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Organizational Culture

A Guide for Sustainable Entrepreneurs

SUSTAINABLE ENTREPRENEURSHIP PROJECT

Dr. Alan S. Gutterman

Organizational Culture: A Guide for Sustainable Entrepreneurs

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The Sustainable Entrepreneurship Project (www.seproject.org) engages in and promotes

research, education and training activities relating to entrepreneurial ventures launched

with the aspiration to create sustainable enterprises that achieve significant growth in

scale and value creation through the development of innovative products or services

which form the basis for a successful international business. In furtherance of its mission

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Dr. Alan S. Gutterman is the Founding Director of the Sustainable Entrepreneurship

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transactions, strategic business alliances, technology transfers and intellectual property,

and has also held senior management positions with several technology-based businesses

including service as the chief legal officer of a leading international distributor of IT

products headquartered in Silicon Valley and as the chief operating officer of an

http://www.businesscounselorinstitute.org/

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University of California at Berkeley, a D.B.A. from Golden Gate University, and a Ph. D.

from the University of Cambridge. For more information about Dr. Gutterman, his

publications, the Sustainable Entrepreneurship Project or the Business Counselor

Institute, please contact him directly at [email protected].

mailto:[email protected]


1 Organizational Culture

Setting the Stage

A number of definitions of organizational culture have been offered; however, if managers and employees

are consulted they may simply respond that culture is “how we do things around here”. There is obviously

truth to such a statement but it would be a mistake to ignore the breadth and scope of the issues that are

influenced by an organization’s cultural norms and values—how activities within the organization are

carried out, how members communicate with one another, who is accepted into the organization and who is

ostracized, and what is the organization’s overall morale. The culture of a particular organization is created

and maintained by its members, particularly the founders and senior managers, based on a variety of

influencing factors—both external and internal—and they are also the ones who can change and transform

the culture when they are convinced that such actions are necessary in light of the then-current environment

that the organization is facing. Organizational culture should not be underestimated and research has

indicated that the culture of an organization has a strong influence on how the organization tackles

problems and questions, sets strategy and creates the structures that determine the work activities and

relationships of organizational members and also on how members behave when carrying out their

organizational activities. There is no single culture that is universally appropriate for all organizations and

there is clearly substantial diversity with respect to the dominant cultural attributes among successful and

effective organizations. The challenge is to construct a culture that fits well with the overall strategic goals

and objectives of the organization and hopefully becomes a core competency for the organization and can

be used to distinguish it from competitors in the minds of customers and prospective members.

Key Topics Covered

Key topics covered in this Guide include the following:

Definitions of organizational culture

Dimensions and typologies of organizational culture

Determinants of organizational culture

Significance of organizational culture

Elements of organizational culture

Learning Objectives

After reading this Guide, you should be able to:

1. Explain various definitions of organizational culture.

2. Explain the dimensions of organizational culture.

3. Explain typologies of organizational culture.

4. Explain how culture influences an organization’s day-to-day activities and interactions.

5. Explain the determinants of organizational culture.

6. Explain the significance of organizational culture.

5. Identify and explain the elements of organizational culture.

§1 Introduction

In addition to their formal organizational structure and the rules and standard operating

procedures used to support and operate the structure, organizations also rely heavily on


2 their organizational culture as an important tool in controlling and coordinating the

activities of their members (e.g., executive, managers and employees), formulating

communications among those members, and providing incentives and reasons for them to

act in ways that the leaders of the organization considers to be necessary in order to

achieve and sustain organizational effectiveness and comply with the requirements and

expectations of the organization’s external environment.

According to Tatarusanu et al., the concept of organizational culture began to emerge in

the 1970s when researchers in the US and Europe were particularly interested in

understanding the sources of the comparatively higher performance of Japanese

companies including the question of whether or not the organizational culture in those

firms provided a specific competitive advantage.1 Subsequent studies took on the

difficult question of defining and measuring organizational culture and examining the

role that organizational culture, and changes in organizational culture, played in

successful implementation of important managerial transformation initiatives such as

reengineering programs, total quality management and technological innovations (i.e.,

resource planning systems, flexible production technologies).2

A number of definitions of organizational culture have been offered; however, if

managers and employees are consulted they may simply respond that culture is “how we

do things around here”. There is obviously truth to such a statement but it would be a

mistake to ignore the breadth and scope of the issues that are influenced by cultural

norms and values—how activities within the organization are carried out, how members

communicate with one another, who is accepted into the organization and who is

ostracized, and what is the organization’s overall morale. The culture of a particular

organization is created and maintained by its members, particularly the founders and

senior managers, based on a variety of influencing factors and they are also the ones who

can change and transform the culture when they are convinced that such actions are

necessary in light of the then-current environment that the organization is facing.

Organizational culture should not be underestimated and, in fact, in most cases it is a

stronger force than any other set of internal laws—rules and procedures—applicable to

the members of the organization. However, in order for culture to have the desired

impact it is important for the founders and senior managers of an organization to

understand as early as possible that culture is one of the fundamental tools available to

1 M. Tatarusanu, A Onea and A. Cuza, “Organizational Culture and Values for Corporate Sustainability

(University of Iasi), http://docplayer.net/11003116-Organizational-culture-and-values-for-corporate-

sustainability.html 2 M. Linnenluecke and A. Griffiths, “Corporate sustainability and organizational culture”, Journal of World

Business, 45 (2010), 357, 360 (citing R. Zammuto, B. Gifford and E. Goodman, “Managerial ideologies, organization culture, and the outcomes of innovation” in N. Ashkanasy, C. Wilderoom and M. Peterson (Eds.), Handbook of organizational culture & climate (Sage: Thousand Oaks, CA, 2000), 261). For more

information on measurement instruments for organizational culture, see N. Delobbe, R. Haccoun and C.

Vandenberghe, Measuring Core Dimensions of Organizational Culture: A Review of Research and

Development of a New Instrument (reviewing 20 organizational culture questionnaires to identify the

common cultural dimensions tapped (i.e., people orientation, innovation, outcome orientation and

bureaucratic orientation) and the level of psychometric support for those dimensions).


3 them to create a working environment in which organizational members are encouraged

and motivated to cooperatively engage in collaborative behavior. Moreover, a failure of

organizational leaders to understand the cultural values and norms that exist within the

organization can doom their attempts to change the goals and strategy of the organization

if the proposed changes are not consistent with the culture.

