Chapter 2: Culture and Organizations Introduction: Part Two Examines The effect of culture on organizations The issue of cultural diversity Provides Insight into the influence of culture on all aspects of the organization Helps to develop The cross-cultural competence needed for working in international business

Chapter 2: Cultures and corporate structures The chapter focuses on the relation between the structure and the culture of an organization Concept 2.1: Organizational structures Forms of organizational structure Influence of cultural differences Concept 2.2: Corporate cultures Various forms of classification Levels and values of corporate cultures

Concept 2.1 Organizational structures Organizational structure forms the basis of the organization’s culture: formalises the tasks, jobs and positions of its personnel, as well as the limits and responsibilities of the work units indicates the kind of hierarchy within the organization, the levels of authority and power as well as the formal lines of communication between the employees

Forms of organizational structure Fatehi (1996): Three basic models of organizational structure: Functions – Products – Geographic areas. Classification of five organizational structures: Geographic structure Functional structure Product structure Mixed structure (combinations of above) Matrix structure (the two ‘lines’ – functional and project – share responsibility)

Other recent organizational structure (1) With globalisation, new organizational forms or adaptations to keep pace with economic reality Network structure a network of company units, which has a horizontal system of communication facilitates cross-cultural transfer of knowledge and organizational learning networking uses ‘socio-interactive communication’ to support the strategy and the mission of the organization

Other recent organizational structure (2) Transnational structure (Bartlett and Ghoshal, 1989) a multi-faceted organization, which can respond to international, multinational and global environment Characteristics: dispersed, interdependent, specialized its national units make differentiated contributions to integrated worldwide operations its knowledge is developed jointly and shared worldwide

Cultural diversity and organizational structure Figure 7.1 Organizational location of global cross-cultural interaction: Internal and external Source: Adler with Gundersen, 2008: 128

Corporate cultures The concept focuses on the ‘corporate’ element of culture and on two key criteria: business environment national cultural setting ‘The business environment is the single greatest influence in shaping a corporate culture’ (Deal and Kennedy, 2000) The national cultural setting also has an influence on how companies manage their business

Corporate culture and management (1) Culture is for: strategy: a diagnostic element human resource management: a framework of reference for change policies and the involvement of the people in the process marketing: the commercial culture of the firm finance: the relation between cultural values and accounting systems To what extent does culture affect management?

Corporate culture and management (2) Culture is of interest to management: offers the possibility of increasing efficiency at various levels, finding behaviours which allow the best performance possible helps to understand the organization as an entity, as a collection of individuals – can serve as a framework of reference for situations in the future allows the manager to explain how the organization works before deciding whether it needs to be changed

Levels of corporate culture Schein’s (2009) general definition of culture with its three separate layers:

Cultural assumptions and culture content Schein (2009): Through a joint learning process, the beliefs and values become tacit assumptions about the nature of the world and how to succeed in it Cultural assumptions: to do with internal workings of an organization how the organization sees itself in relation to its environment The culture content of the organization must: survive in the external environment integrate human aspects take account of the national culture in which it is operating

form the very basis of corporate culture Corporate values (1) Deal and Kennedy (2000) define values as being ‘the basic concepts & beliefs of an organization’. form the very basis of corporate culture  give direction and guidelines for day-to-day behaviour (lack of concern for these values) can undermine leadership and commitment (values) are an indispensible guide for making day- to-day choices

Corporate values (2) Three characteristics emphasise values and distinguish companies from each other (Deal and Kennedy, 2000): organizations have an explicit philosophy as to why they are conducting business management is intent on communicating the values, which shape the company in terms of the economic choices and its business environment these values are shared at all levels of the organization, from the shop floor to the board room

Identifying corporate cultures Deal and Kennedy (2000) present a classification of types of corporate culture using two factors: how much risk is involved in the firm’s activities? how much time is needed before a company and its employees know how successful their decisions or strategies have been (feedback)? Trompenaars and Woolliams (2003) use a model that combines two dimensions: task or person hierarchical or egalitarian They come up with four culture types (Figure 7.2)

Classification of types of cultures (Deal and Kennedy) The tough guy, macho culture e.g. police, hospitals, cosmetics lots of risk-taking, quick feedback emphasis on youth and speed quick decisions needed, even if not always right Work hard/Play hard culture e.g. company sales department or factory ‘Fun’ and action with quick feedback low risk activities (strict control system preventing major risks) consumers very important Bet-your company culture e.g. exploration companies (oil) high risk, slow feedback years before pay-off or failure much discussion to ensure the right decision is taken The process culture e.g. banks, insurance, pharmaceutical company low-risk activities with little feedback focus on how things are done rather than what needs to be achieved

Stereotyping corporate culture (Trompenaars and Woolliams) Model based on ‘organizational relationships’

CHAPTER SUMMARY Define the corporate culture using the models presented in Chapter 2. Schein’s model: Artefacts 2) Espoused values: strategies, objectives, philosophies 3) Shared tacit assumptions: history, internal workings of the company and relation to the environment. Deal & Kennedy’s model

CONT. Deal & Kennedy’s model Four types of cultures using two factors: risk and time. 1) The tough-guy, macho culture: lot of risks, great emphasis on speed, decisions must be made quickly 2) Work hard/play hard culture: low-risk activities that give quick feedback, strict control system preventing big risks 3) Bet-your company culture: favours high risks, but in an environment where feedback is slow 4) The process-culture: activities are low-risk, the employees receive no feedback.

CONT Trompenaars and Woolliams’s model Model based on ‘organizational relationships’ (between employees, employees-superiors and relations within the group as a whole). It combines two dimensions: task or person (high versus low formalization) hierarchical or egalitarian (high versus low centralization) Four culture types: 1) The incubator 2) The guided Missile 3) The Family 4) The Eiffel Tower

Conclusion to Chapter 2 The choice of the structure depends on the strategy and the mission of the organization, as well as its cultural diversity Culture is a way a company can differentiate itself from its global competitors A corporate culture cannot be copied If the company has adapted to the demands of its environment, culture remains the most effective way of maintaining a lasting competitive advantage