Chapter 4

Organizational Culture
 Learning Goals
• Discuss the concept of organizational culture
• Understand the effect of organizational
culture on you as an individual
• Describe the different levels at which we
experience an organization's culture
• Discuss the functions and dysfunctions of
organizational culture
 Learning Goals (Cont.)
• Diagnose an organization's culture
• Understand the relationship between
organizational culture and organizational
performance
• Explain the issues involved in creating,
maintaining, and changing organizational
culture
 Chapter Overview
• Introduction
• Levels of Organizational Culture
• Functions of Organizational Culture
• Dysfunctions of Organizational Culture
• Diagnosing Organizational Culture
 Chapter Overview (Cont.)
• Organizational Culture and Organizational
Performance
• Creating, Maintaining, and Changing
Organizational Culture
• International Aspects of Organizational
Culture
• Ethical Issues in Organizational Culture
 Introduction
• Organizational culture: an ideology and a
set of values that guide the behavior of
organization members
• Includes ceremonies, rituals, heroes, and
scoundrels in the organization’s history
• Defines the content of what a new
employee needs to learn to become an
accepted member of an organization
 Introduction (Cont.)
• Key aspects of organizational culture
– Sharing of values
– Structuring of experiences
– Different sets of values can coexist
– Although values differ, members of each group
can share a set of values
– If you have traveled abroad, you have already
experienced what it is like to enter a new,
different, and "foreign" culture
 Introduction (Cont.)
• All human systems that have endured for
some time, and whose members have a
shared history, develop a culture
• Specific content of an organization's culture
develops from the experiences of a group
– Adapting to its external environment
– Building a system of internal coordination
 Introduction (Cont.)
• Each human system within which you
interact has a culture: family, college or
university, employer, sororities, fraternities
• Can make different and conflicting
demands on you
 Introduction (Cont.)
• Divides into multiple subcultures
– Departments, divisions
– Different operating locations
– Occupational groups
– Workforce diversity
– Global environment

Jargon, different social backgrounds, different local cultures

 Introduction (Cont.)
Organizational culture and organizational socialization

Organizational Organizational
Culture Socialization
(Chapter 4) (Chapter 6)

What a new The process by which

employee needs a new employee
to learn. learns the culture.
 Introduction (Cont.)
Definition of organizational culture
"[A]ny organizational culture consists broadly of long-standing rules of
thumb, a somewhat special language, an ideology that helps edit a
member's everyday experience, shared standards of relevance as to
the critical aspects of the work that is being accomplished, matter-of-
fact prejudices, models for social etiquette and demeanor, certain
customs and rituals suggestive of how members are to relate to
colleagues, subordinates, superiors, and outsiders, and . . . some rather
plain 'horse sense' regarding what is appropriate and 'smart' behavior
within the organization and what is not."

Organizational culture is both the glue

holding the system together and the motor
moving it toward its goals.
 Levels of
Organizational Culture (Cont.)
• Artifacts: behavior, language, architecture,
attire, décor. High visibility
• Values: guides to behavior. Hard for
newcomer to see, but can learn them
– Espoused values: what people say
– In-use values: what people do
• Basic assumptions: like values but often
unconscious to veteran members
 Levels of
Organizational Culture (Cont.)
Artifacts/physical High visibility
characteristics

Values
(Espoused;
In-use)

Basic
assumptions Low visibility

Text book figure 4.1

 Functions of
Organizational Culture (Cont.)
• Adaptation to the organization’s external
environment
– Consensus about mission
– Identify with the organization
– Clear vision
– Consistent image to markets, customers, clients
 Functions of
Organizational Culture (Cont.)
• Coordination of internal systems and
processes
– Measurement of results
– Rewards and sanctions
– Common language
– Social relationships
– Status relationships (stratification)
– Ideology: heroes, folklore
 Dysfunctions of
Organizational Culture
• “Culture constrains strategy”
• Merging cultures: culture clash
– Upjohn: Kalamazoo, Michigan
– Pharmacia: Sweden
• Resistance to change: holding to existing
values
• Conflict among subcultures
• Communication failures: subculture jargon
 Diagnosing
Organizational Culture
Visible artifacts

