You are on page 1of 8

Part – V : Organizational Culture

Organizational culture is a set of shared values and norms that control organizational members’
interactions with each other and with suppliers, customers, and other people outside the organization.
Organizational culture refers to the shared values, attitudes, standards, and beliefs that characterize
members of an organization and define its nature. It is rooted in an organization's goals, strategies,
structure, and approaches to labor, customers, investors, and the greater community. Culture therefore
gives organizations a sense of identity and determines through the organization’s legends, rituals, beliefs,
meanings, values, norms and language, the way in which ‘things are done around here’. An organizations’
culture encapsulates what it has been good at and what has worked in the past. These practices can often
be accepted without question by long-serving members of an organization. One of the first things a new
employee learns is some of the organization’s legends. Legends can stay with an organization and become
part of the established way of doing things. Over time the organization will develop ‘norms’ i.e.
established (normal) expected behavior patterns within the organization. A norm is defined as an
established behavior pattern that is part of a 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 is shown in;
(1) the ways the organization conducts its business, treats its employees, customers, and the wider
(2) the extent to which freedom is allowed in decision making, developing new ideas, and personal
(3) how power and information flow through its hierarchy, and
(4) how committed employees are towards collective objectives.
# Elements of Organizational Culture:
There are four major elements which play a key role in creating and managing organizational cultures.
a) Values:
Values are general criteria, standards, or principles that guide the behavior of organization members.
There are two kinds of values: terminal and instrumental. A terminal value is a desired end state or
outcome that organization members seek to achieve. Organizations might adopt any of the following
terminal values that are as guiding principles: quality, excellence, success, responsibility, profitability,
innovativeness, economy, morality etc.
An instrumental value is a desired mode of behavior. Models of behavior that organizations advocate
include working hard, respecting traditions and authority, being conservative and cautious, being creative
and courageous, being honest, taking risks, and maintaining high standards. Thus, an organization’s
culture consists of outcomes that the organization seeks to achieve (its terminal values) and the modes of
behavior the organization encourages (its instrumental values). Ideally, instrumental values help the
organization achieve its terminal values. For example, a computer company whose culture emphasizes the
terminal value of innovativeness may attain this outcome through the instrumental values of working
hard, being creative, and taking risks.
Terminal values are reflected in an organization’s mission statement and official goals, which tell
organization members and other stakeholders that the company values excellence and has high ethical
standards. So that members understand instrumental values i.e. the models of behavior that they are

- Mukesh Kumar Goit
Kantipur Valley College

newcomers must obtain information about cultural values. Their interpretation of the information influences the perceptions of others. and are constantly upgrading their skills. Organizational members learn pivotal values from an organization’s formal socialization practices and from the stories. ceremonies. or any numbers of specific behaviors that help define who this group is and what they stand for. Most successful organizations feel that these rituals and symbolic actions should be managed. The born hero is the visionary institution builder like Henry Ford. These individuals always have time to listen and provide alternative solutions to problems. and set performance standards that motivate participant achievement. and standard operating procedures that embody its instrumental values. are those the institution has made by noticing and celebrating memorable moments that occur in the day-to-day life of the organization. Socialization is the most effective process by which newcomers learn values and utilize the norms of an organization’s culture. Communication networks always keep everyone well informed about what is going on in the organization. These deeply committed staff come in early. # Transmission of Organizational Culture to its members: The ability of an organization’s culture to motivate employees and increase organizational effectiveness is directly related to the way in which members learn the organization’s values. a) Socialization: Newcomers to an organization must learn the values and norms that guide existing members’ behavior and decision making. New comers are outsiders. These can be individual actions. communication networks are important in creating an institution’s organizational culture. department actions. recognition of achievement is possible. symbolize the organization to others. d) Communication Networks: Stories or myths of heroes are transmitted by means of the communications network. Each institution has storytellers who interpret what is going on in the organization. Friday afternoon Happy Hours. Through rites and rituals. Rituals are practices that are performed regularly and with some specific purpose in mind. Thus. rules. newcomers learn values that the organization 2 . or organizational actions. Heroes are born and created. The employee of the Year Award and organization of the year are examples. Heroes perpetuate the organization’s underlying values. This network is characterized by various individuals who play a role in the culture of the organization. Some organizations have even created their own reward rituals. c) Rites and Rituals Another key aspect in creating organizational cultures is the everyday activities and celebrations that characterize the organization. Created heroes. In many organizations heroes and heroines—exemplars of core values—provide role models of what everyone should be striving for in the organizations. provide role models. To learn an organization’s culture. The concerned individuals play a key role in building and maintaining an organization’s culture through communication. on the other hand. one department may have a tradition of holiday parties.Mukesh Kumar Goit Kantipur Valley College . b) Heroes: Most successful organizations have their heroes. Through a socialization process. founder of the Ford Motor Company.expected to follow as they pursue desired end states –an organization develops specific norms. founder of Mary Kay Cosmetics. are always willing to meet with stakeholders. and organizational languages that develop informally as an organization’s culture matures. and Mary Kay Ash. For example. and only when they have learned and internalized the organization’s values and act in accordance with its rules and norms will longtime members accept them as insiders.

