of organizational culture and scholars from a diverse range of disciplines such as sociology and anthropology have treated culture as something that is implicit in social life and which emerges over extended periods of time as individuals interact with one another and begin to organize themselves as identifiable social groups (e.g., tribes, communities, companies, non-profit organizations, states and countries).  Experts in management science and organizational behavior and communication see organization culture as an explicit product of the choices that a group of people make with respect to accepted behavior as they interact with one another and key stakeholders outside of the organization (e.g., customers, suppliers and regulators) and attempt to develop ways to confront their broader social environment.[8]  Hill and Jones offered a definition of organizational culture as the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization.[9]  Schein defined organizational culture as: [a] pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way you perceive, think, and feel in relation to those problems.[10]

      Approaches to Studying Organizational Culture

      Dauber et al. noted that the concept of organizational culture has roots in cultural theory and the field of cultural studies and reported that organizational culture has been studied as a construct separate and distinguishable from societal culture for several decades and by a variety of different disciplines, each of which bring their own unique approach and emphasis to the subject.[11]  They classified the research approaches into three broad categories: the dimensions approach, which borrowed heavily from work done by a number of different researchers studying societal culture; the interrelated structure approach, a popular example of which is the model of organizational culture developed by Schein that includes three levels: basic underlying assumptions, espoused values and artifacts; and the typology approach, which attempts to divide and cluster organizations into certain categories based on pre-defined key characteristics and then assign organizational culture profiles to each category (e.g., strong, weak, bureaucratic, ‘innovative, people-oriented or team-oriented").  Dauber et al. recognized the influence of research on societal culture on the study of organizational culture; however, they emphasized that organizational values were quite distinguishable from societal values and that while organizational values were influenced by the values of the society in which they were operated identifying organizational culture required attentiveness to the personalities and value preferences of the organizational members and their specific tasks and goals within the organization.

      Dimensions of Organizational Culture

      The dimensions approach was described by Dauber et al. as including efforts focused on measuring organizational culture empirically along (in some cases bipolar) scales that can be related to other, most dependent, variables of interest.[12]  The dimensions approach has become extremely popular for research, analysis and diagnosis in the area of societal culture and its influence on the management of organizations and the behaviors of organizational members.  Researchers have observed that this phenomenon can partly be attributed to a simplification of the approach to culture.  It is, therefore, not surprising that attempts have been made to identify dimensions of organizational culture and, as part of that process, gauge the extent to which dimensions of societal culture can also be applied to analysis at the organizational level.  The consensus seems to be that while organizational values are affected by societal values, and the personal values of organizational members that inevitably come into play as they go about their day-to-day activities are also influenced by societal values, organizational values differ significantly from national or societal values and any dimensional model of organizational culture would best be focused on the tasks required, and the actual practices relating to those tasks, of organizational members.[13]

      A wide range of models of dimensions of organizational cultures have been proposed, often accompanied by suggestions on how organizational leaders can use the various dimensional models in connection with their efforts to assess and evaluate their organizational cultures and implement changes to those cultures that might lead to improvements in productivity, efficiency and other tangible measures of organizational performance. Many of these models were developed by Western researchers looking at organizational activities and behaviors within firms launched and operating in the developed world.  Among those researchers that have proposed models intended to have applicability across all types of societies—developed and developing—the ideas of Hofstede and the research team overseeing the Global Leadership and Organizational Behavior Effectiveness project, commonly referred to as GLOBE, have received most of the attention.

      Hofstede, who is best known for his work in studying how national and regional cultural characteristics (i.e., societal culture) impact organizational behavior, also conducted smaller studies that focused on organizational culture and identified the following dimensions of organizational culture that could be used a descriptive framework for organizational cultures: process-oriented versus results-oriented; job-oriented versus employee-oriented; professional versus parochial; open systems versus closed systems; tight versus loose control; and pragmatic (flexible) versus normative (rigid).[14]  Hofstede acknowledged that his specific research base (20 organizations or parts of organizations, ranging from a toy manufacturing company to municipal police corps, in the Netherlands and Denmark) was too narrow to credibly argue for the universal validity and sufficiency of the six dimensions that he identified and noted that additional dimensions may be necessary or some of the six may be less useful in other countries and/or when analyzing other types of organizations.  In fact, while the organizations that he studied did evidence widely divergent perceptions of daily practices he was only able to uncover modest differences in values after taking into account the effect of non-organizational factors such as nationality, education, age and gender. 