Research has indicated that the culture of an organization has a strong influence on how

the organization tackles problems and questions, sets strategy and creates the structures

that determine the work activities and relationships of organizational members and also

on how members behave when carrying out their organizational activities.3 There is also

evidence that organizational culture plays a big part in defining the competitive position

of the organization in its environment and the way in which the organization is perceived

by external stakeholders. For example, it has been argued that organizational culture is a

key factor in whether or not an organization can achieve and maintain an entrepreneurial

orientation4, which has been defined as a strategic focus on risk-taking, proactive pursuit

of new opportunities and new product or process innovation.5 Organizational culture is

an important determinant of the level of risk-taking that a firm is willing to tolerate.6

Organizational culture can itself become a core competency for an organization and can

be used to distinguish it from competitors in the minds of customers. Good examples are

firms such as Disney and Southwest Airlines, each of which are widely known as

companies with an innovative organizational culture that continuously works to improve

the experience that customers have with their activities and their members. Culture

should not be underestimated and, in fact, in most cases the organizational culture is a

stronger force than any other set of internal laws--rules and procedures--applicable to the

members of the organization.

While the importance of organizational culture has been widely recognized, it is a

difficult and complex subject and careful review and analysis is required in order to

identify the essential cultural values and norms and determine how they impact the

behavior of managers and employees. There is no single culture that is universally

appropriate for all organizations and there is clearly substantial diversity with respect to

the dominant cultural attributes among successful and effective organizations. For

example, the core cultural values at a relatively conservative company, such as General

Motors in the early 1980s, might include loyalty, hierarchy, and conformity and expected

behaviors from managers and employees in that environment might include deferential

respect for authority; open expressions of loyalty to the company and strong

discouragement of opposition; and conservative choices with respect to dress and office

furnishings. In contrast, an upstart company created by founders disenchanted with the

culture and practices of traditional companies might emphasize a very different set of

core values such as rewarding productivity and performance over acts of deference and

3 O. Recklies, Mergers and Corporate Culture, http://www.themanager.org/pdf/Merger_Culture.PDF

4 J. Cornwall and B. Perlman, Organizational Entrepreneurship (Homewood, IL: Richard D. Irwin, 1990).

5 D. Miller, The Correlates of Entrepreneurship in Three Types of Firms, Management Science, 29, 770-

791. 6 R. Burgelman and L. Sayles, Inside Corporate Innovation: Strategy, Structure and Managerial Skills

(1986).

http://www.themanager.org/pdf/Merger_Culture.PDF


4 conformity, encouraging employees to act independently and challenge decisions and

beliefs rather than simply continue to act based on blind loyalty, adopting contemporary

styles of dress and office decoration, and designing and maintaining flat organizational

structures to facilitate rapid decision making.7 In addition, a strong culture is not

necessary better or more effective than a weak one. The real point of measurement is

whether or not the culture fits well with the overall strategic goals and objectives of the

organization and the key challenge for senior management is identifying the particular

cultural elements that are most important and focusing on how appropriate changes can

be made to drive the organization in the direction necessary to execute new strategies.

§2 Definitions of organizational culture

Not surprisingly, there is no generally accepted definition of “organizational culture” and

scholars from a diverse range of disciplines such as sociology and anthropology have

treated culture as something that is implicit in social life and which emerges over

extended periods of time as individuals interact with one another and begin to organize

themselves as identifiable social groups (e.g., tribes, communities, companies, non-profit

organizations, states and countries). Experts in management science and organizational

behavior and communication see organization culture as an explicit product of the

choices that a group of people make with respect to accepted behavior as they interact

with one another and key stakeholders outside of the organization (e.g., customers,

suppliers and regulators) and attempt to develop ways to confront their broader social

environment.8 Hill and Jones offered a definition of organizational culture as "the

specific collection of values and norms that are shared by people and groups in an

organization and that control the way they interact with each other and with stakeholders

outside the organization".9 Schein defined organizational culture as: "[a] pattern of

shared basic assumptions that the group learned as it solved its problems of external

adaptation and internal integration that has worked well enough to be considered valid

and, therefore, to be taught to new members as the correct way you perceive, think, and

feel in relation to those problems".10

§3 Approaches to studying organizational culture

Dauber et al. noted that the concept of organizational culture has roots in cultural theory

and the field of cultural studies and reported that organizational culture has been studied

as a construct separate and distinguishable from societal culture for several decades and

by a variety of different disciplines, each of which bring their own unique approach and

emphasis to the subject.11

They classified the research approaches into three broad

7 J. Martin and C. Siehl, “Organizational culture and counterculture: an uneasy symbiosis”, Organizational

Dynamics, 12(2) (1983), 52–64. 8 R. Wuthnow and M. Witten, New directions in the study of culture. Annual Review of Sociology 14: 50-

51 (1988); E. Schein, Organizational Culture and Leadership (San Francisco, CA: Jossey-Bass, 1988). 9 C. Hill and G. Jones, Strategic Management (Boston, MA: Houghton Mifflin, 2001).

10 E. Schein, Organizational Culture and Leadership (3

rd Ed.) (San Francisco, CA: Jossey-Bass, 1985-

2005). 11

D. Dauber, G. Fink and M. Yolles, “A Configuration Model of Organizational Culture”, SAGE Open 2012, Originally Published on 22 March 2012, http://sgo.sagepub.com/content/2/1/2158244012441482.


5 categories: the dimensions approach, which borrowed heavily from work done by a

number of different researchers studying societal culture; the interrelated structure

approach, a popular example of which is the model of organizational culture developed

by Schein that includes three levels: basic underlying assumptions, espoused values and

artifacts; and the typology approach, which attempts to divide and cluster organizations

into certain categories based on pre-defined key characteristics and then assign

organizational culture profiles to each category (e.g., “strong”, “weak”, “bureaucratic”,

‘innovative”, “people-oriented” or “team-oriented”). Dauber et al. recognized the

influence of research on societal culture on the study of organizational culture; however,

they emphasized that organizational values were quite distinguishable from societal

values and that while organizational values were influenced by the values of the society

in which they were operated identifying organizational culture required attentiveness to

the personalities and value preferences of the organizational members and their specific

tasks and goals within the organization.

§4 --Dimensions of organizational culture

The dimensions approach was described by Dauber et al. as including efforts focused “on

measuring organizational culture empirically along (in some cases bipolar) scales that can

be related to other, most dependent, variables of interest”.12

The dimensions approach

has become extremely popular for research, analysis and diagnosis in the area of societal

culture and its influence on the management of organizations and the behaviors of

organizational members. Researchers have observed that this phenomenon can partly be

“attributed to a simplification of the approach to culture”. It is, therefore, not surprising

that attempts have been made to identify dimensions of organizational culture and, as part

of that process, gauge the extent to which dimensions of societal culture can also be

applied to analysis at the organizational level. The consensus seems to be that while

organizational values are affected by societal values, and the personal values of

organizational members that inevitably come into play as they go about their day-to-day

activities are also influenced by societal values, organizational values differ significantly

from national or societal values and any dimensional model of organizational culture

would best be focused on the tasks required, and the actual practices relating to those

tasks, of organizational members.13

A wide range of models of dimensions of organizational cultures have been proposed,

often accompanied by suggestions on how organizational leaders can use the various

dimensional models in connection with their efforts to assess and evaluate their

organizational cultures and implement changes to those cultures that might lead to

12

Id. at 2. 13

Id. at 3. See L. Sagiv and S. Schwartz, “Cultural values in organisations: Insights for Europe”, European

Journal of International Management, 1 (2007), 176-190 (arguing that organizational culture is influenced

by the “surrounding society” (societal culture), “personal value priorities of organizational members” and “the nature of the organization’s primary tasks”). For a detailed discussion of attempts to identify dimensions of organizational culture, see the chapter on “Dimensions of Organizational Culture” in

“Organizational Culture”, a research paper which is part of “Organizational Culture: A Library of

Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org).


