Chapter 1

Organizational Culture and Environment

 Define Culture
Culture has been an important concept in understanding the human societies and groups for a long
time. Culture is the heart of a particular group or society – what is distinctive about the way members
interact with one another and with outsiders – and how they achieve what they do.

The complex mixture of assumptions, behaviors, stories, myths, metaphors and other ideas that fits
together to define what it means to be a member of a particular society.

 Organizational culture

The set of important understandings, such as norms, values, attitudes and beliefs shared by
organizational members. Organizational culture refers to a system of shared meaning held by members
that distinguishes the organization from other organization.

According to Robbins, coulter and Vohra, Organizational culture is the shared values, principles,
traditions and ways of doing things that influence the way organizational members act. In most
organizations, these shared values and practices have evolved over time and determine, to a large
extent, how “things are done around here.

Robbins, coulter and Vohra’s definition of culture implies three things.

First, culture is a perception. It’s not something that can be physically touched or seen, but employees
perceive it on the basis of what they experience within the organization.

Second, organizational culture is descriptive. It’s concerned with how members perceive the culture
and describe it, not with whether they like it.

Finally, even though individuals may have different backgrounds or work at different organizational
levels, they tend to describe the organization’s culture in similar terms. That’s the shared aspect of
culture.

 Characteristics/Dimensions of Organizational culture

Research suggests seven dimensions that can be used to describe an organization’s culture. These
dimensions (described below) range from low to high, meaning it’s not very typical of the culture
(low) or is very typical of the culture (high).

1. Innovation and risk taking: the degree to which the employees are encouraged to be innovative and
take risks.

2. Attention to detail: the degree to which the employees are expected to exhibit precision, analysis
and attention to detail.

3. Outcome orientation: the degree to which management focuses on results or outcomes rather
than on the techniques and processes used to achieve those outcomes.
4. People orientation: the degree to which management decisions take into consideration the effect of
outcomes on people within the organization.

5. Team orientation: the degree to which work activities are organized around teams rather than
individuals.

6. Aggressiveness: the degree to which people are aggressive and competitive rather than cooperative.

7. Stability: the degree to which organizational activities emphasize maintaining the status quo.

 Basic Elements/level of culture

 Artifacts

Artifacts are things that “one sees, hears and feels when one encounters a new group with an
unfamiliar culture”. Artifacts include products, services and even behavior of group members.

For example, if you walk into the headquarter of one of the large million-dollar company, you will notice
that the CEO is dressed casually, while at a competitor, the CEO is wearing an expensive, dark blue suit.

 Espoused values

The reason given by an organization for the way things are done; according to Schein, the second level
of organizational culture. Espoused values are the reasons that we give for doing what we do. At
DuPont, for example, many procedures and products are a result of the espoused value of safety.

 Basic assumption

The beliefs that are taken for granted by the members of an organization; according to Schein, the
third level of organizational culture. Culture prescribes “the right way to do things” at an organization,
often through unspoken assumption.

Your organization took a basic assumption that any service it offered had to be available (or at least
planned) for all customer.

Many cosmetic companies have assumed that the appropriate marketing strategy focused on
advertising and promotions about how their product enhance beauty.
 Culture’s functions

Culture performs a number of functions within an organization.

1. It has a boundary defining role; that is, it creates distinctions between one organization and others.

2. It conveys a sense of identity for organizational members.

3. Culture facilitates the generation of commitment to something larger than one’s individual self-
interest.

4. It enhances the stability of social system. Culture is the social glue that helps hold the organization
together by providing appropriate standard for what employee should say and do.

5. Culture serves as a sense-making and control mechanism that guides and shapes the attitudes and
behavior of employees.

 Strong Cultures

All organizations have cultures, but not all cultures equally influence employees’ behaviors and actions.
Strong cultures—those in which the key values are deeply held and widely shared—have a greater
influence on employees than do weaker cultures.

The more employees accept the organization’s key values and the greater their commitment to those
values, the stronger the culture is. Most organizations have moderate to strong cultures.

The stronger a culture becomes, the more it affects the way managers plan, organize, lead, and control.

 Why is having a strong culture important?

• For one thing, in organizations with strong cultures, employees are more loyal than are employees
in organizations with weak cultures.

• Strong cultures are associated with high organizational performance. Since values are clear and
widely accepted, employees know what they’re supposed to do and what’s expected of them, so
they can act quickly to take care of problems.

 Drawback of the strong culture

However, the drawback is that a strong culture also might prevent employees from trying new
approaches especially when conditions are changing rapidly.

 Distinguish between strong culture and weak culture

 Where Culture Comes from and How It Continues

The following Exhibit illustrates how an organization’s culture is established and maintained.