Following are the tactics used to socialize newcomers in the organization. each newcomer’s learning experience are unique. Informal: Formal tactics segregate newcomers from existing organizational members during the learning process. Moreover. stories shared with new employees communicate the company’s history. i) Collective vs.Mukesh Kumar Goit Kantipur Valley College . newcomers immediately receive positive social support from other organizational members and are encourage to be themselves. an individualized role orientation results when individuals are allowed and encouraged to be creative and experiment with changing norms and values so that an organization can better achieve its values. Disjunctive process requires newcomers to figure out and develop their own way of behaving. With random tactics. A story can highlight a critical event an organization faced and the organization’s response to it. newcomers learn on the job. With investiture. In this process newcomers are oriented to roles. Studying such stories can reveal the values that guide behavior. Variable: Fixed tactics give newcomers precise knowledge of timetable associated with completing each stage in the learning process. they are not told what to do. newcomers can learn new. b) Stories/Myths/Legends: Organizational stories are important to provide clues of organizational culture. appropriate responses for each situation. they are ignored and existing members withhold support. The stories usually engage employee emotions and generate employee identification with the company or the heroes of the tale. iv) Fixed vs. Variable tactics provide no certain information about when newcomers will reach a certain stage in the learning process. 3 . Disjunctive: When serial tactics are employed.e. existing organizational members act as a role models and mentors for newcomers. With individual tactics. as members of a team. v) Serial vs. ii) Formal vs. training is based on interest and needs of the individual newcomers because there is no set of sequence to the newcomers learning in the organization. The use of different sets of these tactics leads to two different role orientation: institutionalized and individualized. There are different socialization tactics that influence a newcomer’s role orientation. Individual: Collective tactics provide newcomers with common learning experiences designed to produce a standardized response to a situation. iii) Sequential vs. its values and priorities. vi) Divestiture vs. Random: Sequential tactics provide newcomers with explicit information about the sequence in which they will perform new activities or occupy new roles as they advance in an organization. or a heroic effort of a single employee illustrating the company’s values.wants them to learn. In contrast. With informal tactics. Investiture: With divestiture. An institutionalized role orientation results when individuals are taught to respond to a new context in the same way that existing organizational members respond to it. newcomers receive negative social support i. and create a bond between the new employee and the organization. Role orientation is the way in which newcomers respond to a situation. A compelling story may be a key mechanism through which managers motivate employees by giving their behavior direction and by energizing them toward a certain goal. Perhaps the most colorful and effective way in which organizations communicates their culture to new employees and organizational members is through the skillful use of stories.

Ethical values. and how they formally address one another. and the structure of the organization. for example.Mukesh Kumar Goit Kantipur Valley College . the design of the building and logo itself are symbols of organizational values. this leads to effortful working culture. d) Organizational Language: Organizational language is the discourse organizations produce to communicate with their internal and external audiences. the luxury with which they are equipped. and the rules and norms that they embody. the offices they occupy. b) Organizational Ethics: The moral values.c) Ceremonies/Rituals: Ceremonies are regular organizational activities and events that are in practice. The culture differs due to the distinct characteristics of members. Microsoft founders Bill Gates is a workaholic who still often works 18 hours a day. organizational ethics. Jargon is the language of specialized terms used by a group or profession. Such values outline the right and wrong ways to behave in a situation in which an action may help one person on stakeholder group. office parties. 4 . Personal and professional ethics also influence how a person will act in an organization. beliefs. their location on particular floor. In business. The founder of an organization has a substantial influence on the organization’s initial culture because of his or her personal values and beliefs. Sometimes. Many cultural values derive from the personality and beliefs of the founder and the top-management team. the size of people’s offices. e) Organizational Symbols: Organizational symbols often convey an organization’s cultural values to its members and to others outside the organization. A rite or ritual is an important artifact of culture and may be defined as a regular organizational activity that carries more meaning than it does actual purpose. the company cars they drive. Rites and rituals openly publicize the values of an organization. managers rely on ethical instrumental values embodied in the organization’s culture. news paper releases. In the course of making decisions in an organization. a) Characteristics of Organizational Members: The ultimate source of the organizational culture is the people who make up the organization. etc. Companies often have their own acronyms and buzzwords that are clear to them and help set apart organizational insiders from outsiders. employee promotion. rituals send a clear message about the way things are done in an organization. called organizational ethics is another important source to create and manage organizational culture. For example. It encompasses not only spoken language but also how people dress. In some organizations. contribute certain culture in an organization. Announcement of organizational success. are symbols that convey images about the values in an organizational culture. this code is known as jargon. # Sources of Organizational Culture: Organizational culture develops from the interaction of four factors: the personal and professional characteristics of people within organization. so an organization’s culture is strongly affected by the people who are in a position to establish its ethical values. Everyday practices that are repeated frequently are known as rituals. The members’ attitudes and characteristics lay down the foundation of organization’s culture. Typically unwritten. but hurt another. Language is another way to identify an organization’s culture. the property rights that the organization gives to employees. and rules that establish the appropriate way for organizational members to deal with one another and with the organization’s stakeholders. are an inseparable part of an organization’s culture because they help the values that members use to manage situations and make decisions. organization’s popularity etc. The interaction of these factors produces different cultures in different organizations and causes changes in culture overtime.

