Organizational Culture Became An Area Management Essay

Organizational culture became an area of a great interest of many researchers and management consultants in the last few decades. However, this widely used term seems to raise some ambiguity about its effectiveness on various aspects within organisations.

Some theories argue that organizational culture can be considered as one of the main determinants to the achievement and sustainability of competitive advantage. Thus, Trice and Beyer (1993) defined organisational culture as a management tool, while Bennis and Nanus (1985) have considered it as an engine for achievement of competitive advantage, and Denison (1990) stated that it plays a significant role in achieving success.

The aim of this paper is to review the concept of organisational culture, its role and influence in organisational context.

The paper is shaped in a report format and divided into two major parts. In the first part the definition and common characteristics of the organisational culture are reviewed based on the international literature, including its levels, models, role and importance. Functional and dysfunctional effects of the organizational culture are discussed in the second part of the paper in the context of employees’ retention, customer/market orientation, and organization’s performance. The paper is finalized with a conclusion where a summary of the discussed materials is given with the outline of key findings performed by different researchers and theories.

A number of various academic sources is used in order to achieve the targeted aim of the current paper.

2. Organizational Culture: definition and common characteristics

According to Watson (2006) the concept of culture within organisations derives from a metaphor as “something that is cultivated” and Schein (2004) states that main function of culture within organisations is to address shared meanings and interpretations of events.

There is no standard definition of organisational culture in the literature (Abu-Jarad et al, 2010) and in some cases the term is being misinterpreted and mixed with organisational climate (Mullins, 2010).

However, there is a widely recognized general explanation of organizational culture which describes it as “a set of cognitions shared by members of a social unit” (O’Reilly et al, 1991). Furthermore, organisational culture is a shared belief emerging from social interactions (Trice and Beyer, 1993; Schneider, 1987), containing a set of shared values, agreed mutual understandings and expectations (Rousseau, 1990) which connects persons all together in an organisation (Schein, 2004).

Thus, as per Koberg and Chusmir (1987) a detailed definition of organisational culture can be summarized as “a system of shared values and beliefs that produces norms of behaviour and establish an organizational way of life”.

Different researchers have studied the impact of organisational culture on firms and employees. Extensive results of those researches show that organisational culture impacts employees’ creativity (Martins and Terblanche, 2003; Vincent et al, 2004), behaviour and development (Saeed and Hassan, 2000), performance (Zain et al, 2009) and knowledge management (Tseng, 2010). It has been also observed that organisation’s culture is often linked to individual’s personality (Mullins, 2010).

It is believed that culture in organizations is related to the leadership especially if it is connected to the higher level of management (Schein, 2004; Trice and Beyer, 1993). However, Schneider and Smith (2004) refer to a number of theories stating that leaders do influence the organizations.

2.1. Levels and models of Organizational Culture

Organisational culture exists on different levels. Schein (2004) distinguishes two levels of organisational culture: visible and invisible. The first is represented by physical settings, like logos, behaviours, stories, etc. Invisible levels are those which are based on beliefs and feelings.

In their work Deal and Kennedy (1982) look at visible levels of organisational culture through a deeper prism and state that they shape the behaviour, whereas invisible level represent more interest for progression or impendent of organisational change.

Some researchers point on the model offered by Rousseau (1990) which demonstrates major elements of culture and named it as “Layers of Culture” (Appendix 1).

He presented it in a simple ring shape where outside area is showing visible signs of culture and inside area is showing hidden feelings of culture.

However, there are a number of models demonstrating culture, sub-cultures and significant differences between espoused cultures (models) and practiced cultures. Some of the models offer a clear vision about values representing organisational culture (Cooke and Lafferty, 1987).

It is important to note that different organisations have distinctive culture and therefore different models have been developed and implemented by researchers over the time (Mullins, 2010).

In their model, Deal and Kennedy (1982) described organisations as entities which include external forces and grouped by “level of risk” (high / low) and “feedback speed” (fast / slow) (Appendix 2):

Work hard – play hard (low risk and quick feedback);

Tough guy – macho culture (high risk and quick feedback);

Process culture ((low risk and low feedback);

Bet-your-company culture (high risk and slow feedback).

Hofstede (1997) divided organisational culture into four segments and put them into an “onion diagram” where each zone represents: heroes, symbols, rituals and values (Appendix 3). In this model “values” form the core of culture.

According to Brown (1998) values are significantly connected with ethical and moral codes and they define employees’ opinion on what have to be done, as well as they determine “likes” and “dislikes”. The cultural web model presented by Johnson and Scholes (1999) allows people to better understand organisation’s culture as it links political, structural and symbolic sides of organisation. According to Shili (2008) “the cultural web is useful to identify a culture within an organization” (Appendix 4).

