Definition of organization culture
Organizational culture includes an organization’s expectations, experiences, philosophy, and values that hold it together, and is expressed in its self-image, inner workings, interactions with the outside world, and future expectations. It is based on shared attitudes, beliefs, customs, and written and unwritten rules that have been developed over time and are considered valid. Also called corporate culture, it’s shown in
(1) The ways the organization conducts its business, treats its employees, customers, and the wider community,
(2) The extent to which freedom is allowed in decision making, developing new ideas, and personal expression,
(3) How power and information flow through its hierarchy, and
(4) How committed employees are towards collective objectives.
It affects the organization’s productivity and performance, and provides guidelines on customer care and service, product quality and safety, attendance and punctuality, and concern for the environment. It also extends to production-methods, marketing and advertising practices, and to new product creation. Organizational culture is unique for every organization and one of the hardest things to change. 1
- Why organization needs organization culture and what that means in practice?
If you want to provoke a vigorous debate, start a conversation on organizational culture. While there is inversely agreement that (1) it exists, and (2) that it plays a crucial role in shaping behavior in organizations, there is little consensus on what organizational culture actually is, never mind how it influences behavior and whether it is something leaders can change.
This is a problem, because without a reasonable definition (or definitions) of culture, we cannot hope to understand its connections to other key elements of the organization, such as structure and incentive systems. Nor can we develop good approaches to analyzing, preserving and transforming cultures. If we can define what organizational culture is, it gives us a handle on how to diagnose problems and even to design and develop better cultures.
“Culture is how organizations ‘do things’.” — Robbie Katanga
Culture is consistent, observable patterns of behavior in organizations. Aristotle said, “We are what we repeatedly do.” This view elevates repeated behavior or habits as the core of culture and deemphasizes what people feel, think or believe. It also focuses our attention on the forces that shape behavior in organizations, and so highlights an important question: are all those forces (including structure, processes, and incentives) “culture” or is culture simply the behavioral outputs?
“In large part, culture is a product of compensation.” — Alec Haverstick
Culture is powerfully shaped by incentives. The best predictor of what people will do is what they are incentivized to do. By incentives, we mean here the full set of incentives — monetary rewards, non-monetary rewards such as status, recognition and advancement, and sanctions — to which members of the organization are subject. But where do incentives come from? As with the previous definition, there are potential chicken-and-egg issues. Are patterns of behavior the product of incentives, or have incentives been shaped in fundamental ways by beliefs and values that underpin the culture?
“Organizational culture defines a jointly shared description of an organization from within.” — Bruce Perron
Culture is a process of “sense-making” in organizations. Sense-making has been defined as “a collaborative process of creating shared awareness and understanding out of different individuals’ perspectives and varied interests.” Note that this moves the definition of culture beyond patterns of behavior into the realm of jointly-held beliefs and interpretations about “what is.” It says that a crucial purpose of culture is to help orient its members to “reality” in ways that provide a basis for alignment of purpose and shared action.
“Organizational culture is the sum of values and rituals which serve as ‘glue’ to integrate the members of the organization.” — Richard Perrin
Culture is a carrier of meaning. Cultures provide not only a shared view of “what is” but also of “why is.” In this view, culture is about “the story” in which people in the organization are embedded, and the values and rituals that reinforce that narrative. It also focuses attention on the importance of symbols and the need to understand them — including the idiosyncratic languages used in organizations — in order to understand culture.
“Organizational culture is civilization in the workplace.” — Alan Adler
Culture is a social control system. Here the focus is the role of culture in promoting and reinforcing “right” thinking and behaving, and sanctioning “wrong” thinking and behaving. Key in this definition of culture is the idea of behavioral “norms” that must be upheld, and associated social sanctions that are imposed on those who don’t “stay within the lines.” This view also focuses attention on how the evolution of the organization shaped the culture. That is, how have the existing norms promoted the survival of the organization in the past? Note: implicit in this evolutionary view is the idea that established cultures can become impediments to survival when there are substantial environmental changes.
“Culture is the organization’s immune system.” — Michael Watkins
Culture is a form of protection that has evolved from situational pressures. It prevents “wrong thinking” and “wrong people” from entering the organization in the first place. It says that organizational culture functions much like the human immune system in preventing viruses and bacteria from taking hold and damaging the body. The problem, of course, is that organizational immune systems also can attack agents of needed change, and this has important implications for on-boarding and integrating people into organizations.
