Chapter 3
Organisational culture in business
June Session
Defining organisational culture
Components: Who follow the culture? Especially Managers and
Employees.
Influences: What to be followed?
Organisation culture:The proper way to work/behave within an
organisation.
‘The specific collection of values and norms that are shared by people and
groups in an organisation and that control the way they interact with each
other and with stakeholders outside the organisation.’ Hill & Jones
‘The way we do things around here’. Handy
Ultimately, culture means the sum total of all the beliefs, attitudes, norms
and customs that prevail within an organisation.
Each organisation will have its own distinctive cultures, and behaviour
acceptable in one organisational culture may be inappropriate in another.
For example, some companies will expect staff to undertake additional
work in their own time, while other organisations will not(bank v
government offices).
Also cultures develop over time or can change instantly as a result of a
single major event, e.g. death of company founder, threatened takeover,
etc.
Components of culture
There are three key elements to any organisation’s culture.
A set of Norms of behaviour(Rules):Norms guide people’s
behaviour, suggesting what is or is not appropriate (the ‘done
thing’) – e.g. informal dress codes.
Symbols or symbolic action –A symbol is a sign that
represents something. e.g. rituals such as buying the office a
cake on your birthday/ Workers in a shop all have to wear
name badges.
Shared values and beliefs underlie the culture by identifying
what is important – e.g. a belief in the importance of people
as individuals(How to behave or deal with people/Treat all
office visitor equally ).
The main factors that shape culture
Size – How large is the organisation – in terms of
turnover(sales revenue), physical size, employee numbers?
Technology – How technologically advanced is the
organisation – either in terms of its product, or its
productive processes?
Diversity – How diverse is the company – either in terms of
product range(How many products company is making),
geographical spread or cultural make-up of its
stakeholders?
Age – How old is the business or the managers of the
business – do its strategic level decision makers have
experience to draw upon?
History – What worked in the past? Do decision
makers have past successes to draw upon; are they
willing to learn from their mistakes?
Ownership – Is the organisation owned by a sole
trader? Are there a small number of institutional
shareholders or are there large numbers of small
shareholders?
Institutional shareholders (also known
as institutional investors) are
organizations that invest large sums of
money into companies, typically by
purchasing stocks, bonds, or other
securities.Examples: Pension Funds,
Other influences on culture
The degree of individual initiative – is it encouraged or are
decisions always referred upwards?
The degree of risk tolerance – are managers only allowed to
follow low-risk strategies?
Clarity of direction – is there a clear focus; are these clear
objectives and performance expectations?
The degree of integration between groups (wants to work
together or not)– are different units encouraged to work
together? Are management aloof (not familiar)or
approachable; is communication clear to lower level staff?
The reward system – are individuals rewarded for
succeeding, i.e. are rewards based on performance criteria?
Conflict tolerance – are employees encouraged to air
grievances(complaint)?
Communication patterns – is there a formal
hierarchy(Formal structure) or an informal network?
Formalisation of clothing and office layout – are there strict
rules over this?
The kind of people employed (graduates, young, old, etc.).
Writers on culture
There are three writers you need to have knowledge of:
Schein, Handy and Hofstede
Schein
Schein argues that the first leaders of a company create its
culture. Future leaders will only be selected if they support
this original culture. Thus the link between culture and
leadership is very strong and it can be very difficult to change.
Schein further commented that it if leaders are to lead, it is
essential that they understand the culture of the
organisation. In order to try and define culture, Schein
described three levels:
Artefacts – these are the aspects of culture that can be
easily seen, e.g. the way that people dress, Established
ways of speaking with other colleagues, A coffee bar for
employees to use throughout the day, The type of furniture
used in the office.
Espoused values(give a detailed explanation of something)
– these are the strategies and goals of an organisation,
including company slogans/Catchphrases(memorable
phrase or expression)
Basic assumptions and values – these are difficult to
identify as they are unseen, and exist mainly at the
unconscious level.
New employees find the last level of culture the most difficult
to understand, and lack of understanding of the basic values
is one of the main contributors to failure when trying to
implement change.
How do espoused values differ from basic
underlying assumptions in Schein’s Model?
For example,a company has clearly states the it's
mission,objectives & strategies which are
espounded values. The company has not spoken
about its goals and strategies which are basic
assumptions and values.
Hence, basic assumptions and values are
unspoken and espounded values are spoken.
H company is analysing its corporate culture. It has
found that many of its staff believe that the main
purpose of the company is to simply earn as much
profit as possible and therefore they are failing to
provide high quality service to customers.
Handy
Handy popularised four cultural types.
Power culture (denoted by the Greek god Zeus) –(All the
power is in the hands of one person and staff are going to
follow his/her order). Here there is one major source of
power and stronger influence. For example, in a small
owner managed business the owner may strive(try) to
maintain absolute control over subordinates. There may be
few procedures and rules of a formal kind as staff take
direction directly from the owner(less formal procedure
and rules).
Note that this is often found in organisations with an
entrepreneurial structure(Family-run business or
entrepreneurial firm).