6 improvements in productivity, efficiency and other tangible measures of “organizational

performance”. Many of these models were developed by Western researchers looking at

organizational activities and behaviors within firms launched and operating in the

developed world. Among those researchers that have proposed models intended to have

applicability across all types of societies—developed and developing—the ideas of

Hofstede and the research team overseeing the Global Leadership and Organizational

Behavior Effectiveness project, commonly referred to as “GLOBE”, have received most

of the attention.

Hofstede, who is best known for his work in studying how national and regional cultural

characteristics (i.e., “societal culture”) impact organizational behavior, also conducted

smaller studies that focused on organizational culture and identified the following

dimensions of organizational culture that could be used a descriptive framework for

organizational cultures: process-oriented versus results-oriented; job-oriented versus

employee-oriented; professional versus parochial; open systems versus closed systems;

tight versus loose control; and pragmatic (flexible) versus normative (rigid).14

Hofstede

acknowledged that his specific research base (20 organizations or parts of organizations,

ranging from a toy manufacturing company to municipal police corps, in the Netherlands

and Denmark) was too narrow to credibly argue for the universal validity and sufficiency

of the six dimensions that he identified and noted that additional dimensions may be

necessary or some of the six may be less useful in other countries and/or when analyzing

other types of organizations. In fact, while the organizations that he studied did evidence

widely divergent perceptions of daily practices he was only able to uncover “modest”

differences in values after taking into account the effect of non-organizational factors

such as nationality, education, age and gender.

The researchers involved in the GLOBE project on cross-cultural aspects of leadership

assessed nine cultural dimensions derived from a number of sources including Hofstede

and others identified in an extensive literature review.15

In contrast to Hofstede, the

GLOBE researchers worked from the perspective that “societal and organizational

cultures can be described using the same dimensions, recognizing that these dimensions

can have somewhat different psychological meanings at the different levels of

analysis”.16

However, they conceded that when organizational, as opposed to societal,

culture was the primary subject of interest “there is no need to constrain the dimensions

of organizational culture to map onto the dimensions of societal culture” and then

reported that exploratory factor analyses of the responses to the questions on the GLOBE

14

G. Hofstede, B. Neuijen, D. Ohayv and G. Sanders, Measuring Organizational Cultures: A Qualitative

and Quantitative Study across Twenty Cases, Administrative Science Quarterly, 35 (1990), 286. 15

For an interesting and detailed overview of the development of the GLOBE project and the

organizational processes used to collect and analyze the information, see R. House, P. Hanges, S. Ruiz-

Quintanilla, P. Dorfman, M. Javidan and M. Dickson, Cultural Influences on Leadership and

Organizations, in Advances in Global Leadership, Volume I 171 (1999). For a fuller discussion of the

GLOBE project, see “Globalization: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org). 16

M. Dickson, R. Aditya and J. Chhokar, Definition and Interpretation in Cross-Cultural Organizational

Research: Some Pointers from the GLOBE Research Program, in N. Ashkanasy, C. Wilderom and M.

Peterson (Eds.), Handbook of Organizational Culture & Climate 447, 453 (2000).


7 questionnaire to organizational level items led them to identify the following, smaller, set

of factors that might be more appropriate when attempting to construct a list of

organizational culture dimensions: organizational collectivism/commitment; humane

orientation; assertiveness; a combination of uncertainty avoidance and future orientation;

gender egalitarianism; and individualism collectivism.17

In addition to the models developed by Hofstede and the GLOBE researchers, Sagiv and

Schwartz argued for a framework that included each of the following cultural dimensions

as influencers of organizational behaviors: harmony, embeddedness, hierarchy, mastery,

affective autonomy, intellectual autonomy and egalitarianism.18

These dimensions were

expressed in bipolar fashion by linking embeddedness and autonomy; mastery and

harmony; and hierarchy and egalitarianism. Chatterjee et al., who were specifically

interested in developing measurements of corporate culture to be used to determine the

extent to which perceptions of cultural differences of the top management teams of

parties to an acquisition transaction (e.g., a merger) related to stock market gains of the

securities of the acquirer, suggested a group of dimensions of organizational culture that

included innovation and action orientation; risk-taking; lateral integration; top

management contact; autonomy and decision making; performance orientation; and

reward orientation.19

Based on his studies of hundreds of companies around the world,

Denison concluded that four cultural traits or dimensions—adaptability, mission,

involvement and consistency—each had a significant influence on an array of

organizational performance measures including sales growth, return on assets, quality,

profits, employee satisfaction and overall performance.20

Researchers working on the

Organizational Culture Profile project felt that it was possible and valuable to create

profiles of organizational culture that incorporated measures on multiple dimensions that

included supportiveness, innovation, competitiveness, performance orientation, stability,

emphasis on rewards, and social responsibility.21

§5 --Interrelated structure approach

As for the interrelated structure approach, Dauber et al. described it as “concentrate[ing]

on linking the concept of organizational culture to other constructs or characteristics of

organizations and less to single variables”.22

A popular example of this approach is the

17

Id. at 453-454. 18

See, e.g., L. Sagiv and S. Schwartz, “Cultural values in organisations: Insights for Europe”, European

Journal of International Management, 1 (2007), 176-190. 19

See S. Chatterjee, M. Lubatkin, D. Schweiger and Y. Weber, “Cultural differences and shareholder value

in related mergers: Linking equity and human capital”, Strategic Management Journal, 13 (1992), 319-334,

324. 20

For descriptions of the four dimensions of Denison’s model of organizational culture, see Denison, Denison Organizational Culture Model, See also W. Mobley, L. Wang and K. Fang, Organizational

Culture: Measuring and Developing It in Your Organization, The Link (China Europe International

Business School), 11 (Summer 2005), 13.

http://www.denisonconsulting.com/model-surveys/denison-model/organizational-culture. 21

See J. Sarros, J. Gray and I. Densten, The Next Generation of the Organizational Culture Profile, Monash

University Faculty of Business and Economics Working Paper Series, 15/03 (April 2003). 22

