Chapter-5 Organizational culture

Organizational culture can be defined as the group norms, values,

beliefs and assumptions practiced in an organization. It brings
stability and control within the firm. The organization is more
stable and its objective can be understood more clearly.
Organizational culture helps the group members to resolve their
differences, overcome the barriers and also helps them in
tackling risks.

Organizational culture refers to a system of shared assumptions,

values, and beliefs that show employees what is appropriate and
inappropriate behavior (Chatman & Eunyoung, 2003; Kerr &
Slocum Jr., 2005). These values have a strong influence on
employee behavior as well as organizational performance. In fact,
the term organizational culture was made popular in the 1980s
when Peters and Waterman’s best-selling book In Search of
Excellence made the argument that company success could be
attributed to an organizational culture that was decisive, customer
oriented, empowering, and people oriented. Since then,
organizational culture has become the subject of numerous
research studies, books, and articles. However, organizational
culture is still a relatively new concept. In contrast to a topic such
as leadership, which has a history spanning several centuries,
organizational culture is a young but fast-growing area within
organizational behavior.
Culture is by and large invisible to individuals. Even though it
affects all employee behaviors, thinking, and behavioral patterns,
individuals tend to become more aware of their organization’s
culture when they have the opportunity to compare it to other
organizations. If you have worked in multiple organizations, you
can attest to this. Maybe the first organization you worked was a
place where employees dressed formally. It was completely
inappropriate to question your boss in a meeting; such behaviors
would only be acceptable in private. It was important to check
your e-mail at night as well as during weekends or else you would
face questions on Monday about where you were and whether you
were sick. Contrast this company to a second organization where
employees dress more casually. You are encouraged to raise issues
and question your boss or peers, even in front of clients. What is
more important is not to maintain impressions but to arrive at the
best solution to any problem. It is widely known that family life is
very important, so it is acceptable to leave work a bit early to go to
a family event. Additionally, you are not expected to do work at
night or over the weekends unless there is a deadline. These two
hypothetical organizations illustrate that organizations have
different cultures, and culture dictates what is right and what is
acceptable behavior as well as what is wrong and unacceptable.

Elements of Organizational Culture

The two key elements seen in organizational culture are −
 Visible elements − These elements are seen by the outer world. Example,
dress code, activities, setup, etc.
 Invisible elements − These inner elements of the group cannot be seen by
people outside the group or firm. Example, values, norms, assumptions, etc.
Now let us discuss some other elements of organizational culture. They are −
 Stories − Stories regarding the history of the firm, or founder.
 Rituals − Precise practices an organization follows as a habit.
 Symbol − The logo or signature or the style statement of a company.
 Language − A common language that can be followed by all, like English.
 Practice − Discipline, daily routine or say the tight schedule everyone follows
without any failure.
  Values and Norms − The idea over which a company is based or the thought
of the firm is considered as its value and the condition to adopt them are called
norms.
 Assumptions − It means we consider something to be true without any facts.
Assumptions can be used as the standard of working, means the employees
prepare themselves to remain above standard.

Different Types of Organizational Culture

The culture a firm follows can be further classified into different types. They are −

 Mechanistic and Organic culture

 Authoritarian and Participative culture
 Subculture and Dominant culture
 Strong and Weak culture
 Entrepreneurial and Market culture

Mechanistic and Organic Culture

Mechanistic culture is formed by formal rule and standard operating procedures.
Everything needs to be defined clearly to the employees like their task, responsibility
and concerned authorities. Communication process is carried according to the
direction given by the organization. Accountability is one of the key factors of
mechanistic culture.
Organic culture is defined as the essence of social values in an organization. Thus there
exists a high degree of sociability with very few formal rules and regulations in the
company. It has a systematic hierarchy of authority that leads towards free flow of
communication. Some key elements of organic culture include authority, responsibility,
accountability and direct flow towards the employee.