In the discussion, there were also some important observations pushing against the view of culture as something that it is unitary and static, and toward a view that cultures are multiple, overlapping, and dynamic.
“Organizational culture [is shaped by] the main culture of the society we live in, albeit with greater emphasis on particular parts of it.” — Elizabeth Skringar
Organizational culture is shaped by and overlaps with other cultures — especially the broader culture of the societies in which it operates. This observation highlights the challenges that global organizations face in establishing and maintaining a unified culture when operating in the context of multiple national, regional and local cultures. How should leaders strike the right balance between promoting “one culture” in the organization, while still allowing for influences of local cultures?
“It over simplifies the situation in large organizations to assume there is only one culture… and it’s risky for new leaders to ignore the sub-cultures.” — Rolf Winkler
The cultures of organizations are never monolithic. There are many factors that drive internal variations in the culture of business functions (e.g. finance vs. marketing) and units (e.g. a fast-moving consumer products division vs. a pharmaceuticals division of a diversified firm). A company’s history of acquisition also figures importantly in defining its culture and sub-cultures. Depending on how acquisition and integration are managed, the legacy cultures of acquired units can persist for surprisingly long periods of time.
“An organization [is] a living culture… that can adapt to the reality as fast as possible.” — Abdi Osman Jama
Finally, cultures are dynamic. They shift, incrementally and constantly, in response to external and internal changes. So, trying to assess organizational culture is complicated by the reality that you are trying to hit a moving target. But it also opens the possibility that culture change can be managed as a continuous process rather than through big shifts (often in response to crises). Likewise, it highlights the idea that a stable “destination” may never — indeed should never — be reached. The culture of the organization should always be learning and developing.2
- Examples how organization culture are implanted in companies
The term “company culture” gets tossed around a lot. It’s usually synonymous with the idea of optimizing for happiness and creativity, by shucking traditional corporate values and supporting “hands-on contributor(s)” who “embrace and drive change.” Places like Google and Zappos are renowned for their happy employees. Zappos, for an April Fool’s prank, once issued a press release claiming it was suing Disney for saying it was the happiest place on earth, which was “clearly false, deceptive, and
Confusing to the marketplace,” because that honor must be bestowed on Zappos, Therefore, the thinking goes, Zappos and Google, with its free food, optional treadmill desks (metaphor alert!) and massages, must have great company cultures.
But company culture (or organizational development, if you will) consultants have a different, more practical definition. To them a “good” culture is one that supports the company’s business strategy. So a giant company with a lot of moving pieces might need a much stricter ‘culture’ where people’s roles are defined, there isn’t as much room for innovation, and not everyone can have a voice. In contrast, a company where innovation is the heart of its growth would need a culture in which employees are free to create and try new things. Successful company culture isn’t about healthy positivity – it’s about strategy. For every Zappos and Google, with their touchy-feely workplace environments there’s an Oracle or a Microsoft, which may suck to work at but sure make a ton of money.
When those who extol the virtues of company culture sit down with a new potential client, the first thing they do is help that company hone its business goal: how it makes money, what promises it makes to its customers, and what sets it apart from other providers. Only once that’s determined can they help them build that culture (“how we do things around here”) – who they hire, how they manage, and what work values they inculcate. Consultant Sharon Dye has been doing organizational development consulting for 17 years, advising HP after its merger with Compact (a classic case study of company culture clash in tech), and she’s worked with more than 20 lesser-known startups, including Clean Fuel Connection and ITK Solutions.
Dye says one of the big mistakes startups make is thinking they’ve nailed down their business goals. One such startup that brought Dye in for culture consulting – she recalls that its name was Trazzio, a tile company in Lake Tahoe was bought by another company – wanted its tile available in Home Depot and purchased by environmentally conscious interior decorators. But there was an inherent contradiction: if a person is at an income level high enough to hire decorators, (s)he probably doesn’t shop at Home Depot. Once Trazzio conceded its tiles were expensive to manufacture, it re-imagined its company dream, marketing its products to interior decorators in California, who, it hoped, would get to know, love, and recommend its designs.
Only once a clear business goal was determined could Trazzio consider the company culture (and subsequent hiring practices). Since the goal was to get the tiles into the hands of high-income, environmentally conscious users, it invited potential buyers to its showroom and called in interior decorators. Its salesforce had to drive nice cars (because you can’t impress an interior decorator in a used Honda Civic) – which, for the cash-strapped startup meant renting a Mercedes the days representatives visited designers. It implemented free beverage service in its showroom – bottled water or wine – because it marked them as a luxury company trying to reach a luxury market.