D. Dauber, G. Fink and M. Yolles, “A Configuration Model of Organizational Culture”, SAGE Open 2012, Originally Published on 22 March 2012, http://sgo.sagepub.com/content/2/1/2158244012441482, 2.

http://www.denisonconsulting.com/model-surveys/denison-model/organizational-culture


8 model of organizational culture developed by Schein, who began with a definition of

“culture” as “a pattern of basic assumptions – invented, discovered or developed by a

given group as it learns to cope with problems of external adaptation and internal

integration – that has worked well enough to be considered valid and, therefore, to be

taught to new members as the correct way to perceive, think and feel in relation to those

problems”.23

He then fleshed out this definition by suggesting that culture could be

understood by dividing it into three levels or elements. At the broadest and perhaps most

abstract level are “basic assumptions”, which are the most difficult to identify and include

the organization’s tacit core beliefs, values and assumptions that drive the decisions of

organizational members with respect to their behaviors and actions. The next level is

“espoused values”, such as organizational slogans and other visible expressions of

organizational mission and the established rules of behavior or standards of conduct,

often referred to as “norms”, which exist within an organization to control the behavior of

its members. Norms, both formal and informal, contribute to the orderliness and

predictability of the day-to-day activities of the organization and are learned through

various socialization processes. Norms create strong bonds within the organization and

members are likely to feel intense guilt or shame if they should breach their obligations.

The third level consists of the various visible artifacts and creations, sometimes referred

to as “cultural forms,” including rites and rituals, myths and stories, symbols, language,

gestures, dress codes, artifacts physical layout of work spaces and other elements of the

physical surroundings, used by organizations as linking mechanisms to develop networks

of understanding among members and communicate the prevailing cultural values and

norms of the organization. Taken together, these components provide guidelines that

ease the burden on members as they go about their activities within the organization.

§6 --Typologies of organizational culture

Typology approaches identify pre-defined key characteristics that can be used to divide

and cluster organizations into certain categories, and a number of attempts have been

made to identify categories of organizational culture as a means for describing certain

aggregates of cultural characteristics and facilitating comparisons among organizations.24

Perhaps the simplest typology of organizational culture relies on classification on a

continuum from “strong” to “weak” and a key determinant of where an organization falls

on this continuum is the degree of homogeneity. A strong culture is one where the

mutually agreed and understood values and norms have an overriding influence on the

23

E. Schein, Organizational Culture and Leadership (San Francisco, CA: Jossey-Bass, 1992), 16-17. 24

D. Dauber, G. Fink and M. Yolles, “A Configuration Model of Organizational Culture”, SAGE Open 2012, Originally Published on 22 March 2012, http://sgo.sagepub.com/content/2/1/2158244012441482, 2.

Attempts to identify categories of organizational culture and create typologies have been criticized. One

researcher complained that “the allocation of organizations to types often is not clear-cut. Because of their

a priori nature and frequent lack of specified empirical referents and cutoff points, typologies are difficult

to use empirically.” See A. Meyer, A. Tsui and C. Hinings, “Configurational approaches to organizational analysis”, Academy of Management Journal, 36 (1993), 1175-1195, 1182. For further discussion of

typologies of organizational culture, see the chapter on “Typologies of Organizational Culture” in

“Organizational Culture”, a research paper which is part of “Organizational Culture: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship

Project (www.seproject.org).


9 ways in which members conduct their activities on a day-to-day basis and interact with

external stakeholders. On the other hand, if the culture is weak it provides little or no

guidance to members and control of behavior is exercised primarily through formal

written guidelines and procedures. Deal and Kennedy developed four categories of

organizational culture based on how the speed of feedback given to members for their

actions and the level of risk and uncertainty associated with the activities of the

organization. For example, at one extreme is the “tough-guy macho” culture, typical of

stock brokers during the trading day, in which feedback on actions comes quickly,

members can anticipate high rewards for the right decision and stress levels are quite

high. At the other extreme would be organizational cultures that stress learning and

following a “process” and in which members get little or no feedback and tend to focus

on how things are done (i.e., process) as opposed to the value of the end product of all of

the activities. Process-based organizations are often referred to as “bureaucracies.”25

Wallach argued for a typology that included the following three separate, and

measurable, organizational cultures: bureaucratic, innovative and supportive.26

Handy

described four different categories of organizational culture identified by Roger Harrison:

power cultures (high concentration of authority among a relatively few individuals), role

cultures (highly organized structure with authority based on position), task cultures

(emphasis on specialization and expertise), and person cultures (individuals believe they

are more valuable than the organization).27

Bauer and Erdogan used the dimensions

associated with the well-known Organizational Culture Profile to suggest a typology of

seven distinctive organizational cultures: innovative, aggressive, outcome-oriented,

stable, people-oriented, team-oriented and detailed-oriented.28

Researchers have also embraced the “competing values” scale generally associated with

the work of Quinn and Rohrbaugh29

to propose a model that includes the following four

types of organizational culture: an “adhocracy” culture (flexible and externally focused)

which stresses creativity, adaptability and change; a “hierarchy” culture (stable and

internally focused) which focuses on stability, order, rules and regulations and features

hierarchical organizational structures with hierarchical leaders, well-defined policies and

procedures and close oversight by organizational leaders over all aspects of operational

25

T. Deal and A. Kennedy, Corporate Cultures: The Rites and Rituals of Corporate Life, (Harmondsworth:

Penguin Books, 1982). 26

E. Wallach, Individuals and Organizations: The Cultural Match, Training and Development Journal, 37

(1983), 29. 27

C. Handy, Understanding Organizations (3d Ed.) (1985) (citing R. Harrison, Understanding Your

Organization’s Character, 50 Harvard Business Review 119 (1972). 28

T. Bauer and B. Erdogan, Organizational Behavior, v. 1.0, Chapter 15, Flat World Knowledge,

http://catalog.flatworldknowledge.com/bookhub/3?e=bauer-ch15_s02. For further discussion of the

Organizational Culture Profile, see the chapter on “Typologies of Organizational Culture” in

“Organizational Culture”, a research paper which is part of “Organizational Culture: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org). 29

See R. Quinn and J. Rohrbaugh, A Competing Values Approach to Organizational Effectiveness, 5

Public Productivity Review 122 (1981); and R. Quinn and J. Rohrbaugh, A Spatial Model of Effectiveness

Criteria: Towards a Competing Values Approach to Organizational Analysis, 29 Management Science 363

(1983).