Authoritarian and Participative Culture

Authoritarian culture means power of one. In this culture, power remains with the top
level management. All the decisions are made by the top management with no
employee involvement in the decision making as well as goal shaping process. The
authority demands obedience from the employee and warns them for punishment in
case of mistake or irregularity. This type of culture is followed by military organization.
In participative culture, employees actively participate in the decision making and goal
shaping process. As the name suggests, it believes in collaborative decision making. In
this type of culture, employees are perfectionist, active and professional. Along with
group decision making, group problem solving process is also seen here.

Subculture and Dominant Culture

In subculture, some members of the organization make and follow a culture but not all
members. It is a part of organizational culture, thus we can see many subcultures in an
organization. Every department in a company have their own culture that gets
converted to a subculture. So, the strength and adaptability of an organizational culture
is dependent on the success of subculture.
In dominant culture, majority of subculture combine to become a dominant culture.
The success of dominant culture is dependent on the homogeneity of the subculture,
that is, the mixture of different cultures. At the same point of time, some cold war
between a dominant culture and a minor culture can also be seen.

Strong and Weak Culture

In a strong culture, the employees are loyal and have a feeling of belongingness towards
the organization. They are proud of their company as well as of the work they do and
they slave towards their goal with proper coordination and control. Perception and
commitment are two aspects that are seen within the employees. In this culture, there
is less employee turnover and high productivity.
In a weak culture, the employees hardly praise their organization. There is no loyalty
towards the company. Thus, employee dissatisfaction and high labor turnover are two
aspects of this culture.

Entrepreneurial and Market Culture

Entrepreneurial culture is a flexible and risk-taking culture. Here the employees show
their innovativeness in thinking and are experimental in practice. Individual initiations
make the goal easy to achieve. Employees are given freedom in their activity. The
organization rewards the employees for better performance.
Market culture is based on achievement of goal. It is a highly target-oriented and
completely profit-oriented culture. Here the relationship between the employees and
the organization is to achieve the goal. The social relation among the workers is not
motivating.

How to Create an Organizational Culture

An organizational culture is created with the combination of certain criteria that are
mentioned below −
 The founder of the organization may partly set a culture.
 The environment within which the organization standards may influence its
activities to set a culture.
 Sometimes interchange of culture in between different organizations create
different new cultures.
 The members of the organization may set a culture that is flexible to adapt.
  New cultures are also created in an organization due to demand of time and
situation.
The culture of an organizational can change due to composition of workforce, merger
and acquisition, planned organizational change, and influence of other organizational
culture.

How Are Cultures Created?

Where do cultures come from? Understanding this question is important in
understanding how they can be changed. An organization’s culture is shaped as the
organization faces external and internal challenges and learns how to deal with them.
When the organization’s way of doing business provides a successful adaptation to
environmental challenges and ensures success, those values are retained. These values
and ways of doing business are taught to new members as the way to do business
(Schein, 1992).

The factors that are most important in the creation of an organization’s culture include
founders’ values, preferences, and industry demands.

How Are Cultures Maintained?

As a company matures, its cultural values are refined and strengthened. The early values
of a company’s culture exert influence over its future values. It is possible to think of
organizational culture as an organism that protects itself from external forces.
Organizational culture determines what types of people are hired by an organization and
what types of people are left out. Moreover, once new employees are hired, the company
assimilates new employees and teaches them the way things are done in the
organization. We call these processes attraction-selection-
attrition and onboarding processes. We will also examine the role
of leaders and reward systems in shaping and maintaining an organization’s culture.

