Strategic Management

MGT 6301

Lesson 4

Organizational culture and strategy

Nuresh Eranda, PhD

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Lesson outline
Historical and cultural roots for strategy
Strategic drift
Organization’s history
Organization culture
Layers in organizational culture
Cultural web for analysis
Culture influence strategy
Culture for better strategy execution

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Historical and cultural roots for strategy
Organizations need to understand how the past influences on current and
future strategy
Historical and cultural perspectives can help an understanding of both
opportunities and constraints
Capabilities of the organization may have historical roots and have built up
over time in ways unique to the organization
These capabilities may become part of the culture of an organization – the
taken-for-granted way of doing things – therefore difficult for other
organizations to copy
The powers and influence of different stakeholders are also likely to have
historical origins
Therefore, strategic position of an organization has historical and cultural
roots which helps to develop future strategies

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Case study:
DAMRO
Founded with a humble beginning
Deterministic entrepreneur
Quality consciousness

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Strategic drift
The tendency for strategies to develop incrementally on the basis of
historical and cultural influences but fail to keep pace with a changing
environment
Strategies of organizations tend to change gradually

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 Strategic drift
Organizations are used to develop strategies based on the past successful experience
Phase I: Incremental change
Long periods of continuity where the strategies remain unchanged or with incremental
changes
 Alignment with environmental change
 The success of the past
 Experimenting without moving too far from their capability base

Phase II: Strategic drift

Organization's strategy may continue to change incrementally, it may not change in line
with the environment
Organization’s strategy is not keeping pace with environmental changes
 The problem of hindsight
 Building on the familiar operations
 Rigidity in organizational activities
 Lack of support from stakeholder relationships

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Strategic drift
Phase III: A period of flux
A downturn in performance
Strategies may change but in no very clear direction
The differences of opinion would be there: future strategy should be
based on historic capabilities or whether those capabilities are
becoming redundant

Phase IV: Transformational change or death

Multiple changes related to the organization's strategy: change in
products, markets or market focus, changes of capabilities on which the
strategy is based, changes in the top management

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Organization’s history
Strategists have to understand the organization’s
history in dealing with strategic drift
The importance of understanding the history to
deal with strategic position
 The influence of history for manager’s decision making
 To avoid recency bias
 Misattribution of success
 Path dependency
 The early events and decisions establish policy paths that have lasting
effects on subsequent events and decisions

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 What is organization culture?
Organizational culture is the basic assumptions
and beliefs that are shared by members of an
organization, that operate unconsciously and
define in a basic taken-for-granted fashion an
organization’s view of itself and its environment.
Edgar Schein

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 What is organization culture?
Organizational culture is the taken-for-granted
assumptions and behaviors that make sense of people’s
organizational context and therefore contributes to how
groups of people respond and behave in relation to
issues they face.

Johnson et al (2011)

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Examples for organization culture

“Dedication to customer satisfaction, a strong work ethics, the

ritualistic Saturday – morning headquarters meeting to exchange

ideas and review problems, and company executives’

commitment to visit stores, talking to customers and soliciting

suggestions from employees.”

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Examples for organization culture

General Electric

Hard-driving; results-oriented atmosphere; extensive cross-business sharing of

ideas, best practices, and learning; reliance on ‘workout sessions’ to identify,

debate and resolve burning issues; a commitment to six-sigma quality; and the

globalization of the company.

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 Cultural Iceberg

Formal Goals, strategy, structure, systems &

procedures
Organisation
products & services
Financial resources, management

Informal Values, attitudes & beliefs

Organisation Leadership style & behavior, norms of
behavior
Power, politics & conflict
Informal groupings
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 Influences on organisation culture
Organisation’s founder

Organisation’s history

Leadership and management style

Organisation’s environment

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Organizational Culture in four layers
Paradigm (taken-for-
granted assumptions)

Behaviors

Beliefs

Values

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 Organizational Culture in four layers
Values
Written down as statements about an organization's mission,
objectives or strategies
These statements can be vague (e.g. Service to the Community,
shareholder value creation)

Beliefs
These are more specific, but again they can typically be
discerned in how people talk about issues the organization
faces
e.g. the company should not trade with Iraq
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Organizational Culture in four layers
Behaviors
The day-to-day way in which an organization operates and can
be seen by people both inside and outside the organization
E.g. work routines, how the organization is structured and
controlled

Paradigm (Taken-for-granted assumptions)