or stockholders. and discretionary expectations that society has of organizations at a given point of time" . organization’s workforce may be given strong property rights. However. and attitudes towards the organization. The distribution of property rights has a direct effect on instrumental values that shape employee behavior and motivate organizational members.Carroll and Buchholtz. and desirable behaviors include being cautious. suppliers. The values. managers need to design a certain kind of organizational culture. for example. give rise to totally different sets of cultural values. emerge shred norms and rules that help reduce communication problems. d) The structure: Organizational structure is another important source of culture. Similarly. the government. Out of stable task and role relationships. including employees. and philanthropic responsibilities in addition to their responsibilities to earn a fair return for investors and comply with the law. such as guarantee of lifetime employment and involvement in an employee stock-ownership plan or profit sharing plan. rules. 5 . Thus an organic structure is likely to give rise to a culture in which innovation and flexibility are desired end states. The concept of corporate social responsibility means that organizations have moral. Shareholders have the stronger property rights of all stakeholder groups because they own the resources of the company and share in its profit. In organic structure (flat and decentralized). the local community. ethical. # Corporate Social responsibility: Corporate social responsibility (CSR) can be defined as the "economic. but many other constituencies as well. an organization can establish values that encourage and reward creativity or innovation. obeying superior authority. values. people have more freedom to choose and control their own activities. A traditional view of the corporation suggests that its primary. and desirable behaviors include being creative. Property rights encourage employees to use organizational resources to find better ways of serving customers can foster commitment and loyalty. for example. Property rights refer to the rights that an organization gives to its members to receive and use organizational resources. The distribution of property rights to different stakeholders determines: i.Mukesh Kumar Goit Kantipur Valley College . people have relatively little personal autonomy. and norms in a mechanistic structure are different from those in an organic structure. and respecting traditions. and of the society in which the organization distributes property rights. responsibility is to its owners. environmental groups. of professional groups. and other special interest groups. courageous and taking risk. legal. Centralization can contribute to create cultural values that reinforce obedience and accountability. Mechanistic structure and organic structures.c) Property Rights: The value in an organization’s culture reflects the ethics of individuals in the organization. Similarly. prevent the distortion of information. Property rights define the rights and responsibilities of each inside stakeholders groups and cause the development of different norms. centralization or decentralization also largely develops different types of culture. How effective an organization is and ii. By decentralizing authority. stock option. ethical. CSR requires organizations to adopt a broader view of its responsibilities that includes not only stockholders. Because different structure gives rise to different cultures. An organization’s structure can promote cultural values that foster integration and coordination. In mechanistic structure (tall. customers. Top managers often have strong property rights because they are given large amounts of the organizational resources. The culture that emerges in the organization. if not sole. and speed the flow of information. such as high salaries. decision making power etc. highly centralized and standardized). as at companies like Microsoft and Wal-Mart.