“But try those things selling to a Home Depot vendor, they’re going to call you a snob and walk out,” says Dye, comparing the culture split that would have occurred if Trazzio had chosen a different path.
Beyond determining physical culture like what car a salesperson drives, the Trazzio business goals also informed the employee culture: who was hired and why. If the company strategy had remained needlessly broad (selling pretty, recycled glass tiles) then it might have hired anyone who was environmentally conscious. But that would have been a mistake. Once it decided to market to upscale buyers, it needed to hire a narrower sliver of environmentally conscious employees, ones not necessarily apt to be protesting, picketing, getting petitions signed and raising money for Greenpeace.
“The personality that would fit the culture is someone who could step out of a Mercedes looking like they owned it, not like they had rented it,” Dye says. Such a distinction would be different than a person it would hire to sell to vendors like Home Depot – or to go to farmer’s markets and crafts fairs to show product. In that way, the company strategy defined the culture.
For those consultants who work in the field, company culture is not about employee happiness, business perks, or relaxed managerial style. It’s about helping companies do whatever it does best. The cultural attributes are all in service to that larger strategy.
For Microsoft, company culture has to change when their business strategy changed. Bill Schneider has been working in the organizational development world – primarily with corporations – for 40 years. He’s written several articles and a book on the subject, and has advised companies ranging from Microsoft to Coors Beer. Schneider used Microsoft as an example for explaining appropriate shifts in company culture. “The culture in the beginning was: work 16 hours a day, brainstorm every possible idea, lots of experimentation…it would really permeate what they were doing.” Now, with such a large market share and established products, the company culture focuses on preserving what they’ve built, through all the things that give them a bad rap: bureaucratic leadership, policies, procedures, and rules.
Microsoft, with its $290 billion market cap, give or take a couple of billion, may be a stodgy corporate beast, but you can’t deny that it’s still a major software power.
Schneider says a leader should determine his company strategy by sitting down and asking what the company’s promise to a customer is? Is it to create the best product in the business (superiority promise)? To be the predictable, systematic service provider (certainty promise)? Or is it to help people and organizations fulfill their potential (enrichment promise)?
“People,” Schneider says, “ask me all the time: is there only just one culture? My answer is: are there 2 different customer promises in your organization? Then have them operate separately. Don’t mesh them together.”
Where Microsoft has gone astray in its corporate culture is by neglecting to instill pockets of protection. Designers and engineers need to be able to forget about the company’s stock price if they’re going to create products that could revolutionize industries and meet a superiority promise. But the salesforce or production departments can’t forget about stock price. They need to operate based on rules and structure to ensure Microsoft meets its certainty promise to shareholders.
Newish companies, too, struggle with culture. Dan Collett, a partner at consulting firm Spencer, Shenk, Capers, and Associates, which has advised more than 100 businesses, says that startup founders are so focused on getting their products to market, they don’t think about what it will take to sustain their companies as they grow. It’s a “cold shower wakeup call” when all of a sudden the startup gains traction and has to hire a workforce, get them aligned behind the product, and sustain its evolution. That’s when company culture – policies, norms, procedures, and personalities – really starts to matter for the company’s survival.
“A startup is generally somebody’s baby,” Collett says. “They get reluctant to let anybody else touch their baby, and they sub optimize their growth.”
Along with hiring practices, reward systems, and values, companies have to figure out what leadership styles best suit the products or services they produce. In April, a 50-year-old aerospace company called S&H, based in Southern California, acquired a small 20-person aerospace organization called Melkes Precision Products. S&H President David Fisher decided he needed guidance in merging the two company cultures and hired consultant Sharon Dye.
“In the beginning, we’re constantly making changes based on the needs of the clients,” Fisher says. “[Dye] helps our teams roll with the punches.” She guides management teams in using democratic, collaborative leadership’s styles or systematic top-down leadership styles depending on the needs of a particular product. The flexibility in managerial styles mattered: some aerospace parts needed to be produced quickly, on a hard deadline, to absolute specifications, and the team needed to be run strictly to make sure that happened. Others required a collaborative approach so that the team could build on each other’s’ ideas and work together to solve a problem. 3