Unit 2.

5 - Organisational (corporate) culture -HL

Organizational culture (AO1)

The term corporate culture (or organizational culture) refers to an organization’s set of core values and beliefs. It shapes the firm’s
attitudes and norms. The term was coined by T. Deal and A. Kennedy (1982) who referred to the "cultural norm" of an organization
as ‘the way things are done around here’.
The success to a business depends on many factors, including its organizational culture. For example, a clear and consistent
organizational culture helps to create cohesiveness and purpose. This helps to minimize misunderstandings and
miscommunications, thereby reducing the chances of conflict in the workplace.
Organizational culture is influenced by numerous factors, including:
 The size of the organization – larger organizations tend to have more formal policies, procedures and bureaucratic processes.
 Traditions and values of the organization – for example, a small charity will have a different organizational culture from a
large multinational fast-food restaurant chain.
 Attitudes and traits of senior managers – for example, organizational culture is shaped by the personalities and traits of senior
managers (and hence their management and leadership style), such as their approach to risk-taking and risk management.
As state by Bill Marklein, an expert in emotional intelligence and renowned author, "Culture is how employees' hearts and
stomachs feel about Monday morning on Sunday night."
 Societal and cultural norms in the region or country – for example, some countries (such as in Scandinavia) have greater
gender equality so are more receptive to female leadership and female participation in the labour force. Societal norms also
shape business ethics and corporate social responsibilities of business organization.

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Although organizational culture is established over a long period of time, it can be disrupted by radical changes to the firm. For
example, a change in the senior leadership team or a takeover of the company can alter the organizational culture in a short period
of time.
Types of organizational culture (HL only) (AO2)

There are several factors that affect the organizational culture of a business. Elements of organizational culture that impact
different types of culture include:

 Vision: The overall purpose of an organization’s existence is a major element of its corporate culture. A strong corporate culture
must be consistent with the organization’s vision, ensuring employees and managers understand the strategic direction of the
business.
 Values: A firm’s values statement specifies its beliefs and moral standards. These are essential elements of its organizational
culture. Values guide the firm to towards its overall vision.
 Practices: What a firm does, and how it goes about this, is an element of its organizational culture. Approaches to time
management and dress code are examples of practices that influence organizational culture. Its behaviour should mirror
putting its values statement into practice. For example, an organization that claims to be supportive of sustainable practices
must be environmentally friendly in its operations.
 People: This element of organizational culture refers to all aspects of human resources in an organization, e.g. the approach
used to hire (recruit) employees, attitudes towards staff training and development, approaches to teamwork, and protocol for
dismissing workers.
 Traditions: Each organization has its own history and customs, signifying ‘the way things are done around here’. The Walt
Disney Company, for example, prides itself on making magical memories for generations of children around the world. The
IBO has a tradition of building a better world through a framework of international education. Celebrations and codes of
conduct are also part of a firm’s traditions.
 Leadership styles: The way in which an organization is led is a major element of organizational culture. For example, employees
at Google are empowered to run their own projects and encouraged to make mistakes (just not too many that are costly!) By
contrast, the organizational culture in the army or military would be very different, as a different leadership style is needed.

Advantages of a strong and cohesive organizational culture include:

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  Helps to create unity and purpose.
 Helps to lessen misunderstandings and miscommunications, thus minimising the chances of conflict in the workplace.
 Ultimately, a pleasant working environment due to a cohesive and harmonious culture leads to improve levels of motivation,
higher labour productivity and greater staff retention.
A culture gap occurs if there is a difference between an organization’s desired culture and its actual culture. This can easily cause a
weak organizational culture, which has disadvantages that could lead to:
 A lack of clarity for workers, which can lead to disharmony and misunderstandings.
 Negativity and conflict within the workplace.
 Lower productivity and profitability.

Charles Handy's “Gods of management” (HL only) (AO2)

A popular model to describe the various cultures within an organization is Professor Charles Handy’s Gods of Management: The
Changing Work of Organizations (1978). Using the Greek gods Zeus, Apollo, Athena, and Dionysus, Charles Handy demonstrated
four distinct types of organizational cultures that can exist within all businesses: power, role, task, and person cultures.
Zeus - Power culture
Zeus was the first of the Greek gods, and extremely powerful as the god of thunder and lightening. In a power culture (also known
as a club culture), an individual (such as the founder or a figurehead like Zeus), or a small group of senior staff, makes decisions
for the organisation. Power and authority are concentrated in the hands of the elite few at the top of the organization, who strive to
maintain absolute control over their employees, i.e. leaders are autocratic. Communication is also highly centralized, so procedures
and formal rules do not matter so much as decisions are made quickly, without bureaucratic processes to slow things down.
Organizations with a power culture are driven by results, which act as the best indicator of the value each and every employee. Due
to centralized decision-making, organizations with a power culture are relatively cheap to operate, and decisions can be made quickly.
However, a power culture can have negative effects on staff morale, and hence productivity levels. It can also limit the level of staff
loyalty, thus cause higher rates of labour turnover.
Apollo - Role culture
Apollo was the son of Zeus and had many roles as a Greek god, including archery, art, knowledge, light, medicine, music,
poetry, and sun. In a role culture, operations and organizational norms are underpinned by formal structures and procedures. Clear
policies and hierarchies exist in order to facilitate the smooth running of the business. Workers have clearly defined roles and
responsibilities, and operate within clear rules and guidelines.