 Where Culture Comes From/ Source of organizational culture

The original source of the culture usually reflects the vision of the founders. Company founders are not
constrained by previous customs or approaches and can establish the early culture by articulating a
vision of what they want the organization to be. Also, the small size of most new organizations makes it
easier to instill that vision with all organizational members.

 How an organizational culture Continues

• Once the culture is in place, however, certain organizational practices help maintain it. For
instance, during the employee selection process, managers typically judge job candidates not only
on the job requirements, but also on how well they might fit into the organization. At the same
time, job candidates find out information about the organization and determine whether they are
comfortable with what they see.

• The actions of top managers also have a major impact on the organization’s culture. Top managers
establish norms that filter down through the organization and can have a positive effect on
employees’ behaviors.

• Finally, organizations help employees adapt to the culture through socialization, a process that
helps new employees learn the organization’s way of doing things. New employees learn company
philosophy, company jargon, and even how to assist customers.

 How Employees Learn Culture

Employees “learn” an organization’s culture in a number of ways. The most common are stories, rituals,
material symbols, and language.

• STORIES

Organizational “stories” typically contain a narrative of significant events or people including such
things as the organization’s founders, rule breaking, reactions to past mistakes, and so forth. Managers
at Southwest Airlines tell stories celebrating employees who perform heroically for customers. Such
stories help convey what’s important and provide examples that people can learn from.
To help employees learn the culture, organizational stories anchor the present in the past, provide
explanations and legitimacy for current practices, exemplify what is important to the organization, and
provide compelling pictures of an organization’s goals

• RITUALS

Corporate rituals are repetitive sequences of activities that express and reinforce the important values
and goals of the organization. One of the best-known corporate rituals is Mary Kay Cosmetics’ annual
awards ceremony for its sales representatives. Looking like a cross between a circus and a Miss America
pageant, the ceremony takes place in a large auditorium, on a stage in front of a large, cheering
audience, with all the participants dressed in glamorous evening clothes. Salespeople are rewarded for
sales goal achievements with an array of expensive gifts. This “show” acts as a motivator by publicly
acknowledging outstanding sales performance. It conveys to her salespeople that reaching their sales
goals is important and through hard work and encouragement, they too can achieve success.

• MATERIAL ARTIFACTS AND SYMBOLS

When you walk into different businesses, do you get a “feel” for what type of work environment it is
—formal, casual, fun, serious, and so forth? These reactions demonstrate the power of material symbols
or artifacts in creating an organization’s personality. The layout of an organization’s facilities, how
employees dress, the types of automobiles provided to top executives, and the availability of
corporate aircraft are examples of material symbols.

Material symbols convey to employees who is important and the kinds of behavior (for example, risk
taking, conservative, authoritarian, participative, individualistic, and so forth) that are expected and
appropriate.

• LANGUAGE
Many organizations and units within organizations use language as a way to identify and unite
members of a culture. By learning this language, members attest to their acceptance of the culture and
their willingness to help preserve it. For instance, at Cranium, a Seattle board game company, “chiff ” is
used to remind employees of the need to be incessantly innovative in everything they do. “Chiff ” stands
for “clever, high quality, innovative, friendly, fun.”

Over time, organizations often develop unique terms to describe equipment, key personnel, suppliers,
customers, processes, or products related to its business. New employees are frequently overwhelmed
with acronyms and jargon that, after a short period of time, become a natural part of their language.
Once learned, this language acts as a common denominator that bonds members.

 How Culture Affects Managers

A manager’s decisions are influenced by the culture in which he or she operates. An organization’s
culture, especially a strong one, influences and constrains the way managers plan, organize, lead, and
control.

Planning

• The degree of risk that plans should contain

• Whether plans should be developed by individuals or teams

• The degree of environmental scanning in which management will engage

Organizing

• How much autonomy should be designed into employees’ jobs

• Whether tasks should be done by individuals or in teams

• The degree to which department managers interact with each other

Leading

• The degree to which managers are concerned with increasing employee job satisfaction

• What leadership styles are appropriate

• Whether all disagreements—even constructive ones—should be eliminated

Controlling

• Whether to impose external controls or to allow employees to control their own actions

• What criteria should be emphasized in employee performance evaluations

• What repercussions will occur from exceeding one’s budget

 Current Issues in Organizational Culture

Creating an Ethical Culture

Ethics are the principles, values & beliefs that define what is right and what is wrong.

The content and strength of an organization’s culture influences its ethical climate and the ethical
behavior of its members. If the culture is strong and supports high ethical standards, it should have a
very powerful and positive influence on employees behavior.

For example, the CEO of SEI investment company spends a lot of time emphasizing to the employees for
his vision for the company – an open culture of integrity, ownership and accountability.

 Creating an Innovative Culture

• You may not recognize IDEO’s name, but you’ve probably used a number of its products. Some of its
creations range from the first commercial mouse (for Apple) to the first standup toothpaste tube
(for Procter & Gamble) to the handheld personal organizer (for Palm) to the Contour USB glucose
meter (for Bayer AG). It’s critical that IDEO’s culture support creativity and innovation.

