Lesson 10: Organizational Culture

1. DEFINITION
Organizational culture is a system of shared beliefs and values that defines how things are done
in a workplace. It sets the organization apart from others. Imagine it as the "vibe" or
"personality" of a workplace.

Seven Key Characteristics of Organizational Culture

1. Innovation and Risk-Taking: Encouraging creativity and taking chances.
2. Attention to Detail: Expecting employees to focus on precision and thoroughness.
3. Outcome Orientation: Prioritizing results over processes.
4. People Orientation: Considering how decisions affect employees.
5. Team Orientation: Emphasizing teamwork over individual work.
6. Aggressiveness: Being competitive versus being relaxed and easygoing.
7. Stability: Maintaining current systems versus constantly evolving.
Organizations can be measured on how strongly they exhibit each characteristic.

Levels of Culture (Schein’s Model):

Edgar Schein breaks culture into three levels:
1. Artifacts:
o These are the visible, tangible aspects of culture, like office design, company
slogans, or dress codes.
o Example: Apple’s minimalist store design reflects its focus on simplicity and
innovation.
2. Espoused Values:
o These are the stated values and norms that an organization claims to uphold.

o Example: Nike’s value of "inspiring athletes" is reflected in its marketing and

product development.
3. Basic Underlying Assumptions:
 o These are the deep, often unconscious beliefs that truly guide behavior. They’re
rarely questioned.
o Example: A company may assume "change is necessary for growth," driving
constant innovation.

Descriptive Nature of Culture

 Organizational culture describes how employees perceive the workplace (e.g., “Do we
encourage teamwork?” or “Are risks welcomed?”).
 It’s different from job satisfaction, which evaluates how employees feel about their jobs.

Certainly! Let’s dive deeper into the concept of organizational culture, ensuring clarity and
including examples to bring each idea to life.

What is Organizational Culture?

At its core, organizational culture is like the "DNA" of a company—it shapes how things are
done, how people behave, and how decisions are made. It encompasses shared values, beliefs,
and practices that bind members together.
For example:
 A tech startup may have a culture that values innovation (encouraging bold ideas and fast
failure) and teamwork (collaborative projects).
 A traditional bank might focus on stability (risk aversion) and attention to detail
(accuracy in operations).

Key Characteristics of Organizational Culture:

1. Innovation and Risk-Taking:
o Organizations with this trait encourage employees to think outside the box and
take calculated risks.
 o Example: Google’s “20% time” policy allows employees to dedicate part of their
workweek to side projects, leading to innovations like Gmail.
2. Attention to Detail:
o High precision and thoroughness are expected, especially in industries like
finance or engineering.
o Example: NASA emphasizes meticulous planning and checks to ensure mission
success.
3. Outcome Orientation:
o Results matter more than how they’re achieved. Employees are measured by their
impact.
o Example: A sales company rewards employees based on hitting revenue targets
rather than the process they followed.
4. People Orientation:
o Companies focus on employee well-being and value their contributions.

o Example: Patagonia offers work-life balance perks like onsite childcare and
environmental activism support.
5. Team Orientation:
o Collaboration and group achievements are prioritized.

o Example: Toyota uses team-based problem-solving to improve production

efficiency.
6. Aggressiveness:
o Competition, both internally and externally, is encouraged.

o Example: Amazon’s culture is known for its emphasis on customer obsession and
intense internal competition.
7. Stability:
o Consistency and long-term focus guide operations.

o Example: IBM built its reputation on delivering reliable products and services
over decades.

Levels of Culture (Schein’s Model):

Edgar Schein breaks culture into three levels:
1. Artifacts:
o These are the visible, tangible aspects of culture, like office design, company
slogans, or dress codes.
o Example: Apple’s minimalist store design reflects its focus on simplicity and
innovation.
2. Espoused Values:
o These are the stated values and norms that an organization claims to uphold.

o Example: Nike’s value of "inspiring athletes" is reflected in its marketing and

product development.
3. Basic Underlying Assumptions:
o These are the deep, often unconscious beliefs that truly guide behavior. They’re
rarely questioned.
o Example: A company may assume "change is necessary for growth," driving
constant innovation.