Founder Values
A company’s culture, particularly during its early years, is inevitably tied to the
personality, background, and values of its founder or founders, as well as their vision for
the future of the organization. When entrepreneurs establish their own businesses, the
way they want to do business determines the organization’s rules, the structure set up in
the company, and the people they hire to work with them. For example, some of the
existing corporate values of the ice cream company Ben & Jerry’s Homemade Holdings
Inc. can easily be traced to the personalities of its founders Ben Cohen and Jerry
Greenfield. In 1978, the two high school friends opened up their first ice-cream shop in a
renovated gas station in Burlington, Vermont. Their strong social convictions led them
to buy only from the local farmers and devote a certain percentage of their profits to
charities. The core values they instilled in their business can still be observed in the
current company’s devotion to social activism and sustainability, its continuous
contributions to charities, use of environmentally friendly materials, and dedication to
creating jobs in low-income areas

Industry Demands
While founders undoubtedly exert a powerful influence over corporate cultures, the
industry characteristics also play a role. Companies within the same industry can
sometimes have widely differing cultures. At the same time, the industry characteristics
and demands act as a force to create similarities among organizational cultures. For
example, despite some differences, many companies in the insurance and banking
industries are stable and rule-oriented, many companies in the high-tech industry have
innovative cultures, and those in nonprofit industry may be people-oriented. If the
industry is one with a large number of regulatory requirements—for example, banking,
health care, and high-reliability (such as nuclear power plant) industries—then we might
expect the presence of a large number of rules and regulations, a bureaucratic company
structure, and a stable culture. The industry influence over culture is also important to
know because this shows that it may not be possible to imitate the culture of a company
in a different industry, even though it may seem admirable to outsiders.

How Are Cultures Maintained?

As a company matures, its cultural values are refined and strengthened. The early values
of a company’s culture exert influence over its future values. It is possible to think of
organizational culture as an organism that protects itself from external forces.
Organizational culture determines what types of people are hired by an organization and
what types of people are left out. Moreover, once new employees are hired, the company
assimilates new employees and teaches them the way things are done in the
organization. We call these processes attraction-selection-
attrition and onboarding processes. We will also examine the role
of leaders and reward systems in shaping and maintaining an organization’s culture.

Attraction-Selection-Attrition
Organizational culture is maintained through a process known as
attraction-selection-attrition (ASA). First, employees are attracted to
organizations where they will fit in. Someone who has a competitive nature
may feel comfortable in and may prefer to work in a company where
interpersonal competition is the norm. Others may prefer to work in a
team-oriented workplace. Research shows that employees with different
personality traits find different cultures attractive. For example, out of the
Big Five personality traits, employees who demonstrate neurotic
personalities were less likely to be attracted to innovative cultures, whereas
those who had openness to experience were more likely to be attracted to
innovative cultures (Judge & Cable, 1997).
Of course, this process is imperfect, and value similarity is only one reason
a candidate might be attracted to a company. There may be other, more
powerful attractions such as good benefits. At this point in the process, the
second component of the ASA framework prevents them from getting
in: selection. Just as candidates are looking for places where they will fit in,
companies are also looking for people who will fit into their current
corporate culture. Many companies are hiring people for fit with their
culture, as opposed to fit with a certain job. For example, Southwest
Airlines prides itself for hiring employees based on personality and attitude
rather than specific job-related skills, which they learn after they are hired.
Companies use different techniques to weed out candidates who do not fit
with corporate values. For example, Google relies on multiple interviews
with future peers. By introducing the candidate to several future coworkers
and learning what these coworkers think of the candidate, it becomes easier
to assess the level of fit.
Even after a company selects people for person-organization fit, there may
be new employees who do not fit in. Some candidates may be skillful in
impressing recruiters and signal high levels of culture fit even though they
do not necessarily share the company’s values. In any event, the
organization is eventually going to eliminate candidates eventually who do
not fit in through attrition. Attrition refers to the natural process where the
candidates who do not fit in will leave the company. Research indicates that
person-organization misfit is one of the important reasons for employee
turnover (Kristof-Brown, et. al., 2005; O’Reilly, et. al., 1991).
Because of the ASA process, the company attracts, selects, and retains
people who share its core values, whereas those people who are different in
core values will be excluded from the organization either during the hiring
process or later on through naturally occurring turnover. Thus,
organizational culture will act as a self-defending organism where intrusive
elements are kept out. Supporting the existence of such self-protective
mechanisms, research shows that organizations demonstrate a certain level
of homogeneity regarding personalities and values of organizational
members (Giberson, et. al., 2005).

