Organizational Culture

What People Say… “It was a good job, but I just didn’t fit in.” “The company’s values weren’t my values.” “Everything was just too ___________.” – formal – chaotic – competitive These all involve the organization’s culture.

What is organizational culture? Organizational Culture – A system of shared meanings and beliefs in a organization that influence how employees act Levels of culture – Artifacts – visible organizational structures and processes – Espoused values – strategies, goals, philosophies (espoused justifications) – Basic Assumptions – unconscious, taken-for-granted beliefs, perceptions, thoughts and feelings (ultimate sources of values and actions). Levels of culture from:, E. Schein, 1999, The Corporate Culture Survival Guide, Jossey Bass.

Where does culture come from? Often reflects a founder’s values and vision Is built from shared experiences and success. – Has been called the “residue of success” – reflects social learning about what works Also reflects the industry, national and societal culture

Influence of culture on managers Culture directs and constrains managerial behavior – Filters what managers see, how they interpret it, what they can do to take action. Much like a perceptual filter like selectivity. Planning - degree of risk that plans should contain Organizing - degree of autonomy given to employees Leading – what leadership style is appropriate Controlling – what performance measures are appropriate Once established, culture tends to be very stable – Can be changed, with difficulty, in times of crisis by strong leaders

How culture constrains managers: Streamlining Atari Atari: king of the hill in the early days of the computer game wars. New CEO brought in, marketing background. His cultural background said run a company by creating individual incentives and career systems. He is shocked to discover a loosely organized bunch of engineers and programmers – you couldn’t even tell who to reward for what! He institutes clear personal accountability, an individualistic, competitive reward system, symbolized by “engineer of the month.” Organization becomes demoralized, some of the best engineers leave. CEO did not understand a basic assumption of the culture: That only through extensive informal interaction could an idea come to fruition. A successful game was a group product where no one could remember who contributed what. The new systems were incompatible with the culture.

Common Types of Organizational Cultures Some combinations of beliefs about the dimensions arise fairly commonly, often when one or a few elements rise above the rest to dominate the culture as a whole. These are “types” of cultures such as: – Bureaucratic – Clan – Entrepreneurial – Market

Bureaucratic culture (“Command and Control”) Formalization, rules, SOPs, hierarchical coordination

Clan culture Tradition, loyalty, personal commitment, extensive socialization, teamwork

Entrepreneurial culture High levels of risk taking, dynamism, and creativity

Market culture Achievement of measurable and demanding goals, especially those that are financial and/or market-based; very contractual arrangement

Describing Culture – 7 underlying dimensions

Strong vs. Weak Cultures Strong cultures: Key components of culture are intensely held and widely shared Strong cultures are associated with – Greater influence on employees – More committed employees But strong cultures aren’t always good – Cults!

External vs. Internal cultural orientation Internal orientation – focus on issues internal to the firm rather than what is going on outside the firm. – Success leads managers to act arrogantly, politically, bureaucratically, to protect what they have. – Competitive changes mean a strong cultural drummer prevents managers from mobilizing action to respond to change. External orientation – focused on the several key constituencies and on the external environment: – Stockholders, AND employees, AND especially customers. – Key managers are willing to initiate change when the environment changes or constituent’s needs change. – A strong cultural drummer helps firms adapt to change.

Examples: Cultures & Performance Xerox – Success => strong, internally-oriented culture – Invented many of the initial components of computers but is Xerox a computer company? – Strong internal focus resulted in missed opportunities. Intel – Strong entrepreneurial culture – “Only the paranoid survive” = external – Shifts from memory to microprocessors SWA – Strong internal culture – employees first! – Faced with hard times, strong culture enabled cost cutting through employee effort