• From founding in 1976 to today, Apple has been on the forefront of product design and
development.

• Although both these companies are in industries where innovation is critical to success, the fact is
that any successful organization needs a culture that supports innovation.
• The most important driver of innovation for companies was a supportive corporate culture.

 Characteristics of an Innovative culture firm

• Challenge and involvement – Are employees involved in, motivated by, and committed to long-
term goals and success of the organization?

• Freedom – Can employees independently define their work, exercise discretion, and take initiative
in their day-to-day activities?

• Trust and openness – Are employees supportive and respectful to each other?

• Idea time – Do individuals have time to elaborate on new ideas before taking action?

• Playfulness/humor – Is the workplace spontaneous and fun?

• Conflict resolution – Do individuals make decisions and resolve issues based on the good of the
organization versus personal interest?

• Debates – Are employees allowed to express opinions and put forth ideas for consideration and
review?

• Risk-taking – Do managers tolerate uncertainty and ambiguity, and are employees rewarded for
taking risks?

 Some suggestions for creating a more ethical culture

• Be a visible role model.

• Communicate ethical expectations

• Provide ethical training

• Visibly reward ethical acts and punish unethical ones.

• Provide protective mechanisms so employees can discuss ethical dilemmas and report unethical
behavior without fear.

 Creating a Customer-Responsive Culture

Research showed that customers who were satisfied with the product and service they received,
increased their expenditures on those goods and services. When customer service translates into these
types of results, of course managers would want to create a customer-responsive culture.

 Characteristics of Customer-Responsive Culture

• Type of employee: Hire people with personalities and attitudes consistent with customer service:
friendly, attentive, enthusiastic, patient, good listening skills.

• Type of job environment: Design jobs so employees have as much control as possible to satisfy
customers, without rigid rules and procedures
• Empowerment: Give service-contact employees the discretion to make day-to-day decisions on job-
related activities

• Role clarity: Reduce uncertainty about what service-contact employees can and cannot do by
continual training on product knowledge, listening, and other behavioral skills

• Consistent desire to satisfy and delight customers: Clarify organization’s commitment to doing
whatever it takes, even if it’s outside an employee’s normal job requirements

 Spirituality and Organizational Culture

What is workplace spirituality? It’s a culture in which organizational values promote a sense of
purpose through meaningful work taking place in the context of community. Organizations with a
spiritual culture recognize that people have a mind and a spirit, seek to find meaning and purpose in
their work, and desire to connect with other human beings and be part of a community.

 Workplace spirituality seems to be important now for a number of reasons.

• Employees are looking for ways to cope with the stresses and pressures of a turbulent pace of life.
Contemporary lifestyles—single-parent families, geographic mobility, temporary jobs, technologies
that create distance between people—underscore the lack of community that many people feel. As
humans, we crave involvement and connection.

• Many managers as they reach mid-life, they’re looking for something meaningful both at the job and
outside the job.

• Others wish to integrate their personal life values with their professional lives.

 Spiritual organizations tend to have five cultural characteristics

1. Strong sense of purpose. Spiritual organizations build their cultures around a meaningful purpose.
While profits are important, they’re not the primary values of the organization. For instance,
company’s intend to use its resources, energy and profits to combat social ill, help the environment
and improve condition for labors around the globe.

2. Focus on individual development. Spiritual organizations recognize the worth and value of
individuals. They aren’t just providing jobs; they seek to create cultures in which employees can
continually grow and learn.

3. Trust and openness. Spiritual organizations are characterized by mutual trust, honesty, and
openness. Managers aren’t afraid to admit mistakes. And they tend to be extremely upfront with
employees, customers, and suppliers.

4. Employee empowerment. Managers trust employees to make thoughtful and conscientious

decisions.

5. Toleration of employee expression. The final characteristic that differentiates spiritually based
organizations is that they don’t stifle employee emotions. They allow people to be themselves—to
express their moods and feelings without guilt or fear of reprimand.
  The environment
Some one’s environment is all the circumstances, people, things and events around them. An
organization interact with its environment as it takes in inputs and distributes outputs.

 Defining the external environment

The term external environment refers to factors and forces outside the organization that affect its
performance. As shown in Exhibit in the next slide, it includes two components: the specific
environment and the general environment.

1. The specific environment

The specific environment includes the external forces that directly impact manager’s decisions and
actions and are directly relevant to the achievement of the organization’s goals. An organization’s
specific environment is unique to it. The main forces that makes up the specific environment are
customers, suppliers, competitors and pressure groups.