New Employee Onboarding

Another way in which an organization’s values, norms, and behavioral
patterns are transmitted to employees is through onboarding (also referred
to as the organizational socialization process). Onboarding refers to the
process through which new employees learn the attitudes, knowledge,
skills, and behaviors required to function effectively within an organization.
If an organization can successfully socialize new employees into becoming
organizational insiders, new employees will feel accepted by their peers and
confident regarding their ability to perform; they will also understand and
share the assumptions, norms, and values that are part of the organization’s
culture. This understanding and confidence in turn translate into more
effective new employees who perform better and have higher job
satisfaction, stronger organizational commitment, and longer tenure within
the company (Bauer, et. al., 2007). Organizations engage in different
activities to facilitate onboarding, such as implementing orientation
programs or matching new employees with mentors.

What Can Employees Do During

Onboarding?
New employees who are proactive, seek feedback, and build strong
relationships tend to be more successful than those who do not (Bauer &
Green, 1998; Kammeyer-Mueller & Wanberg, 2003; Wanberg &
Kammeyer-Mueller, 2000). For example, feedback seeking helps new
employees. Especially on a first job, a new employee can make mistakes or
gaffes and may find it hard to understand and interpret the ambiguous
reactions of coworkers. By actively seeking feedback, new employees may
find out sooner rather than later any behaviors that need to be changed and
gain a better understanding of whether their behavior fits with the company
culture and expectations.
Relationship building or networking (a facet of the organizing function) is
another important behavior new employees may demonstrate. Particularly
when a company does not have a systematic approach to onboarding, it
becomes more important for new employees to facilitate their own
onboarding by actively building relationships. According to one estimate,
35% of managers who start a new job fail in the new job and either
voluntarily leave or are fired within one and a half years.

Signs of Organizational Culture

How do you find out about a company’s culture? We emphasized earlier
that culture influences the way members of the organization think, behave,
and interact with one another. Thus, one way of finding out about a
company’s culture is by observing employees or interviewing them. At the
same time, culture manifests itself in some visible aspects of the
organization’s environment. In this section, we discuss five ways in which
culture shows itself to observers and employees.

Companies have been trying to adopt customer centricity for nearly 20 years now. But
the CMO Council reports that “only 14 percent of marketers say that customer centricity
is a hallmark of their companies, and only 11 percent believe their customers would
agree with that characterization.”

Why do so many companies struggle to get customer centricity right? The volume,
velocity, and variety of customer data that now exists overwhelms many organizations.
Some companies don’t have the systems and technology to segment and profile
customers. Others lack the processes and operational capabilities to target them with
personalized communications and experiences.

But the most common, and perhaps the greatest, barrier to customer centricity is the
lack of a customer-centric organizational culture. At most companies the culture
remains product-focused or sales-driven, or customer centricity is considered a priority
only for certain functions such as marketing. To successfully implement a customer-
centric strategy and operating model, a company must have a culture that aligns with
them — and leaders who deliberately cultivate the necessary mindset and values in their
employees.

To build a customer-centric culture, business leaders should take six actions:

Operationalize customer empathy. Empathy is one of those buzzwords that sound

really good, but very few companies actually understand what it means, much less
practice it. Essentially, customer empathy is the ability to identify a customer’s
emotional need, understand the reasons behind that need, and respond to it effectively
and appropriately. And it’s pretty rare. According to PwC, only 38% of U.S. consumers
say the employees they interact with understand their needs.
To instill empathy as a universal value, one that informs everything their organization
does, leaders must do more than give it lip service. Slack, the business communication
software company, operationalizes empathy. Employees spend a lot of time reading
customer messages and observing customers to try to intuit what they want and need.
Customer support specialists are encouraged to research the people they’re helping and
create mini personas for them to better understand how the customers are using Slack.
The company screens for support people who know how to express empathy through the
written word, and the company doesn’t allow them to cut and paste canned responses.
And for partners who build apps on the Slack platform, the company promotes nine best
practices to help them practice empathy, including “outline your use cases” and
“storyboard each interaction.”