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Competing Values Framework (CVF), one of the most recent model of organisational culture was presented by Bradley and Parker (2006) and further by Cameron et al (2007) based on work made by Quinn and Rohrbaugh in 1983 (Appendix 5).

The CVF gives a view of cultural values that reflect chosen structural characteristics and favourite models of operation. According to Cameron et al (2007) CVF spaces along two main dimensions: demands between flexibility and stability, and demands between internal-external environments on the other hand.

Two dimensions of CVF define four models of culture, individuallly covering a specific set of criteria:

Clan culture – The firm is characterized by an atmosphere of collectivity, where values are shared and common goals are set;

Hierarchy culture – A Clear organization structure is set up, together with precise procedures, rules and strict control over employees;

Adhocracy culture – This kind of culture is popular among consultancy firms, where culture is set up and dismissed whenever organisational tasks are completed;

Market culture – Focused on interactions with external environment outside organisation. Main goal are profit and beat competition.

CVF was considered as one of the most important models for management and it is being used for scientific and practical studies of organisational cultures (Van Vianen, 2000).

2.2. Why is organisational culture important?

According to Mullins (2010) organisational culture helps to reduce uncertainty and complexity and believes that there is a correlation between organisational culture and performance.

Schein (2004) states that importance of organisational culture has been increasing over the years as it allowed increasing globalization, competition, alliances and workforce development.

Hofstede (1997) argued that the way people behave and think is influenced by the culture in organisation, so it is essential to understand it. Whereas according to Grieves (2000) organizational development can encourage human values. Earlier, Deal and Kennedy (1982) believed that the combination of organizational development and organizational culture makes people working in a more efficient manner.

The importance of culture is a key element for achieving organizational efficiency because culture has an impact on the way organization is run (Schneider and Barsoux, 1997). Moreover, culture can influence employee morale and motivation, their attitude within the workspace, quality of work, innovation and creativity (Campbell et al, 1999).

Hofstede (1991) stated that organisational culture together with national and occupational cultures is the key determinant of person’s behavioural change within the workspace.

Thus, Bratton and Gold (2012) highlighted that Organisational culture plays a significant role especially during the process of change and re-design in organisations.

3. Functional and dysfunctional effects of Organisational Culture

During the last two decades researchers spent more efforts on understanding the effects of Organisational culture on organisations’ success.

According to Brache (2002) organisational culture affects different sides of the firm such as employee satisfaction and methods of performance evaluation and strategy execution. Work performed by pioneers Deal and Kennedy (1982) demonstrated how organisational culture can influence employees’ behaviour towards organisation’s success. As per Brache (2002) satisfied employees are more productive and eager to serve better to win customer’s appreciation and happiness.

However, according to Peters and Waterman (1982) a negative organisational culture can be toxic for organisation’s life and deterring any possibility of growth.

In fact, lack of understanding the influence of organisational culture by management may lead to the loss and turnover of employees within the firms (Lee, 2006). Moreover, according to Schein (2004) many of the problems can be referred to management’s inability to understand and analyse organizational culture and such misinterpretation of organisational culture might have dysfunctional effect on further message delivery to the rest of employees. For example, the case of BP incident in Mexican Gulf demonstrates how important it is to understand corporate culture by the management in first place, and to communicate it in appropriate manner to the employees (Bryant and Hunter, 2010).

3.1. Organisational Culture and employee retention

Some researchers have stated that organizational culture affects the retention of employees within the firm. Organisations that do not build strong cultural awareness among employees and that approach their people in unfair and unrewarding manner risk to lose the best workforce (Gray and Larson, 2006).

According to the studies performed by Lee (2006) on the example of IT industry, firms which undervalue the influence of organisational culture and which do maintain a proper retention program are risking to lose their employees, which is vice-versa for the companies possessing strong organizational culture oriented to create positive environment. Firms focusing on employees’ retention do implement organizational culture aimed to provide various types of investments into skills and professional development as well as other loyal motivation programs (Pfeffer, 2007).

People prefer to stay in organizations where the culture establishes success and challenge, as well as enjoyment (Pogorzelski et al, 2008).

3.2. Organisational Culture and Customer/Market orientation

According to Slater and Narver (1995) market orientation has been labelled as a “culture” where employees have norms for understanding the relationship between market and organisational performance.