http://catalog.flatworldknowledge.com/bookhub/3?e=bauer-ch15_s02


10 activities; a “market” culture (stable and externally focused) which is concerned with

planning, efficiency and attainment of well-defined goals related to the organization's

position in its competitive environment; and a “clan” culture (flexible and internally

focused) which is focused on flexibility and developing human potential through

consensus building and relies on rules that are typically communicated socially and clan

leaders who act as supportive facilitators and assume a “parental role”.30

Trompenaars supplemented his well-known research on societal cultures31

by examining

organizational culture and suggested that it was possible to identify four “types” of

organizational or corporate culture based on the premise that the following aspects of

organizational structure were especially important in determining the culture: the general

relationship between employees and their organization; the vertical or hierarchical system

of authority defining superiors and subordinates; and the general views of employees

regarding the destiny, purpose and goals of the organization and their specific roles and

places within those views. 32

Trompenaars argued that two dimensions, incorporating the

aforementioned aspects of organizational structure, were needed in order to distinguish

different organizational cultures: equality-hierarchy and orientation to person-orientation

to task. This allowed him to generate four quadrants, each of which representing a

specific type of organizational culture: the “family”, the “Eiffel Tower”, the “guided

missile” and, finally, the “incubator”.33

According to Trompenaars each of the types of

organizational culture that they had identified could be distinguished from one another

with respect to several important elements and he argued that there were real and

identifiable differences among them with respect to how employees related to one

another (e.g., degree of formality); how employees viewed authority (e.g., egalitarianism

versus hierarchy); ways of thinking and learning; attitudes toward people; ways of

changing; the methods that would be most effective for motivating and rewarding; and

the processes used for delivering criticism and resolving conflicts and disputes.34

30

Descriptions adapted from K. Cameron, Measuring Organizational Effectiveness in Institutions of Higher

Education. 23 Administrative Science Quarterly 604 (1978) (as described in K. Chadwick, T. Barnett and

S. Dwyer, Entrepreneurial Orientation, Organizational Culture, and Firm Performance: An Empirical Study

in the Banking Industry, 6(3) Journal of Management and Applied Entrepreneurship 3 (2001) and

“Competing Values Framework.” ChangingMinds.org. Web. No Date. 31

For discussion of the work of Trompenaars and his colleague, Hampdon-Turner, on societal cultures,

including their “Seven Dimensions of Culture” model, see F. Trompenaars and C. Hampden-Turner, Riding

the Waves of Culture: Understanding Cultural Diversity in Global Business (2nd

Ed.) (1998) and

“Globalization: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org). 32

F. Trompenaars and C. Hampden-Turner, Riding the Waves of Culture: Understanding Cultural Diversity

in Global Business (2nd

Ed.) 161 (1998). 33

Id. at 162. For further discussion of these “ideal types” of organizational cultures, see the chapter on “Typologies of Organizational Culture” in “Organizational Culture”, a research paper which is part of “Organizational Culture: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org). 34

Trompenaars believed that countries could actually be classified into one of the four types of

organizational cultures in his suggested model and set out to do so by compiling a “database of corporate culture” based on responses received from 42 countries to questionnaires that “deal[t] with general concepts of egalitarianism versus hierarchy, degrees of formality, different forms of conflict resolution,

learning and so on” and asked respondents to “choose between four possible descriptions of their company” that corresponded to the four types of organizational cultures in the Trompenaars model. F. Trompenaars


11

§7 Determinants of organizational culture

Behind any model of organizational culture is an attempt to identify the most important

influences on, and determinants of, organizational culture. A great deal of focus has been

placed on understanding the external environment in which the organization operates,

technology, industry factors and societal culture (both for its direct impact on the

organization and its indirect impact through the personal values that organizational

members bring with them as a result of growing up within the societal culture). In fact,

Schein’s definition of organizational culture suggests that the basic assumptions

underlying an organization’s culture can be identified and understood by looking closely

at the “problems of external adaptation and internal integration” that the organization has

confronted and overcome, which means that learning about the organizational history,

particularly the way it is communicated to new members during their orientation process,

is extremely important in assessing its culture.35

Identifying the determinants of organizational culture is obviously a fundamental

endeavor when attempting to make comparisons of organizational cultures; however, the

complexity of culture makes it impossible to identify with certainty all of the factors that

determine the culture of a particular organization. Jones argued that specific

determinants of organizational culture include such things as the personal and

professional characteristics of the organizational members, particularly the founders;

organizational ethics; the manner in which property rights are created and allocated

within the organization; the structure used by the organization for communication and

coordination of activities; the systems used by the organization to control its internal

activities; and the power structures within the organization.36

In many cases the

organizational culture is also heavily influenced by the characteristics of the industry in

which the organization operates and organizations within a particular industry share the

cultural characteristics that are most appropriate for survival and growth in the face of the

competition and other environmental factors that they are facing.37

Other factors that are

likely contributors to the development of organizational culture include the history and

background of the organization; the size and evolution of growth of the organization;

societal culture; the function and purpose of the organization (i.e., organizational tasks

and the nature of the organization’s business, clients and operating processes); the

and C. Hampden-Turner, Riding the Waves of Culture: Understanding Cultural Diversity in Global

Business (2nd

Ed.) 182 (1998), 182. 35

E. Beaudan and G. Smith, “Corporate culture: asset or liability”, Ivey Business Journal, 64(4) (2000), 29-

33. 36

See G. Jones, Organizational Theory, Design and Change (5th

Ed) (Old Tappan N.J.: Prentice Hall,

2007), 187-194. 37

G. Gordon, “Industry Determinants of Organizational Culture”, Academy of Management Review: 16-2

(1991), 396-415. See also K. Haddad, C. Chow, G. Gordon, R. Hwang and A. Wu, Cross-National

Differences in Corporate Cultures and the Culture-Performance Relationship: a Two-Country Comparison,

International Journal of Business, 4(2) (1999), 81-112, 82-83 (“. . . Because industries place different demands and constraints on their members, companies in the same industry tend to develop common

responses (an "industry recipe") to the managerial uncertainties that they face. That corporate culture

differs systematically across industries has been empirically demonstrated in a number of studies (Citations

omitted).).


12 technology used in the conduct of the organization’s activities (i.e., job design,

complexity and interdependence); the goals and objectives of the organization; training,

appraisal and rewards systems; and the leadership and communications skills of those at

the top of the organizational hierarchy.38

While it may be true that organizational culture develops as a response to, and way of

coping with, the environment in which the organization must operate and the

expectations of the various external stakeholders that support and depend on the

organization, in many ways the culture of a particular organization is created and

maintained by its members, particularly the founders and senior managers, and they are

also the ones who are best positioned to change and transform the culture when they are

convinced that such actions are necessary in light of the then-current environment that the

organization is facing. The influence of the organizational founders on organizational

culture is substantial and persists long after those persons have ceased to be actively

involved with the organization.