Hire for customer orientation. From the very first interaction with prospective
employees, organizations should make thinking about customers and their needs a clear
priority. At Hootsuite, the social media management platform, marketing and human
resources executives collaborate to do this.

During the interview process, hiring managers are required to ask every candidate,
regardless of role, a question to gauge their customer orientation. Kirsty Traill, the
company’s VP Customer, explains that this practice not only assesses candidates and
ensures that every new employee is aligned to customer-centric thinking, but also sends
a clear message to everyone — recruits and hiring managers alike — about the
importance of customer experience at the company.

Democratize customer insights. For every employee to adopt a customer-centric

mindset, every employee must understand the organization’s customers. Adobe Systems
has opened up access to customer insights for all employees. It doesn’t store up
customer understanding in the sales and marketing groups and then expect other
departments to focus solely on their functions.

The company created a new department, a combined customer and employee

experience team, to facilitate customer understanding. It set up listening stations where
employees can go, either online or in an Adobe office, to listen to customer calls. And at
every all-employee meeting, leaders give an update on the company’s customer
experience delivery.

Facilitate direct interaction with customers. Companies need to develop ways for
employees to interact with customers directly, even in “back office” functions. After all,
every employee impacts the customer experience in some way, even if indirectly, so
every employee can benefit from interacting with customers to better understand them
and learn about their successes and challenges.

Airbnb considers hosts, the people who rent out their homes, to be customers, so it
facilitates employee-host interactions by requiring employees to stay in Airbnb rentals
whenever they travel for business. The company also asks employees to let hosts stay
with them when they attend meetings at the Airbnb offices. What’s more, employees
participate in an annual event alongside hosts so that together they discuss learnings
from the past year and plans for the next.

Most organizations’ business models probably don’t allow for direct employee-customer
contact as organically as Airbnb’s does, but leaders can still facilitate interactions by
letting employees observe focus group, sales and support calls, customer visits and ride-
alongs, and co-creation labs, and participate in customer events like advisory board
meetings and industry conferences.

Link employee culture to customer outcomes. The adage “You can’t manage
what you don’t measure” applies to customer centricity, too. Managers will be motivated
and equipped to cultivate a customer-centric culture if they know if and how it impacts
results, so organizations should ensure they establish and track the link between culture
and customer impact. According to Diane Gherson, head of HR at IBM, employee
engagement drives two-thirds of her company’s client experience scores. That proves
what Gherson and her team knew intuitively: If employees feel good about IBM, clients
do, too.

Temkin Group, a customer experience consulting firm, has developed a model that
estimates the impact of customer experience improvements on revenue in different
industries. On average, Temkin calculates, a typical $1 billion company can gain $775
million over three years through modest improvements such as reducing customer wait
times or making a transaction easier for the customer.

Tie compensation to the customer. Organizations should reinforce a customer-

centric culture through their compensation program. Donna Morris at Adobe calls this
“giving every employee skin in the game.” She says that for employees to know that
customer-oriented attitudes and behaviors are expected from them, there has to be “an
element of risk” to it.

So Adobe implemented a compensation program tying every employee to the customer.

The short-term cash incentive plan reflects the company’s revenue performance as well
as customer success measures such as retention. The program not only makes tangible
the contributions to the customer that every employee makes but also produces
organization-wide alignment because everyone is working toward the same goals.

Company leaders are starting to recognize that culture and strategy go hand in hand.
Only when customer-centric strategies are supported and advanced by culture will a
company realize its customer-centric vision.