Types of Organizational Culture:

1. Dominant Culture:
o A dominant culture represents the main values shared across the organization,
giving it a distinct identity.
o Example: At Tesla, the dominant culture revolves around innovation and pushing
boundaries.
2. Subcultures:
o Subcultures exist in smaller groups or departments, combining core
organizational values with unique traits (e.g., a department valuing risk-taking
within a cautious company)
o Example: A company’s marketing team may have a creative, relaxed subculture,
while the finance team maintains a stricter, detail-oriented one.

Strong vs. Weak Cultures

  A strong culture occurs when most employees deeply share and follow the same values,
creating clear behavioral expectations.
 A weak culture has inconsistent values, leading to diverse employee opinions about the
organization.
 Strong cultures often reduce turnover because they foster unity, loyalty, and commitment.
 They also reduce the need for strict rules since employees naturally align with the
culture's expectations.
2. FUNCTION
Organizational culture performs several critical functions:
1. Boundary-Defining: Differentiates one organization from another, giving it a unique
identity.
2. Identity Creation: Provides members with a sense of belonging and purpose.
3. Fosters Commitment: Encourages individuals to prioritize the organization’s goals over
their personal interests.
4. Social Glue: Serves as a stabilizing force, helping employees align with shared norms
and expectations.
5. Sensemaking and Control: Acts as a guiding mechanism for shaping employee behavior
and attitudes.
In decentralized or virtual organizations, culture becomes even more critical, as it replaces
formal authority with shared meaning to ensure alignment and consistency. Leaders play a
pivotal role in fostering this culture through communication and clear goal-setting.

Culture as a Liability
Despite its benefits, culture can also pose challenges and hinder an organization’s effectiveness
in several ways:
1. Institutionalization
o The organization becomes more about maintaining itself than achieving its
original goals.
o Unquestioned habits and behaviors can stifle innovation.

2. Barriers to Change
 o A strong culture can resist change, making it harder to adapt in dynamic
environments.
o Shared values that once aligned with success may no longer be effective as the
market evolves.
3. Barriers to Diversity
o A strong culture can pressure new employees to conform, reducing the benefits of
diverse perspectives.
o If the culture condones bias or insensitivity, it undermines diversity efforts.

4. Reinforcing Dysfunctions
o If the culture is built around negative values, such as low job satisfaction or high
turnover, these issues can perpetuate themselves.
o Dysfunctional management systems and toxic workplace attitudes can amplify
these problems.
5. Barriers to Mergers and Acquisitions
o Cultural incompatibility is a major reason mergers fail.

o Misaligned cultures between merging organizations can create friction, as seen in

the AOL-Time Warner merger, which led to significant financial losses.

Examples of Culture as an Asset vs. Liability

1. Asset:
o ChildNet transformed its grim culture into a collaborative and innovative one,
leading to better employee morale and organizational performance.
o Alexion Pharmaceuticals fosters innovation with a caring culture, developing
life-saving medicines even under challenging conditions.
2. Liability:
o Dish Network has achieved financial success despite a toxic micromanaging
culture, which has led to poor employee satisfaction and retention.
o Hewlett-Packard (HP) faced market decline due to dysfunctional management
and a disengaged workforce caused by cultural misalignment.
3. HOW ORGANIZATIONAL CULTURE IS CREATED AND SUSTAINED
Creation of Culture
The culture of an organization is shaped by its founders, who influence it in several key ways:
1. Vision and Values: Founders have a clear vision of what the organization should stand
for, and this is often embedded in the company’s early practices.
o Example: Richard Branson’s adventurous and unconventional personality is
mirrored in Virgin Group’s culture.
2. Selective Hiring: Founders hire individuals who align with their values and vision,
creating a team with similar beliefs and attitudes.
3. Socialization: Founders actively instill their way of thinking and acting in employees.
4. Behavior Modeling: Founders’ behaviors set the tone, encouraging employees to
emulate their values and actions.
When the organization achieves success, the founders' philosophies and approaches become
institutionalized in its culture.