It should not be forgotten, however, that while founders and senior managers can attempt

to influence organizational culture through their ideas, visions and personality traits, the

culture itself will not develop unless and until the organization and its members have

gone through a variety of crises of growth and survival and identified the best solutions to

deal with adapting to the organization's external environment and established appropriate

rules for all of the internal relationships within the organization. Schein observed that

organizational culture is based on “a pattern of assumptions that has worked well enough

to be considered valid ….”39 In other words, organizational culture ultimately emerges

from a complex, and often unpredictable, “interaction between (1) the assumptions and

theories that founders bring to the group initially and (2) what the group learns

subsequently from its own experiences.”40

§8 Significance of organizational culture

Values and norms that are part of an organization's culture generally serve as the primary

point of reference for the members of the organization as they make decisions about how

they behave and how they respond to particular situations that may arise during the

course of performing their activities on behalf of the company. Values and norms also

serve an important role as a point of reference for organizational members in terms of

expectations regarding how other members will and should behave when communication

38

See, for example, the discussion of antecedents of organizational culture in R. Cooke and J. Szumal,

“Using the Organizational Culture Inventory to Understand the Operating Cultures of Organizations” in N. Ashkanasy, C. Wilderom and M. Peterson (Eds.), Handbook of Organizational Culture & Climate

(Thousand Oaks, CA: Sage Publications, Inc., 2000), 147-162, 151. For a fuller discussion of the

determinants of organizational culture, see the chapter on “Determinants of Organizational Culture” in

“Organizational Culture”, a research paper which is part of “Organizational Culture: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org). 39

E. Schein, The Role of the Founder in Creating Organizational Culture, in Organizational Dynamics 348

(1983). 40

Id. at 349.


13 and collaboration is necessary. This does not necessary mean that other members will be

expected to react obediently and passively, unless that it is the response dictated by the

specific organizational culture, and it is conceivable in entrepreneurial cultures that others

will react in new and novel ways that are consistent with values such as innovativeness

and creativity. In any case, shared cultural values provide members of any organization

with an immediate “common ground” so that they do not have to invest a substantial

amount of time debating how a particular issue or situation should be viewed from the

organization's perspective. Finally, organizational members that understand and share

clearly defined cultural values are likely to have a stronger feeling of identification with

the organization and view their relationship with the organization as an important source

of their own individual self-esteem.

§9 --Links between organizational culture and organizational performance

A clear and strong set of cultural values and norms can be an important contributor to the

effectiveness of the overall organizational structure and to the success of the organization

in general. Researchers have long debated the question of how organizational culture

influences organizational performance, and it has been suggested that organizational

culture, including the way that a company operates, what it focuses on, and how it treats

customers, employees and shareholders, is the central driver of superior business

performance.41

Abu-Jarad et al. surveyed the history of research on the link between

organizational culture and corporate performance, especially the ability of a firm to

remain continuously competitive by developing and maintaining a portfolio of innovative

products and services.42

In general, it was assumed that there was a direct positive

relationship and that is was also possible to identify specific types of organizational

culture that could be expected to lead to better financial performance. Abu-Jarad et al.

noted that during the 1980s it became very popular to prescribe a “strong culture”, one

characterized by strong shared values, as the preferred means for achieving “high

performance” by an organization.43

However, several researchers reported inconsistent

results on any link between culture strengths and organizational performance.44

In

addition, studies differed with respect to key assumptions such as the dimension of

organizational culture and the composition of the samples of organizational members.

Nonetheless, while some researchers remained skeptical of drawing a link between

organizational culture and performance, there appeared to be sufficient evidence to

support such a relationship, albeit with several important caveats.45

41

J. Karanjia, “Effects of Corporate Culture on Organization Performance”, IOSR Journal of Mathematics, 10(6 Ver. II) (November – December, 2014), 59, 62. 42

I. Abu-Jarad, N. Yusof and D. Nikbin, “A Review Paper on Organizational Culture and Organizational Performance”, International Journal of Business and Social Science, 1(3) (December 2010), 26, 41. 43

See, e.g., T. Peters and R. Waterman, In Search of Excellence: Lessons from America’s Best-Run

Companies (New York: Harper and Row, 1982); and T. Deal and A. Kennedy, Corporate Culture: The

Rites and Rituals of Corporate Life (Reading: M.A: Addison Wesley, 1982) 44

D. Denison, Corporate Culture and Organizational Effectiveness (New York: John Wiley and Sons,

1990); and J. Kotter and L. Heskett, Corporate Culture and Performance (New York: Free Press, 1992). 45

E. Ogbonna and L. Harris, “Leadership style, organizational culture and performance: Empirical evidence from UK companies”, International Journal of Human Resources Management, 11(4) (2000), 766.


14 Widely shared and strongly held cultural values and beliefs are seen as a sign of cultural

strength, and many researchers have explored and tested hypotheses that a strong culture

leads to improved financial performance.46

Linnenluecke and Griffith explained that

these hypotheses were largely based on the presumption that there are performance

benefits from a strong corporate culture due to enhanced coordination and control as well

as increased motivation and goal alignment among organizational members.47

Commentators on leadership styles admonished organizational leaders to envision and

proactively create a strong organizational culture in order to achieve the anticipated

increases in productivity and overall performance.48

Early studies failed to find much

empirical evidence for any linkages between a ‘‘strong culture’’ and firm performance49

;

however,, later studies integrated environmental conditions and strategy into the mix and

argued that such a linkage could exist but only if a strong and widely held culture was

aligned with the organizational strategy and could also adapt to changing environmental

conditions.50

Denison developed what has become a well-known model and measurement tool of

organizational culture in an effort to identify those characteristics of organizational

culture that were most strongly related to effective organizational performance. Based on

his studies, Denison concluded that “in those organizations whose work is more sensibly

organized and where individuals are more involved in decision-making, return on

investment and return on sales are two to three times higher” and he argued that there

46

C. O’Reilly and J. Chatman, “Culture as social control: Corporations, culture and commitment” in B. Staw and L. Cummings (Eds.), Research in organizational behavior (Greenwich, CT: JAI Press, 1996),

157; C. Reilly, “Corporations, culture and commitment: Motivation and social control in organizations”, California Management Review, 31(4) (1989), 9; G. Saffold, “Culture traits, strength, and organizational performance: Moving beyond ‘‘strong’’ culture”, Academy of Management Review, 13(4) (1998), 546; D. Denison, “Bringing corporate culture to the bottom line”, Organizational Dynamics, 13(2) (1984), 4; and J. Sørensen, “The strength of corporate culture and the reliability of firm performance”, Administrative Science Quarterly, 47(1) (2002), 70. 47

M. Linnenluecke and A. Griffiths, “Corporate sustainability and organizational culture”, Journal of World Business, 45 (2010), 357, 362 (citing J. Sørensen, “The strength of corporate culture and the reliability of firm performance”, Administrative Science Quarterly, 47(1) (2002), 70; T. Deal and A.