Characteristics:Informal communication, Dominant
individual/group, Small entity
Role culture (denoted by the Greek god Apollo) –All
individuals/staff have a formal role and follow established
rules and procedures.This would be seen in a bureaucratic
organisation, where the structure determines the authority
and responsibility of individuals and there is a strong
emphasis on hierarchy and status.
This tends to be most effective in stable environments, where
the work performed by employees(Work is repetative/simple)
rarely changes.
Characteristics:
• Formal communication
• Strict rules and procedure
• Predictable
• Compliance is rewarded.
Example:Civil service department
Task culture (denoted by the Greek god Athena) –
Focus on getting the job done.
The emphasis here is on achieving the particular task at
hand and staff may need to be flexible to ensure deadlines
are met. People therefore describe their positions in terms
of the results they are achieving. Nothing is allowed to get
in the way of task accomplishment. This is best seen in
project teams that exist for a specific task.
Characteristics:
• Focus on output and results.
• Performance-based rewards.
• Development of individual skills(Pressure handling
skills,time management skills).
Example:Management consultancy firm
Person culture (denoted by the Greek god
Dionysius) –
The interests of several key individuals/key
employee are prioritized/satisfied.
This is characterised by the fact it exists to
satisfy the requirements of the particular
individual(s) involved in the organisation. The
person culture is to be found in a small, highly
participatory organisation where individuals
undertake all the duties themselves, for example,
a barrister in chambers(barristers' chambers are
the rooms used by a barrister or a group of
barristers). It is found in an organisation whose
purpose is to serve the interests of the individuals
within it. Such organisations depend on the talent
of the individuals.
Characteristics:
Hofstede
Hofstede looked for national differences between over
100,000 of IBM’s employees in different parts of the world, in
an attempt to find aspects of culture that might influence
business behaviour.(Examined difference between culture in
different country).He found four traits or ‘cultural
dimensions’:
Individualism (vs. collectivism)-Wants to work in group or
self
High individualism indicates that staff expect to be assessed
on their own achievements and performance. (Judged on the
basis of his/her performance).
Low individualism (or collectivism) would mean that staff
expect to be assessed on a group basis and prefer the
organisation to set group goals.(judged on the basis of group
performance).
Uncertainty avoidance (UA) index-Wants to take risks or
not
High UA cultures will not like to act outside their normal job
descriptions or roles(take less risks). They prefer to be
directed by management and like formal rules and
guidelines. (wants to work in comfort zone).
Low UA cultures will be prepared to take more risks and go
beyond their ‘comfort zones’. They tend to dislike
bureaucracy as it stifles initiative.
Power distance (PD) index -Employees wants to take the
power in his hands or not and involves in decision making
or not
High PD cultures expect to answer to powerful managers and
do not expect to have any democratic input into decisions
that are made.
Low PD cultures expect to be involved with the decision-
making process and want less direct supervision by
managers(wants less supervision from manager).
Masculinity (vs. femininity) – Whether wants to focus
on status, pay rises or on work life balances, quality of
life and relationships at works.
Employees in masculine cultures can be motivated by
offering them job titles, increased status and pay rises, as
this is what the culture values(ready to work if given
overtime payments/promotion).
Staff in feminine cultures will be motivated more by
work life balance, quality of life and relationships at
work(Eg: wants to go home rather than working late for
money).
More recently, two additional dimensions have been added to
Hofstede’s model:
Long-term orientation (vs. short-term orientation) –(How much
employee wants to stay in the organisation?) societies with a long-
term orientation focus on future rewards, with a particular focus on
saving, persistence(tolerate) and the ability to adapt to changing
circumstances.
Short-term oriented cultures focus on past and present concerns,
such as respect for tradition, social/family obligations and saving
‘face’. Saving face:to avoid humiliation or embarrassment,preserve
dignity or restore one’s reputation.
Indulgence(freedom) vs. restraint(stop/prevent) – indulgent
societies allow relatively free gratification(satisfication) of basic and
natural human drives related to enjoying life and having fun. More
restrained societies suppress gratification of needs and regulate it
by means of strict social norms.
The informal organization(group) and its
relationship with the formal organisation
The informal organization(group) is the network of
relationships that exist within an organisation.
This network evolves over time and tends to arise through
common interests and friendships between members of staff.
These relationships are often across divisions.
An informal organisation will be present to some degree
within all formal organisations.
Think of the informal organisation as being an aspect of the
organisation’s culture.
Advantages and disadvantages of
informal organisation
Advantages Disadvantages
better motivation inefficient organisations(Working
(friendship between less talking more)
opposition to change can be
member of staff)
intensified
better communication(clear
the ‘grapevine effect’, where
communication between potentially inaccurate information
friends) or rumours spread through the
provision of social informal organisation(not sure
which information is correct and
control(can share co’s which is not)
objective and each other Conformity(productive staff might
feelings.) become less productive in
inefficient group)
The informal organisation can either enhance or hold
back the business. Managers need to be aware of the
informal structure and ensure that they:
adapt the formal structure to complement the
informal one
maintain a looser formal structure so that the
informal structure can thrive.
at the very least take account of the informal
structure in decision making.