      The researchers involved in the GLOBE project on cross-cultural aspects of leadership assessed nine cultural dimensions derived from a number of sources including Hofstede and others identified in an extensive literature review.[15]  In contrast to Hofstede, the GLOBE researchers worked from the perspective that societal and organizational cultures can be described using the same dimensions, recognizing that these dimensions can have somewhat different psychological meanings at the different levels of analysis.[16]  However, they conceded that when organizational, as opposed to societal, culture was the primary subject of interest there is no need to constrain the dimensions of organizational culture to map onto the dimensions of societal culture and then reported that exploratory factor analyses of the responses to the questions on the GLOBE questionnaire to organizational level items led them to identify the following, smaller, set of factors that might be more appropriate when attempting to construct a list of organizational culture dimensions: organizational collectivism/commitment; humane orientation; assertiveness; a combination of uncertainty avoidance and future orientation; gender egalitarianism; and individualism collectivism.[17]

      In addition to the models developed by Hofstede and the GLOBE researchers, Sagiv and Schwartz argued for a framework that included each of the following cultural dimensions as influencers of organizational behaviors: harmony, embeddedness, hierarchy, mastery, affective autonomy, intellectual autonomy and egalitarianism.[18] These dimensions were expressed in bipolar fashion by linking embeddedness and autonomy; mastery and harmony; and hierarchy and egalitarianism.  Chatterjee et al., who were specifically interested in developing measurements of corporate culture to be used to determine the extent to which perceptions of cultural differences of the top management teams of parties to an acquisition transaction (e.g., a merger) related to stock market gains of the securities of the acquirer, suggested a group of dimensions of organizational culture that included innovation and  action  orientation;  risk-taking;  lateral  integration;  top management  contact;  autonomy  and decision  making;  performance  orientation;  and  reward  orientation.[19]  Based on his studies of hundreds of companies around the world, Denison concluded that four cultural traits or dimensions—adaptability, mission, involvement and consistency—each had a significant influence on an array of organizational performance measures including sales growth, return on assets, quality, profits, employee satisfaction and overall performance.[20]  Researchers working on the Organizational Culture Profile project felt that it was possible and valuable to create profiles of organizational culture that incorporated measures on multiple dimensions that included supportiveness, innovation, competitiveness, performance orientation, stability, emphasis on rewards, and social responsibility.[21]

      Interrelated Structure Approach

      As for the interrelated structure approach, Dauber et al. described it as concentrate[ing] on linking the concept of organizational culture to other constructs or characteristics of organizations and less to single variables.[22]  A popular example of this approach is the model of organizational culture developed by Schein, who began with a definition of culture as a pattern of basic assumptions – invented, discovered or developed by a given group as it learns to cope with problems of external adaptation and internal integration – that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think and feel in relation to those problems.[23]  He then fleshed out this definition by suggesting that culture could be understood by dividing it into three levels or elements.  At the broadest and perhaps most abstract level are basic assumptions, which are the most difficult to identify and include the organization’s tacit core beliefs, values and assumptions that drive the decisions of organizational members with respect to their behaviors and actions.  The next level is espoused values, such as organizational slogans and other visible expressions of organizational mission and the established rules of behavior or standards of conduct, often referred to as norms, which exist within an organization to control the behavior of its members.  Norms, both formal and informal, contribute to the orderliness and predictability of the day-to-day activities of the organization and are learned through various socialization processes.  Norms create strong bonds within the organization and members are likely to feel intense guilt or shame if they should breach their obligations.  The third level consists of the various visible artifacts and creations, sometimes referred to as cultural forms, including rites and rituals, myths and stories, symbols, language, gestures, dress codes, artifacts physical layout of work spaces and other elements of the physical surroundings, used by organizations as linking mechanisms to develop networks of understanding among members and communicate the prevailing cultural values and norms of the organization.  Taken together, these components provide guidelines that ease the burden on members as they go about their activities within the organization.

      Typologies of Organizational Culture

      Typology approaches identify pre-defined key characteristics that can be used to divide and cluster organizations into certain categories, and a number of attempts have been made to identify categories of organizational culture as a means for describing certain aggregates of cultural characteristics and facilitating comparisons among organizations.[24]  Perhaps the simplest typology of organizational culture relies on classification on a continuum from strong to weak and a key determinant of where an organization falls on this continuum is the degree of homogeneity.  A strong culture is one where the mutually agreed and understood values and norms have an overriding influence on the ways in which members conduct their activities on a day-to-day basis and interact with external stakeholders.  On the other hand, if the culture is weak it provides little or no guidance to members and control of behavior is exercised primarily through formal written guidelines and procedures.  Deal and Kennedy developed four categories of organizational culture based on how the speed of feedback given to members for their actions and the level of risk and uncertainty associated with the activities of the organization.  For example, at one extreme is the tough-guy macho culture, typical of stock brokers during the trading day, in which feedback on actions comes quickly, members can anticipate high rewards for the right decision and stress levels are quite high.  At the other extreme would be organizational cultures that stress learning and following a process and in which members get little or no feedback and tend to focus on how things are done (i.e., process) as opposed to the value of the end product of all of the activities. Process-based organizations are often referred to as bureaucracies.[25]