Kennedy, Corporate cultures: The rites and rituals of corporate life (Reading, MA: Addison-Wesley, 1982);

W. Ouchi and R. Price, “Hierarchies, clans, and theory Z: A new perspective on organization development”, Organizational Dynamics, 21(4) (1993), 62; and T. Peters and R. Waterman, In search of

excellence: Lessons from America’s best-run companies (New York: Harper & Row and Warner Books,

1982). 48

J. Martin, Organizational culture: Mapping the terrain (Thousand Oaks: Sage, 2002); and C. Jarnagin and

J. Slocum, “Creating corporate cultures through mythopoetic leadership”, Organizational Dynamics, 36 (2007), 288. 49

G. Gordon and N. DiTomaso, “Predicting corporate performance from organizational culture. Journal of Management Studies”, 29(6) (1992), 783; and C. Siehl and J. Martin, “Organizational culture: A key to financial performance?” in B. Schneider (Ed.), Organizational climate and culture (San Francisco: Jossey-

Bass, 1990), 241. 50

D. Denison and A. Mishra, “Toward a theory of organizational culture and effectiveness”, Organization Science, 6(2) (1995), 204; J. Sørensen, “The strength of corporate culture and the reliability of firm performance”, Administrative Science Quarterly, 47(1) (2002), 70; and G. Gordon and N. DiTomaso, “Predicting corporate performance from organizational culture”, Journal of Management Studies”, 29(6) (1992), 783; and J. Kotter and J. Heskett, Corporate culture and performance (New York: Free Press,

1992).


15 were four cultural traits—adaptability, mission, involvement and consistency—that each

had a significant influence on an array of other organizational performance measures

including sales growth, return on assets, quality, profits, employee satisfaction and

overall performance.51

Denison found that organizational culture was correlated with

financial performance as measured by returns on investment and sales, however, he also

identified differences among indicators with respect to the strength of the relationship

(e.g., decision making and work design were associated with long term financial

performance while supervisory leadership was associated with short term financial

performance).52

In a specific survey involving tens of thousands of employees from over 30 large US

firms engaged in 25 different industries Denison found that his “involvement” dimension

was positively related to short- and long-term performance and his “consistency”

dimension was positively related to short-term performance, but negatively related to

long-term performance.53

In another study, Denison teamed with Mishra to collect

responses from 764 top managers from the same number of firms in five different US

industries and analyze those responses for links to both perceived performance and

objectives performance as measured by the average over three years or return on assets

and sales growth. The evidence led them to conclude that: for larger firms, the stability

traits (i.e., “mission” and “consistency”) were the best predictors of profitability; the

flexibility traits (i.e., “involvement” and “adaptability”) were the best predictors of sales

growth; and all of the cultural traits in the Denison model were positively related to

return on assets, with “mission” being the strongest predictor.54

Marcoulides and Heck tested the link between organizational culture and performance

using a model in which organizational culture was measured using several latent

variables including organizational structure, organizational values, task organization,

climate, and individual employee values and beliefs and organizational performance was

measured using capital, market and financial indicators such as gross revenue/product

value ratio, market shares, profit and return on investment.55

Based on data collected

from 26 organizations, they found that all of the latent variables of organizational culture

had some impact on organizational performance, with the most significant variables

being workers’ attitudes and task organization activities.

Wilderom et al. compiled a useful review and summary of empirical studies on the link

51

W. Mobley, L. Wang and K. Fang, “Organizational Culture: Measuring and Developing It in Your

Organization”, The Link (China Europe International Business School, Summer 2005), 11-20, 13. Mobley

et al. reported that Denison had pulled data from over 500 companies, including small, medium-sized and

large multinationals that varied substantially in terms of number of employees, gross revenues and

maturity, to create a database for a reliable norming benchmark. Id. at 13-14. 52

D. Denison, “Bringing corporate culture to the bottom line”, Organizational Dynamics, 13(2) (1984), 5. 53

D. Denison, Corporate culture and organizational effectiveness (New York: John Wiley, 1990). The

performance measures that he used included the average over six years of return on sales, return on

investment, income/sales ratio and income investment ratio. 54

D. Denison and A. Mishra, “Toward a theory of organizational culture and effectiveness”, Organization Science, 6 (1995), 204-223. 55

G. Marcoulides and R. Heck, “Organizational culture and performance: Proposing and testing a model”, Organizational Science, 4(2) (1993), 209.


16 between organizational culture and performance.

56 In addition to the work of Denison

and Marcoulides and Heck referred to above, interesting results have been obtained by

other researchers such as Petty et al. (used dimensions such as teamwork, trust and

credibility, performance improvement and common goals and organizational functioning

and found that much teamwork is associated with high performance in areas such as

operations, customer accounting, support services, employee health and safety and

marketing)57

; and Rousseau (studied team or satisfaction-oriented norms and security-

oriented norms and found that little emphasis on security-oriented norms is significantly

related to increasing the amount of money raised for community).58

As noted above, other researchers found inconclusive relationships between

organizational culture and performance59

, and it has been argued that it may be too

difficult to investigate and test propositions relating to the culture-performance link and

draw clear and direct cause and effect relationships.60

A number of researchers also

suggested that the more fertile ground for study was assessing the link between

organizational culture practices, the actual “operating culture” of the organization, and

performance, thereby reducing emphasis on often hard to determine and understand

factors such as “values” and “beliefs”.

§10 --Strong cultures

Others have argued that organizations with “strong cultures” (i.e., organizations in which

there were shared values, beliefs and norms that were strongly enforced among members)

would perform better because the culture would promote better goal alignment and

development of a consensus on achieving those goals.61

It has also been claimed that a

strong and shared organizational culture would have positive effects on motivation since

it would encourage members to identify with the organization and feel a belongingness

that made them feel responsible for the organization and its actions.62

Kotter and Heskett studied strength of culture, strategy-culture fit and adaptability and

found a positive albeit moderate relationship between culture strength and long-term

economic performance measured by the average over eleven years of yearly increase in

56

C. Wilderom, U. Glunk and R. Maslowski, “Organizational Culture as a Predictor of Organizational Performance”, in N. Ashkanasy, C. Wilderom and M. Peterson (Eds.), Handbook of Organizational Culture & Climate (Thousand Oaks, CA: Sage Publications, Inc., 2000), 193-209, 198-199. 57

M. Petty, N. Beadles, C. Lowery, D. Chapman and D. Connell, “Relationships between organizational culture and organizational performance”, Psychological Reports, 76 (1995), 483-492. 58

D. Rousseau, “Normative beliefs in fund-raising organizations: Linking culture to organizational

performance and individual responses”, Group & Organization Studies, 15 (1990), 448-460. 59

See, e.g., D. Rousseau, “Quantitative assessment of organizational culture”, Group and Organizations Studies, 15(4) (1991), 448. 60

See, e.g., R. Calori and P. Sarnin, “Corporate Culture and Economic Performance: A French Study”, Organization Studies, 12(1) (January 1991), 49; and A. Brown, Organizational Culture (London: Pitman

Publishing, 1995). 61

See, e.g., M. Tushman and C. O’Reilly, Winning through innovation: A practical guide to leading organizational change and renewal (Boston, MA: Harvard University Press, 2002). 62

A. Brown, Organizational Culture (London: Pitman Publishing, 1995).

https://www.researchgate.net/journal/0170-8406_Organization_Studies


17 net income, yearly return on investment and yearly increase in stock price.

