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2.5. Organizational and Corporate Culture (HL only)

  • Organizational and corporate culture
    • Defined as what is normal to the organizations; how workers behave w/in the business
  • Set of norms (based on mission and vision)
    • Helps people fit in based on the organization’s traditions and routines
    • A manager has to understand in order to:
      • Train the employees to fit company norms
      • Improve communications between employees
      • Better job description
    • Other groups conform to subcultures, which can cause conflicts or culture gaps
      • Culture gaps are discrepancies among subgroups
      • Difference between cultures exists within a business
  • Elements of organizational culture
    • N.O.R.M.S (nature of business, organizational structure, rewards, management styles, sanctions)
    • External factors such as location can also affect corporate culture (concern from cross border joint ventures)
    • Advantages of strong organizational culture
      • Belonging and security
      • Reducing mistakes
      • Team cohesiveness
      • Minimizes culture clash/gap
    • Cultures can change due to:
      • Mergers, takeovers, acquisitions
      • Change in NORMS
  • Types of organizational cultures
    • Charles Handy’s 4 Types of Culture
      • Power culture
        • Power is centralized, quick decision making
        • Results-based, likely flat
      • Role culture
        • Jobs are clearly stated, little creativity
        • Highly structured, tall organization/bureaucratic
      • Task culture
        • Focuses on getting results from work done
        • Individuals and teams are empowered and given flexibility
        • Decentralized power
      • Person culture
        • Staff have similar positions with similar expertise
        • Staff form groups to share knowledge
        • Individual may benefit which may carryover to firm
    • Edgar Schein’s 3 levels of corporate culture:
      • Artifacts (e.g. history, facilities, buildings, dress code, etc.)
      • Espoused values (e.g. mission, branding, slogans, etc.)
      • Basic assumptions and values (values in behavior/action)
    • Deal and Kennedy
      • Corporate culture is the way things get done
      • Two dimensions feedback/reward and risk
        • Rapid feedback means bad culture is quickly removed
        • High risk businesses needs people that fit well in their culture
      • 4 types of culture:
        • Tough-guy Macho (rapid feedback, high risk)
          • e.g. stock market, police force
        • Work-hard, Play-hard (rapid feedback, low risk)
          • Stress from pace of work instead of risk (e.g. hotel)
        • Bet-the-company (slow feedback, high risk)
          • e.g. oil exploration, pharmaceuticals
        • Process (slow feedback, low risk)
          • e.g. governments, insurance (bureaucracy)
    • Knotted and Heskett
      • Adaptive cultures – flexible work practices, entrepreneurial
      • Inert cultures – strict work protocols
    • Goffee and Jones
      • Sociability – extent of concern for colleagues
      • Solidarity – cohesiveness/unity in the organization
      • Ideal culture will have high sociability and solidarity
    • Gerry Hofstede
      • Several factors in culture:
        • Power distance – extent of unequal power distribution
          • High – centralized
          • Low – decentralized, delegation
        • Individualism vs. collectivism
        • Masculinity vs. femininity
        • Uncertainty avoidance
        • Long-term vs. short-term
  • Culture clashes
    • Occurs when there conflict between subcultures in an organization
    • May lead to lowered productivity, staff walkouts, losses
    • Happens during times of change
      • e.g. takeovers, acquisitions, mergers, expansions
    • Common causes
      • High cost of implementing change
      • Resistance to change from workforce
      • Public opinion
      • Difference in national cultures (e.g. job practice)
  • Importance of understanding the organizational culture
    • Culture gaps can cause major problems since individuals affect culture as much as the other way around
    • Poor culture may lead to absenteeism, lateness
    • Cultural intelligence or cultural quotient
      • Ability of individual to blend into a culture; attitude of workers to change
      • Rational, motivated, and attentive workers help establish good culture