Physical Public
Behavior documents
characteristics

See textbook Table 4.1 infer

Invisible artifacts

Values Basic
assumptions
 Diagnosing
Organizational Culture (Cont.)
• Two perspectives
– An outsider considering a job with an
organization
– An insider after you have joined an
organization
– Use the Organizational Culture Diagnosis
Worksheet, text book Table 4.1
 Diagnosing
Organizational Culture (Cont.)
• As an outsider
– Physical characteristics of organization: site
visit or photographs
– Read about the organization: annual reports,
press accounts, Web sites
– Site visit: How are you treated?
– Talk to present employees
 Diagnosing
Organizational Culture (Cont.)
• As an insider
– Stories and anecdotes
– Organization heroes
– Basis of promotions and pay increases
– Observe behavior in meetings: status
differences
– Focus of meetings: what is discussed?
 Organizational Culture and
Organizational Performance
• Theoretical and empirical research shows a
relationship between organizational culture
and organizational performance
• Different theoretical views of the culture-
performance link
 Organizational Culture and
Organizational Performance
(Cont.)
• Organizations have a competitive advantage
when their culture is valuable, rare, and not
easily imitated
– Value: guidance it gives to direct people's
behavior toward higher performance
– Rarity: features of a culture not common
among competing organizations
 Organizational Culture and
Organizational Performance
(Cont.)
• Competitive advantage (cont.)
– Not easily imitated: hard for competitors to
change their cultures to get the same
advantages
– Difficulty of imitation follows from the rare
features of some cultures and the difficulties
managers have when trying to change a culture
 Organizational Culture and
Organizational Performance
(Cont.)
• The environment-culture congruence
theoretical view
– Organizations facing high complexity and high
ambiguity require a cohesive culture: widely
shared values and basic assumptions
– Organizations facing low uncertainty and low
complexity can use more formal control
processes such as organization policies, rules,
and procedures
 Organizational Culture and
Organizational Performance
(Cont.)
• Trait theory of organizational culture. Four
traits
– Involvement: degree of participation of
employees in organizational decisions
– Consistency: degree of agreement among
organization members about important values
and basic assumptions
 Organizational Culture and
Organizational Performance
(Cont.)
• Trait theory (cont.)
– Adaptability: ability of the organization to
respond to external changes with internal
changes
– Mission: core purposes of the organization that
keep members focused on what is important
 Organizational Culture and
Organizational Performance
(Cont.)
• Some empirical research results
– Involvement and adaptability related to
organizational growth
– Consistency and mission traits related to
profitability
– Strong, widely dispersed cultures help high risk
organizations maintain high reliability. Nuclear
submarines, nuclear aircraft carriers

See text book for more detail.

 Creating, Maintaining, and
Changing Organizational Culture
• Managers face three decisions about their
organization's culture
– Create a completely new culture, usually in a
separate work unit or in a new organization
– Maintain existing organizational culture
– They believe it is right for their environments
– Change their culture to a new set of values,
basic assumptions, and ideologies
 Creating, Maintaining, and
Changing Organizational Culture
(Cont.)
• Creating organizational culture
– A deliberate effort to build a specific type of
organizational culture
– Happens when an entrepreneur forms an
organization to pursue a vision or when
managers of an existing organization form a
new operating unit
 Creating, Maintaining, and
Changing Organizational Culture
(Cont.)
• Creating organizational culture (cont.)
– The new culture needs an ideology that is
understandable, convincing, and widely
discussed
– Ideology is a key tool for getting commitment
to the vision from organization members
 Creating, Maintaining, and
Changing Organizational Culture
(Cont.)
• Maintaining organizational culture
– A dilemma
• Keep successful values of the past
• Question whether those values are right for the
environment the organization now faces
– Requires managers to be aware of what
organizational culture is and how it manifests
itself in their organization
 Creating, Maintaining, and
Changing Organizational Culture
(Cont.)
• Maintaining organizational culture (cont.)
– Requires knowing the existing artifacts, values,
and ideologies
– Can become familiar with their culture by doing
the culture diagnosis described earlier
– Managers want to maintain commitment of
organization members to key parts of that culture
– Strengthen key values so they are widely held
throughout the organization
 Creating, Maintaining, and
Changing Organizational Culture
(Cont.)
• Maintaining organizational culture (cont.)
– Keep the good part of the organization's culture
– Requires managers to carefully examine new
practices for consistency with their culture
– Example: introducing drug testing in an
organizational culture built on trust
 Creating, Maintaining, and
Changing Organizational Culture
(Cont.)
• Changing organizational culture
– Breaking from some features of the old culture
and creating new features
– Size and depth of change varies depending on
degree of difference between the desired new
culture and the old
– The change reaches deep into the cultural fabric
of the organization over many years

Changing the culture of an organization that has a

homogeneous workforce to one that values diversity
 Creating, Maintaining, and
Changing Organizational Culture
(Cont.)
• Changing organizational culture (cont.)
– Successfully managing the change process
• Choosing the right time for change
• Act when the times seem right for culture change
• Situation clearly demands change

Pursue favorable new markets.