Sustaining Culture
Once a culture is established, it is maintained through consistent practices and reinforcement
mechanisms, which include:
1. Selection Practices
o The hiring process identifies individuals who share the organization’s core values,
ensuring alignment.
o Example: W.L. Gore’s team-based interviews ensure candidates can adapt to its
collaborative and flexible work culture.
2. Actions of Top Management
o Leadership behaviors communicate what is valued and expected, setting standards
for decision-making, rewards, and conduct.
o Example: Wegmans’ leadership prioritizes employee satisfaction and loyalty,
reflected in above-average pay and educational scholarships.
3. Socialization
o Socialization helps new employees adapt to the culture through a three-stage
process:
 1. Prearrival Stage: Employees form expectations before joining.
2. Encounter Stage: New employees compare their expectations with
reality.
3. Metamorphosis Stage: Employees adjust and align with the
organizational culture.
o Example: Booz Allen Hamilton begins onboarding before new hires start,
providing resources to understand the culture and connecting them with mentors.

Mechanisms to Reinforce Culture

1. Onboarding Programs: Personalized orientation sessions, peer coaching, and immediate
task assignments help integrate new employees.
o Example: Facebook and Google use onboarding to ensure alignment with their
innovative and collaborative cultures.
2. Reward and Promotion Systems: Employees who exemplify the culture are rewarded,
while those who do not may face consequences, reinforcing desired behaviors.
3. Institutional Practices: Organizations can choose between:
o Formal Practices: Focus on conformity and consistency, common in fields like
law enforcement.
o Informal Practices: Encourage individuality and creativity, used in industries
like advertising and filmmaking.
4. HOW CULTURE IS TRANSMITTED TO EMPLOYEES
Organizational culture is passed down through various forms that convey values, norms, and
expectations. Here’s how it happens:

1. Stories
Stories are powerful narratives about the organization’s history and founders that help reinforce
its values. They link the past to the present and justify current practices.
 Example: At Nike, stories about co-founder Bill Bowerman using a waffle iron to
innovate running shoes emphasize a culture of creativity and innovation.
 Lesson: These stories often highlight success, rule-breaking, or resilience to inspire
employees and align them with the organization’s mission.
2. Rituals
Rituals are repetitive activities or traditions that reinforce core values and organizational
priorities.
 Example:
o Kimpton Hotels has a "Housekeeping Olympics" to celebrate and support their
service-oriented culture.
o United Entertainment Group schedules overnight work sessions to spark
creativity by disrupting normal routines.
 Lesson: Rituals bring employees together and create shared experiences that embody
cultural values.

3. Material Symbols
Material symbols are physical aspects of the workplace that convey what is valued within the
organization.
 Examples:
o Google provides casual and fun perks like bocce courts and nap pods, reflecting a
culture of creativity and employee well-being.
o Dynegy has an open-office setup to emphasize equality and openness.

o Threadless hosts meetings in quirky spaces, like an Airstream camper, to

encourage creativity.
 Lesson: Office design, perks, and even dress codes can communicate whether a company
values hierarchy, equality, creativity, or tradition.

4. Language
Organizations develop unique terminology, acronyms, and jargon to help employees feel
connected and integrated into the culture.
 Example:
o Employees at a tech company may refer to specific tools or projects with
acronyms that new hires need to learn.
 o The use of insider language unites employees and fosters a sense of belonging.

 Lesson: Mastery of this language signifies acceptance and alignment with the culture.
Challenges in Multicultural Organizations:
When organizations operate globally, cultural differences can create challenges. Here are some
examples specific to Western vs. Vietnamese culture (from your document):
1. Decision-Making Styles:
o Western employees may act independently and make quick decisions.

o Vietnamese employees often await instructions from superiors.

o Solution: Training programs that encourage decision-making and initiative-

taking.
2. Communication Styles:
o Western cultures favor direct communication, while Vietnamese prefer subtlety.

o Problem: Misunderstandings and frustration.

o Solution: Sensitivity training for expatriates and cultural awareness workshops.

3. Reward Systems:
o Western cultures reward performance; Vietnamese often prioritize fairness and
relationships.
o Problem: Employees may feel undervalued or misaligned with company goals.

o Solution: A mix of performance-based rewards and recognition for teamwork.

Adapting Organizational Culture to Change:

In today’s globalized and digital world, organizations must have adaptive cultures. A strong but
flexible culture allows companies to:
 Embrace new technologies (e.g., AI integration).
 Handle diverse workforces with varying cultural expectations.
 Compete in rapidly changing markets.