2. The general environment

The general environment includes the broad economic, political/legal, sociocultural, demographic,
technological and global conditions that affect an organization. Although these external factors don’t
affect organizations to the extent that changes in their specific environment do, managers must
consider them as they plan, organize, lead and control.

a) Economic condition
The economic component encompasses factors such as interest rates, inflation, changes in disposable
income, stock market fluctuations, and business cycle stages that can affect manager practices in the
organization.

b) Political/legal condition
The political/legal component looks at federal, state, and local laws, as well as global laws and laws of
other countries that influence what organization can and cannot do.

c) Sociocultural condition
The sociocultural component is concerned with societal and cultural factors such as values, attitudes,
trends, traditions, lifestyles, beliefs, tastes, and patterns of behavior.

Workers have begun seeking more balanced lives, organizations have had to adjust by offering family
leave policies, flexible work hours, and even on-site child care facilities.
Managers must adopt the changing condition of the society in which they operate. Sociocultural trends
may pose a potential constraint to managers’ decisions and actions.

d) Demographic Condition

The demographic component is concerned with trends in population characteristics such as age, race,
gender, education level, geographic location, income, and family composition.

e) Technological Condition

The technological component is concerned with scientific or industrial innovations. Companies that
capitalize on technology, prosper.

f) Global condition

The global component encompasses those issues associated with globalization and a world economy.
Managers are challenged by an increasing number of global competitors and markets.

 How the External Environment Affects Managers

Understanding how the environment affects managers is equally as important. In three ways the
environment constrains and challenges managers—

first, through its impact on jobs and employment;

next, through the environmental uncertainty that is present; and

finally, through the various stakeholder relationships that exist between an organization and its external
constituencies.

 JOBS AND EMPLOYMENT

• As any or all external environmental conditions (economic, demographic, technological,

globalization, etc.) change, one of the most powerful constraints managers face is the impact of
such changes on jobs and employment—both in poor conditions and in good conditions. The power
of this constraint became painfully obvious during the recent global recession as millions of jobs
were eliminated and unemployment rates rose to levels not seen in many years.

• Changes of external environmental conditions do create challenges for managers who must
balance work demands and having enough of the right types of people with the right skills to do the
organization’s work.

• Not only do changes in external conditions affect the types of jobs that are available, they affect
how those jobs are created and managed. For instance, many employers use flexible work
arrangements to meet work output demand.

 ASSESSING ENVIRONMENTAL UNCERTAINTY

Another constraint posed by external environments is the amount of uncertainty found in that
environment, which can affect organizational outcomes. Environmental uncertainty refers to the
 degree of change and complexity in an organization’s environment (see the Exhibit in the next
slide).

• The first dimension of uncertainty is the degree of change. If the components in an

organization’s environment change frequently, it’s a dynamic environment. If change is minimal,
it’s a stable one. A stable environment might be one with no new competitors, few technological
breakthroughs by current competitors, little activity by pressure groups to influence the
organization, and so forth.

• The other dimension of uncertainty describes the degree of environmental complexity, which
looks at the number of components in an organization’s environment and the extent of the
knowledge that the organization has about those components. An organization with fewer
competitors, customers, suppliers, government agencies, and so forth faces a less complex and
uncertain environment. Organizations deal with environmental complexity in various ways. For
example, Hasbro Toy Company simplified its environment by acquiring many of its competitors.

• Complexity is also measured in terms of the knowledge an organization needs about its
environment.

• How does the concept of environmental uncertainty influence managers? Looking again at
Exhibit, each of the four cells represents different combinations of degree of complexity and
degree of change. Cell 1 (stable and simple environment) represents the lowest level of
environmental uncertainty and cell 4 (dynamic and complex environment) the highest.

• Managers have the greatest influence on organizational outcomes in cell 1 and the least in cell
4. Because uncertainty poses a threat to an organization’s effectiveness, managers try to
minimize it. Given a choice, managers would prefer to operate in the least uncertain
environments. However, they rarely control that choice.

 MANAGING STAKEHOLDER RELATIONSHIPS

• The nature of stakeholder relationships is another way in which the environment influences
managers. The more obvious and secure these relationships, the more influence managers will
have over organizational outcomes.
 • Stakeholders are any constituencies in the organization’s environment that are affected by an
organization’s decisions and actions. These groups have a stake in or are significantly influenced
by what the organization does.

• Exhibit shown in the next slide identifies some of an organization’s most common stakeholders.

 How can managers manage stakeholder relationships?

First, they need to identify the organization’s stakeholders.

Second, they need to determine what particular interests or concerns the stakeholders might have –
product quality, financial issues, safe working conditions, environmental protection, and so forth.

Third, they need to decide how critical each stakeholder is to the organization's decision and action.

The final step is to determine how to manage the stakeholders relationship. The more critical the
stakeholder and the more uncertain the environment, the more that managers need to rely on
establishing explicit stakeholder partnership rather than just acknowledging their existence.