The organization is performing poorly and faces
clear threats to its viability.
 Creating, Maintaining, and
Changing Organizational Culture
(Cont.)
• Changing organizational culture (cont.)
– Successfully managing the change process
(cont.)
• Managers should not assume everyone in the
organization will share their view of the need to
change
• Senior executives play leadership roles
• Managers move forward with confidence,
persistence, and optimism about the new culture
 Creating, Maintaining, and
Changing Organizational Culture
(Cont.)
• Changing organizational culture (cont.)
– Successfully managing the change process
(cont.)
• The change effort focuses on many aspects of the
organization's culture: ideology, values, symbols
• Managers should know the roots of their
organization's culture and maintain some continuity
with the past
 Creating, Maintaining, and
Changing Organizational Culture
(Cont.)
• Changing organizational culture (cont.)
– Successfully managing the change process
(cont.)
• Example: FBI perceives itself as the world’s finest
law-enforcement agency. Move to Quality
Management is consistent with that view
• This approach also lets managers say what will not
change as a way of offering familiarity and security
to veteran employees
 International Aspects of
Organizational Culture
• Effects of national cultures on multinational
organizations
– Local cultures can shape the subcultures of
globally dispersed units
– National culture, local business norms, and the
needs of local customers can affect the
subcultures of such units
 International Aspects of
Organizational Culture (Cont.)
• Effects of national cultures (cont.)
– Example: the multinational insurance firm AIG
follows local practices in collecting monthly
premiums
• At each insured’s home in Taiwan
• Electronic bank transfers in Hong Kong
 International Aspects of
Organizational Culture (Cont.)
• Multinational organizations
– Employees from many countries working side
by side
– They do not shed their national cultural values
when they come to work
 International Aspects of
Organizational Culture (Cont.)
• Multinational organizations (cont.)
– Strong chance of subcultures forming along
national lines
– Research evidence suggests that instead of
masking local differences with organizational
culture, multinational cultures may increase ties
people have to their native cultures
 International Aspects of
Organizational Culture (Cont.)
• Multinational cultural diversity
– Managers may refuse to recognize cultural
differences and insist on the home culture way
of doing business
– The cultural synergy view sees multinational
cultural diversity as a resource
 International Aspects of
Organizational Culture (Cont.)
• Multinational cultural diversity (cont.)
– Use combinations of cultural differences for the
strategic advantage of the organization
– Get better product ideas for culturally diverse
markets and better communication with
culturally diverse customers
 Ethical Issues in
Organizational Culture
• What moral action should managers take in
managing the cultures of their organiza-
tions?
• An analysis with different ethical theories
gives different answers
 Ethical Issues in
Organizational Culture (Cont.)
• Utilitarian analysis
– The moral action is the one that gives the
greatest net benefit to the greatest number of
people
– Cultural values supporting such action are
morally correct
– Managers are morally correct in changing or
creating cultures in that direction
 Ethical Issues in
Organizational Culture (Cont.)
• Rights-based analysis
– People must have the right to make free and
informed choices about what affects them
– Fully disclose values and basic assumptions to
new employees
 Ethical Issues in
Organizational Culture (Cont.)
• Rights-based analysis (cont.)
– Fully inform employees about proposed
changes to the organization's culture
– Managers can have difficulty honoring a rights-
based ethic because veteran employees often
are not consciously aware of basic assumptions
 Ethical Issues in
Organizational Culture (Cont.)
• Justice analysis
– A culture is unethical if it prevents employees
from freely voicing their opinions
– A culture is unethical if all employee groups do
not have an equal chance for advancement
 Ethical Issues in
Organizational Culture (Cont.)
• A moral dimension of organizational
culture
– Require an ethical dialogue in management
decision processes
– Make ethical dialogue an explicit part of the
organization's ideology
– Goal: The discussion of moral issues in
decisions is a comfortable, desired, and
required part of every manager's job