Set of assumptions held in common and taken for granted in
an organization
Aspects of organizational life which people find difficult to
identify and explain
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 Strong culture
The cultures in which the key values
are deeply held and widely shared
have a greater influence
Useful for improving business
performance
Replace rules, guidelines, and close
supervision
Increase employee loyalty and
commitment
Drive organisational change
Weak culture
A highly politicized internal
environment in which individuals or
groups who have the political
influence make the strategic
decisions
It has little alignment with
organisational values and
organisational control is undertaken
through widespread procedures and
bureaucracy.
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The cultural web
Device for mapping organizational culture
The cultural web shows the behavioral, physical and symbolic
manifestation of a culture that inform and are informed by the
taken-for-granted assumptions, or paradigm of an organization
Cultural web is important for analyze the culture to understand
both existing culture and its effect to the organization
Help managers to address the challenge of strategy driven cultural
change

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The cultural web of an organization

Adapted from Johnson and Scholes (1998)

Elements of cultural web
Paradigm
 Paradigm is the core element position in the centre

 The taken-for-granted assumptions and beliefs of the paradigm

are the collective experience applied to a situation to make
sense of it and inform a likely course of action.

 It is difficult for internal people to understand the paradigm

and outsiders can be used for this

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Elements of cultural web
Stories
 Narratives told by members of an organization to each other, to outsiders,
to new recruits
 Include successes, disasters and heroes
 This is a way of letting people know what is important in an organization

Rituals
 Activities or events that emphasize, highlight or reinforce what is especially
important in the culture
 E.g. training programmes, interview panels, promotion and assessment
procedures,
 sales conferences
 Rituals can also be informal activities such as drinks in the pub after work

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Elements of Cultural Web
Routines
 ‘The way we do things around here’ on a day-to-day basis
 These may have a long history and may well be common across
organizations
 Routines accelerate the working of the organization, and may
provide a distinctive organizational competence

Symbols
 The objects, events, acts or people that convey, maintain or create
meaning over and above their functional purpose
 E.g. offices and office layout, cars and titles have a functional
purpose but are also typically signals about status and hierarchy

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Elements of cultural web
Power structures
 The most powerful groupings within an organization are likely to be closely
associated with the core assumptions and beliefs
 E.g. powerful executives may stay longer during some strategic drift

Organizational structure
 Reflect power and show important roles and relationships
 Formal hierarchical, mechanistic structures may emphasize that strategy is
the province of top managers and everyone else is ‘working to orders
 Holacracy structure reflects that strategy is collectively emergent

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Elements of cultural web
Control systems
 Measurements and reward systems emphasize what is
important
 to monitor in the organization
 E.g. public sector organizations concern more with
stewardship of funds than with quality of service
 Controlling focus more on financial measures
 Individual based performance reflects a culture of
individuality, internal competition and an emphasis on
sales volume rather than teamwork

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Using the cultural web
1. Analyzing the culture as it is now

2. Analyzing culture as organization wants it to be

3. Compare the current culture with what it wants

to be

4. Prioritize changes, and develop a plan to

address them
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Cultural Web:
Useful questions to ask……….

Refer additional material

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Exercise
Select an organization of your choice and analyze its culture
using the cultural web.

Answer the following questions as well.

 How would you characterize the dominant culture in the
organization?

 How easy is this to change?

 What are the strategic implications of your analysis?

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Culture’s influence on strategy
Development of Corporate
Culture Implementation
strategy performance

If unsatisfactory
Step 1
Tighter control
Step 2
Reconstruct new
strategy
Step 3
Abandon paradigm &
adopt new one
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Culture’s influence on strategy
Step 1: Tighter control
Lowering cost, improve efficiency, tighten control

Step 2: Reconstruct new strategy

Extending the market for the business (e.g. market development or
product development)

Step 3: Abandon paradigm & adopt new one

Changing a bureaucratic organization to be customer-oriented

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Culture promote better strategy
execution
Culture provides employees with clear guidance regarding
what behaviors and results constitute good job performance

Culture produces significant peer pressure from coworkers

to conform to culturally acceptable norms

Culture promotes employee commitment to the company‘s

vision, performance targets and strategy

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Summary
Historical and cultural roots for strategy
Strategic drift
Organization’s history
Organization culture
Layers in organizational culture
Cultural web for analysis
Culture influence strategy
Culture for better strategy execution

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