Organisational Culture: Factors influencing the Culture of an Organisation and Cultural Differences

We've summarised below some key points that students should consider when revising the the factors influencing the culture of an organisation and cultural differences within an organisation:

Definitions

• Culture: “The way we do things around here"
• Sub-culture: group of people within a culture (whether distinct or hidden) which differentiates them from the larger culture to which they belong
• Mission: a formal statement of an organisation's fundamental purpose (similar to vision, purpose)
• Core values: the essential and enduring guiding principles of an organisation.
• Vision statement: a picture of an organisation in the future (aspiration, inspiration) which sets the framework for strategic planning.
• Paradigm: the set of assumptions held in common & taken for granted in an organisation. Often unspoken.

Key Theories / Concepts

• Charles Handy: four types of culture
• Power : focus on personal charisma & risk-taking
• Role: focus on position, bureaucracy, hierarchy
• Task: focus on problem-solving, teamwork, creativity
• Person: focus on individual needs, independence
• Edgar Schein: 4 layers of organisational structure: Values | Beliefs | Behaviours | Paradigm
• Johnson & Scholes: Cultural Web (Symbols, Power Structures, Organisational Structures, Control Systems, Rituals & Routines, Stories)

Factors Influencing Culture of an Organisation

• Influence of the founder (“shadow of the leader")
• Size & development stage of the business (e.g. start-up, multisite, multinational)
• Leadership & management style
• Organisational structure, policies & practices
• Employee & management reward structures (e.g. pay, bonuses, individual v team rewards)
• Market /industries in which it operates
• Working environment & nature of tasks (e.g. physical, office, remote working, flexible working)
• External environment (e.g. legal, economic, social)
• Attitude of organisation to risk-taking & innovation
• Sector: e.g. service, manufacturing

Cultural Differences Within an Organisation

• Subcultures develop within an organisation based on occupations, product lines, functions, geographies and echelons in the hierarchy.
• Some firms: sub-cultures are stronger than overall organisational culture
• Managing Sub-cultures has become more important & challenging:
• Mergers, takeovers, joint ventures more common
• Globalisation: many firms now multi-cultural based on nationality, language
• Technological complexity: depts. more specialised; more remote & flexible working

Key Examples / Evidence

• Barclays: impact of powerful sub-culture at investment banking division (came to dominate retail bank)
• Apple / Disney: role of culture of innovation & secrecy; shadow of the leader – Steve Jobs, Walt Disney
• HP (“HP Way"), Toyota (“Toyota Way") – long-established cultural programmes, including induction
• NHS: public sector organisation with complex cultural challenges – combination of role & task culture?
• Walmart: a common approach to employee (“shareholder") engagement across the globe
• Google: has deliberately maintained existing culture of acquisitions (e.g. YouTube & Zappos)
• Ikea: has developed a consistent culture among employees around the world who “love the values"

Depends on Factors

• Organisations will vary significantly in terms of the strength and depth of their culture: this will depend on:
• Strength & clarity of the organisation founder
• Amount and intensity of shared experiences that organisation members have had
• How much success the organisation has enjoyed
• The history/heritage of the business

Further Evaluation Opportunities

• Much academic research on what organisational culture is – but little agreement, so theoretical models can only be a guide.
• Culture is a complex concept which is difficult to understand = a challenge for business leaders!
• There is no absolute criterion for a “better" or a “worse" culture – it depends on what is “right" for the organisation