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This culture is common in bureaucratic organizations with tall organizational structures and long chains of command, e.g. the civil
service, public sector organizations, tax agencies, the military, local government, and central government. Other examples
include colleges and universities, motor insurance firms, health institutions, and accounting firms. A worker’s responsibilities and
authority are determined by their respective level in the organizational hierarchy.

Organizations with a role culture benefit from clarity of direction, clear policies and procedures, and stability. However, a drawback
of a role culture is that there is not much initiative among the employees, especially as managers look at the past in order to predict
the future. Hence, such organizations are not well prepared to respond to radical changes in the external business environment.
Athena - Task culture
Athena was the Greek goddess of important tasks such as strategic warfare, wisdom, law and justice, and civilization. In a task
culture, teams of experts are empowered to complete a project or tackle a problem with their particular skills. The role of senior
managers in such a culture is to ensure the team consists of the best mix of people, and that they are supported to achieve their
objectives. The success of organizations with a task culture depends largely on group dynamics, team cohesiveness, and
interpersonal skills in the workplace.
An Athenian (task) culture is appropriate in dynamic, creative, innovative and forward-looking organizations. Examples include
management consultancy firms and ICT companies.
However, this type of culture can be expensive to maintain (paying expert teams to work on particular tasks). Hiring, remunerating
and retaining industry experts is not always feasible or sustainable. Over time, the organizational culture is likely to develop routines
and common practices, i.e. it is likely to adopt a role culture.
Dionysus - Person culture
Also the son of Zeus, Dionysus was the Greek son of wine, winemaking, and theatre. In a Dionysian person culture, people regard
themselves or their skills set as being more important than the organization itself. Effectively, this means the organization only exists
in order to help individuals to achieve their personal and professional goals. In a person culture (sometimes referred to as existential
culture), the business values each person as an expert, and relies on their skills and experiences for the organization to succeed and
thrive.
The organization employs a cluster of individuals with similar skills, qualifications, talents, and expertise. Examples include private
health professionals in a health clinic, general practitioners (GPs) in a surgery, accountants in an auditor’s firm, management
consultants, and solicitors in a law firm.
Similar to organizations with a task culture, organizations with a person culture also offer very generous financial and non-financial
remuneration packages to recruit and retain staff. However, as a person culture depends entirely on individuals (rather than teams)
to succeed, such a culture is more dominant and permanent. Apart from being an expensive model, organizations with a Dionysian
person culture often have to deal with the contrasting personalities and egos of talented individuals.

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Cultural clashes when organizations change (HL only) (AO2)

A culture clash occurs when there are wide-ranging differences in the values and views held by different individuals within an
organization, thereby causing potential conflict within the organization.

Consequences of culture clashes include:

 Reduced staff morale and self-esteem
 Lower level of motivation
 Lower labour productivity
 More cases of conflict in the workplace
 Higher absenteeism and labour turnover
 Lower profitability
Effective change management requires a good level of understanding and awareness of corporate culture as an organization grows
and evolves.
The IB Business Management syllabus specifies three reasons for culture clashes (which have different, but related, implications for
the stakeholders of an organization):
 growth
 mergers, and
 change in leadership styles.
Growth (AO3)

 When organizations grow internally (organically), there is often a disconnect between junior staff members and senior
managers in very large organizations, i.e. workers may feel 'out of touch' with senior management. This might result in the
beliefs and values of employees being different from those of senior managers, thereby leading to a culture clash.
 Growth and evolution can disrupt the existing organizational cultures, causing uncertainties and worry for employees. For
example, a new vision or mission may be formed as the firm grows or evolves, which may be met with some resistance from
the workforce. This is further complicated if the organization expands in overseas markets, where the firm needs to be aware
of and sensitive to cultural differences

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Mergers (AO2)
When organizations merge or are taken over by another company, a culture clash often results.
Inorganic growth usually results in one culture being more dominant than the other, so conflict is likely to occur (at least in the
short term). This is particularly the case when a hostile takeover occurs, against the wishes of the target company, or when the two
organizations are from vastly different regional cultures.
However, culture is difficult to measure or manage effectively, so is often overlooked. According to The Huffington Post, there is a 70
– 90 per cent change that mergers and acquisitions fail; culture clashes are a major factor behind this.

Leadership styles (AO3)

Culture can be described as the unseen and intangible aspects of an organization that influences employees and managers in the
workplace. Corporate culture is also shaped by the people within the organization. For example, in a power culture, employees have
no influence as only the senior managers or leaders have decision-making power. By contrast, organizations with a person
culture rely on individuals to influence the culture of the organization. Professor Charles Handy argued such individuals see
themselves as more important than organization itself, so have significant influence of the corporate culture.
The extent to which an individual exerts influence on the organizational culture depends on their position and level of skills or
expertise within the firm. For example, the chief executive officer (CEO) of a large multinational company is likely to exert far more
influence on organizational culture than a junior manager would.
An analogy of this is leadership in sports team. The Captain or Most Valued Player (MVP) in a team can make a huge difference in
influencing the effectiveness of the group in any team sport, such as football, basketball or ice hockey.
When leadership styles change, perhaps as a result of a new CEO being appointed or a new board of directors being elected, this
can cause a culture clash as views, approaches, and priorities may conflict. Employees, especially the longer serving members of
the workforce, can often find it difficult to adapt and conform to a different leader and the subsequent new vision for the organization.
A new leader often feels they have to prove themselves, so introduce change based on their own ideas for the organization. This
established a new culture. For example, Business Insider described Tim Cook, who took over as the CEO of Apple in August 2011,
as a Peacetime CEO, whereas Steve Jobs was described as a Wartime CEO of the company.