Deshpande et al (1993) studied different Japanese and Indian companies together with their customers in order to understand if there is a link between organisational culture, customer orientation and performances. Findings from such studies demonstrated that companies with a customer-oriented culture are more flexible and responsive to the market. Furthermore, they found that Indian firms were characterized by entrepreneurial culture, while Japanese firms possessed a competitive culture in addition to entrepreneurial.

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Further studies performed by Deshpande and Farley (1999) on Indian and Japanese companies demonstrated that organisational culture affects positively their market orientation.

Thus for instance, investments made by IBM management in human resources, culture, health, and environment led them to expand their presence on global arena (IBM, 2010).

3.3. Organisational Culture and performance

Various researchers have tried to find out if organisational culture has any impact on firm’s performance. Hofstede and Bond (1988) suggested that there is a correlation between culture and organisation’s performance. Moreover, Schein (1990) stated that corporate culture helps to identify the characteristics of successful companies.

In his studies, Rousseau (1990) tried to measure organisational culture and results showed that there is no link between culture and employee’s performance. However, other researchers found that companies with a strong culture perform better than those which have a deficiency in shared values (Deal and Kennedy, 1982; Peters and Waterman, 1982).

Furthermore, according to studies performed by Lim (1995) it can be stated that

“strong” culture has positive influence on organisation’s long-term performance as there is no link between organisational culture and short-term organisations’ performance.

As an example, it is worth to refer to a conclusion made in IBM report (IBM, 2010) “strong company culture and a commitment to good corporate citizenship would lead to success in both business and society”.

However, there are cases when organisational culture is too strong and it can reduce company’s adaptability to changes (Cloke and Goldsmith, 2002).

According to Certo and Certo (2006) corporate culture within an organization influences the behaviour and can have a positive effect on organizational success.

Importance of corporate culture was discussed by a number of researchers as well as managers who justified their statements outlining three major functions. Mainly, corporate culture of a firm is related to social control which may have an impact on the decisions and behaviour of the employees. Secondly, corporate culture of the organization may strengthen employees’ unions and influence their engagement in corporate culture. This might be beneficial for the firm to retain its employees as well as to attract new.

Thirdly, it is useful to use the corporate culture as a tool allowing employees to learn the firm’s events, mission, vision and goals. This might be a great opportunity for the firm to improve the performance and effectiveness, and even to achieve the competitive advantage.

According to Saffold (1998) a well-established and strongly maintained corporate culture can be used a drive for enhancement of the performance as it has impact on self-confidence of employees as well as for their level of commitment. Such effect in its turn decreases stress at work and increases ethical behaviour.

Saffold also states that many studies about culture generally tend to give emphasis to a single organizational culture. However, according to Deal and Kennedy’s (1982), both strong and weak cultures are important and have a significant influence on organizational behaviour. They also highlight that in the strong culture, employee’s goals are aligned with management’s goals and represent a big help to organizational performance increase.

4. Conclusion

An attempt to understand the definition, concept and role of organisational culture was made in the current paper. Thus, in the first place works of Rousseau, Schein, Mullins, Watson, O’Reilly et al were reviewed. Although, it has been observed that there is no common fixed definition of organisational culture, however, the one proposed by Schein (2004) in his book “Organizational Culture and Leadership” is the most widely shared and used.

As it has been discussed, organisational culture exists on different levels and therefore a number of different academic sources were used to understand the common characteristics of the organisational culture. Thus, levels (Schein, 2004) and models (Rousseau, 1990; Deal and Kennedy, 1982; Hofstede, 1997; Johnson and Scholes, 1999) of organisational culture were reviewed.

In the second part of the paper an effort was made to identify functional and dysfunctional effects of the organizational culture. Works of various researchers were reviewed. As a result of literature and practical review, it was found that organisational culture has an impact on different sides of organization. Thus, Brache (2002) stated it affects the satisfaction of employees, methods of performance evaluation and execution of the strategy. Whereas Deal and Kennedy (1982) showed how it affects behaviour of employees towards organisational success. The effects of organisational culture in context of employees’ retention (Gray and Larson, 2006; Lee, 2006; Pfeffer, 2007; Pogorzelski et al, 2008), customer/market orientation (Deshpande et al, 1993; Deshpande and Farley, 1999), and performance of both employees and organization have been discussed.

Summarizing the research made to achieve the aim of this paper it can be stated that organisational culture is an important concept that affects both individual and organisational related processes and outcomes.

Concluding all discussed in current paper it is worth to mention the statement about the culture made by the Chairman of IBM Louis Gerster, who implemented cultural change with his arrival which led to the successful performance of the company throughout the years from 1993 to 2002: “The thing I have learned at IBM is that culture is everything”. (Harvard Business School – Working Knowledge, 2002).

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