      Wallach argued for a typology that included the following three separate, and measurable, organizational cultures: bureaucratic, innovative and supportive.[26] Handy described four different categories of organizational culture identified by Roger Harrison: power cultures (high concentration of authority among a relatively few individuals), role cultures (highly organized structure with authority based on position), task cultures (emphasis on specialization and expertise), and person cultures (individuals believe they are more valuable than the organization).[27]  Bauer and Erdogan used the dimensions associated with the well-known Organizational Culture Profile to suggest a typology of seven distinctive organizational cultures: innovative, aggressive, outcome-oriented, stable, people-oriented, team-oriented and detailed-oriented.[28]

      Researchers have also embraced the competing values scale generally associated with the work of Quinn and Rohrbaugh[29] to propose a model that includes the following four types of organizational culture: an adhocracy culture (flexible and externally focused) which stresses creativity, adaptability and change; a hierarchy culture (stable and internally focused) which focuses on stability, order, rules and regulations and features hierarchical organizational structures with hierarchical leaders, well-defined policies and procedures and close oversight by organizational leaders over all aspects of operational activities; a market culture (stable and externally focused) which is concerned with planning, efficiency and attainment of well-defined goals related to the organization's position in its competitive environment; and a clan culture (flexible and internally focused) which is focused on flexibility and developing human potential through consensus building and relies on rules that are typically communicated socially and clan leaders who act as supportive facilitators and assume a parental role.[30]

      Trompenaars supplemented his well-known research on societal cultures[31] by examining organizational culture and suggested that it was possible to identify four types of organizational or corporate culture based on the premise that the following aspects of organizational structure were especially important in determining the culture: the general relationship between employees and their organization; the vertical or hierarchical system of authority defining superiors and subordinates; and the general views of employees regarding the destiny, purpose and goals of the organization and their specific roles and places within those views.[32]  Trompenaars argued that two dimensions, incorporating the aforementioned aspects of organizational structure, were needed in order to distinguish different organizational cultures: equality-hierarchy and orientation to person-orientation to task.  This allowed him to generate four quadrants, each of which representing a specific type of organizational culture: the family, the Eiffel Tower, the guided missile and, finally, the incubator.[33]  According to Trompenaars each of the types of organizational culture that they had identified could be distinguished from one another with respect to several important elements and he argued that there were real and identifiable differences among them with respect to how employees related to one another (e.g., degree of formality); how employees viewed authority (e.g., egalitarianism versus hierarchy); ways of thinking and learning; attitudes toward people; ways of changing; the methods that would be most effective for motivating and rewarding; and the processes used for delivering criticism and resolving conflicts and disputes.[34]

      Determinants of Organizational Culture

      Behind any model of organizational culture is an attempt to identify the most important influences on, and determinants of, organizational culture.  A great deal of focus has been placed on understanding the external environment in which the organization operates, technology, industry factors and societal culture (both for its direct impact on the organization and its indirect impact through the personal values that organizational members bring with them as a result of growing up within the societal culture).  In fact, Schein’s definition of organizational culture suggests that the basic assumptions underlying an organization’s culture can be identified and understood by looking closely at the problems of external adaptation and internal integration that the organization has confronted and overcome, which means that learning about the organizational history, particularly the way it is communicated to new members during their orientation process, is extremely important in assessing its culture.[35]

      Identifying the determinants of organizational culture is obviously a fundamental endeavor when attempting to make comparisons of organizational cultures; however, the complexity of culture makes it impossible to identify with certainty all of the factors that determine the culture of a particular organization.  Jones argued that specific determinants of organizational culture include such things as the personal and professional characteristics of the organizational members, particularly the founders; organizational ethics; the manner in which property rights are created and allocated within the organization; the structure used by the organization for communication and coordination of activities; the systems used by the organization to control its internal activities; and the power structures within the organization.[36]  In many cases the organizational culture is also heavily influenced by the characteristics of the industry in which the organization operates and organizations within a particular industry share the cultural characteristics that are most appropriate for survival and growth in the face of the competition and other environmental factors that they are facing.[37]  Other factors that are likely contributors to the development of organizational culture include the history and background of the organization; the size and evolution of growth of the organization; societal culture; the function and purpose of the organization (i.e., organizational tasks and the nature of the organization’s business, clients and operating processes); the technology used in the conduct of the organization’s activities (i.e., job design, complexity and interdependence); the goals and objectives of the organization; training, appraisal and rewards systems; and the leadership and communications skills of those at the top of the organizational hierarchy.[38]

      While it may be true

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