In most cases. At the low end of the range is an obstructive approach.Corporate social responsibility is related to. but not identical with. Like an accommodating company. Though these companies are often socially responsible. Thus. An accommodating company does not attempt to hide its actions and remains open about why it takes specific actions. These companies may consider themselves neutral. b) Defensive Approach: A defensive approach indicates at least commitment to ethical behavior. d) Proactive Approach: Managers taking a proactive approach actively embrace the need to behave in socially responsible ways. a proactive company attempts to remain ahead of the curve when it comes to social responsibility. source products that are not tested on animals and pay its employees a fair wage. it may decrease its creation of waste. It may make ethics part of its mission statement and attempt to avoid any harm to the 6 . The strength of an organization’s commitment to social responsibility ranges from low to high level. These companies satisfy all legal requirements and attempt to meet ethical standards. legal. These companies make a point of following the law to ensure that others cannot take legal action against them. companies that take a defensive stance towards social responsibility are not particularly responsible. a proactive company makes social responsibility a priority. The result of this approach may leads to not only loss of reputation but also its devastation. instead making profits the most important aspect of its business. c) Accommodating Approach: An accommodating stance signifies that a company believes social responsibility is important . For example. but of the stakeholders. and are willing to utilize organizational resources to promote the interest not only of stockholders. While CSR encompasses the economic. business ethics usually focuses on the moral judgments and behavior of individuals and groups within organizations. Obstructionist managers choose not to behave in socially responsible way. they may change their policies in response to criticism. The company would keep its records open to the public. An obstructive company does not make social responsibility an effort. and discretionary responsibilities of organizations. whereas. Managers adopting this approach want to make choices that are responsible in the eyes of society and want to do the right thing when called on to do so. Instead of reacting to criticism. For example. at the other end. a) Obstructive Approach: A company that takes an obstructive stance toward social responsibility attempts to defend its economic priorities by blocking any attempts to point out the company's lack of social responsibility. proactive managers actively embrace the need to behave in socially responsible ways. pollute natural lands or deceive customers.and perhaps as important as making a profit.Mukesh Kumar Goit Kantipur Valley College . but it will remove of the waste in a legal method rather than dumping it illegally. business ethics. go out of their way to learn about the needs of different stakeholder groups. ethical. Some people view obstructive businesses as immoral since they may exploit their employees. the study of business ethics may be regarded as a component of the larger study of corporate social responsibility. a company may create more waste than necessary. and they make profits a more important motive than performing actions in a socially responsible way.

In turn. It is not easy for competitors to imitate. The more resources an organization can obtain from the environment. Organizational strategy allows an organization to shape and manage its domain to exploit its existing core competences and develop new competences that make it better competitors for resources. improved competences give organization a competitive advantage.Mukesh Kumar Goit Kantipur Valley College . value is anything that satisfies the needs and desires of the organizational stakeholders. or new resources of financial support. A core competency can take various forms. In this context. such as manufacturing. A core competency is a specific factor that a business sees as central to the way the company or its employees work. good market coverage. # Strategy and the Environment: An organization’s strategy is a specific pattern of decisions and actions that managers take to use core competences to achieve a competitive advantage and outperform competitors. 7 . that allows a company to achieve superior efficiency. # Core Competences: The ability to develop a strategy that allows an organization to create value and outperform competitors is a function of the organization’s core competencies. and donate a portion of its profits to charity. It must contribute to the end consumer's experienced benefits and the value of the product or service to its customers. Customers are likely to respond to a strategy that is based on the goal of offering highquality products and services at appropriate prices. Core competencies are skills and abilities in value creation activities. or attract new resources –for example.environment or its employees. including technical/subject matter know-how. innovation. give all of its employees a living wage and benefits. An organization that poses superior core competencies can outperform its rivals. the better able to set ambitious long term goals and then develop a strategy and invest resources to create core competences to allow it to achieve those goals. best Human Resource Management (HRM). or kaizen or continuous improvement over time. These enable an organization to access a wide variety of markets. such as employee dedication. highly qualified employees. The core competences that an organization holds are difficult to replicate. A core competency results from a specific set of skills or production techniques that deliver additional value to the customer. It may also include product development or culture. new customers. Businesses can develop core competencies by identifying key internal strengths and investing in the capabilities valued by their customers. or R&D. It can be reused widely for many products and markets. or customer responsiveness. A proactive company may go out of its way to institute new recycling programs. 3. an organization seeks to use and develop core competencies to gain a competitive advantage so that it can increase its share of scarce resources in its environment. Shareholders want a company to set goals and develop an action plan that maximizes the long-run profitability of the company and the value of their stocks. It fulfills three key criteria: 1. Core competencies allow small businesses to deliver value to their customers. Through its strategy. marketing. a reliable process and/or close relationships with customers and suppliers. 2. quality. An organization develops a strategy to increase the value it can create for its stakeholders. highly qualified employees.

elements. relations with structure and culture of organization) 8 . focus.The strength of its core competences is a product of the specialized resources (functional and Organizational) and coordination abilities that it possesses and other organizations lack.Mukesh Kumar Goit Kantipur Valley College . # Different Levels of Organizations Strategies: a) Functional Level b) Business Level c) Corporate Level d) International Level (Four levels of organizational strategies.