63 Mobley et

al. noted that the companies with “stronger culture” in Kotter and Heskett’s study also

enjoyed better growth in revenues and greater expansion of their workforces and

described a strong culture as one in which the organization is sharply focused on three

managerial constituencies: customers, stockholders and employees.64

Koene used the

Hofstede dimensions to study store, cost and personnel performance in 50 company-

owned Dutch supermarket stores of a large retail chain and concluded that employee

orientation and openness influenced performance both directly and indirectly through

their impact on general and task communication within the organizations.65

While there may be support for the “strong culture” theory, it is important not to forget

the distinction between “strength” and “content” and to recognize that the specific values

and norms embedded in the culture are important. For example, it is reasonable to

speculate that strong cultures that celebrate positive approaches (i.e., “Winners are

rewarded here” and “People really care if you do a good job”) will generally produce

better results than those achieved by organizations in which there is a strong consensus

that members should keep their heads down, not make waves and do just enough to get

by so that nobody will bother them.66

Similarly, the strength of an organizational culture

involves both “consensus” and “intensity” and weaknesses in either of those areas may

undermine the impact that the surface-level values and norms have on organizational

performance. Arguments have been made that organizations should abandon pursuit of a

“strong culture” and focus instead on reducing the gap between the stated preferences of

organizational members with respect to organizational practices and the actions and

behaviors actually observed on a day-to-day basis in the organization.67

§11 --Adaptable cultures

Another factor that must be considered is the environmental context in which the

organization and its members are acting. Researchers who have examined the

relationship between organizational culture and coping with turbulent times have

suggested that cultural strength would be an advantage provided that the applicable

values and norms emphasize adaptability.68

In turn, organizations with an organizational

culture that includes an intense emphasis on conformity would likely do well in a stable

environment, but would probably encounter difficulties in implementing changes during

63

J. Kotter and J. Heskett, Corporate culture and performance (New York: Free Press, 1992). 64

W. Mobley, L. Wang and K. Fang, Organizational Culture: Measuring and Developing It in Your

Organization, The Link (China Europe International Business School), 11 (Summer 2005), 13. 65

C. Wilderom, U. Glunk and R. Maslowski, “Organizational Culture as a Predictor of Organizational Performance”, in N. Ashkanasy, C. Wilderom and M. Peterson (Eds.), Handbook of Organizational Culture

& Climate (Thousand Oaks, CA: Sage Publications, Inc., 2000), 193-209, 198-199 (citing B. Koene,

Organizational culture, leadership and performance in context: Trust and rationality in organizations

(Rijksuniversiteit Limburg: Unpublished doctoral dissertation, 1996)). 66

D. Stewart, Growing the Corporate Culture (2007). 67

C. Wilderom and P. Van den Berg, A Test of the Leadership-Culture-Performance Model within a large

Dutch Financial Organization, Discussion Paper (1998). 68

J. Chatman, D. Caldwell, C. O’Reilly and B. Doerr, Organizational Culture And Performance In High-

Technology Firms: The Effects Of Culture Content And Strength (2011),

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.378.9723&rep=rep1&type=pdf


18 time when the environment becomes more dynamic and challenges to preexisting ways of

doing business appear on the horizon.69

It appears that organizations with organizational cultures that are well suited to their

external environment have better performance than those with cultures that are less fitted

to their environment, regardless of the “strength” of the particular culture. Several

studies have provided support for the proposition that there was a positive relationship

between profitability and an organizational culture that emphasized adaptability to

growth and changes in the environment (i.e., a culture in which members were willing to

take risk, trust one another, work collaboratively and engage in proactive behaviors in

responding to opportunities and challenges), although the specific reasons for the

relationship were not completely clear.70

The positive impact on performance that can be expected from being adaptable to the

external environment was illustrated by the findings of Gallagher et al., who proposed

that organizations with a strong “market culture” would perform better on a number of

measures including return on investment, revenue growth, customer retention, market

share, new product sales, and employee performance.71

They explained that market

cultures differ from other organizational cultures with respect to the focused attention of

the entire organizational on understanding its markets, supporting the necessary skills to

create value for customers and promoting the belief that the ultimate purpose of the

business is to profitably create superior customer value.72

However, others have

cautioned that some of the features associated with an adaptable culture, such as risk-

taking, may not be suitable in a relatively stable environment and may lead to instability,

inefficiency and a loss of direction when attempted in that context.73

§12 --Small and medium-sized enterprises

Culture has been cited as an important factor among small to medium-sized enterprises

seeking to establish and maintain a work environment that supports and encourages

69

E. Van den Steen, "Organizational Beliefs and Managerial Vision.", Journal of Law, Economics &

Organization, 21(1) (April 2005), 256. 70

See, e.g., J. Kotter and L. Heskett, Corporate Culture and Performance (New York: Free Press, 1992); B.

Lund, “Organizational culture and job satisfaction”, Journal of Business and Industrial Marketing, 18(3) (2003), 219; and G. Gordon and N. DiTomaso, “Predicting Corporate Performance from Organizational Culture”, Journal of Management Studies, 29 (1992), 83. 71

S. Gallagher, C. Brown and L. Brown, “A strong market culture drives organizational performance and success”, Employment Relations Today, 35(1) (Spring 2008), 25. 72

The use of the term “market culture” in this context is not intended to be limited to the elements of the culture type of the same name using the “competing values framework” but should be extended to include

elements of the other culture type derived from the framework, the adhocracy culture, that also places

emphasis on external positioning. Taken together, key elements of the “market culture” referred to by Gallagher and Brown would include, among others, competitiveness, goal- and achievement-orientation,

growth and market leadership, creativity, adaptability and flexibility, innovation and tolerance for risk. See

also E. Ogbonna and L. Harris, “Leadership style, organizational culture and performance: Empirical

evidence from UK companies”, International Journal of Human Resources Management, 11(4) (2000), 766 (finding that innovative and competitive cultures, such as the market and adhocracy cultures, had a direct

effect on performance). 73

A. Brown, Organizational Culture (London: Pitman Publishing, 1995).

http://www.people.hbs.edu/evandensteen/OnlineDocs/P05_JLEO_EVdS_Organizational%20Beliefs.pdf


19 innovation. Specifically, a culture suited for innovation should include supervisory and

reward system support for creative behavior and management should be open to change

and facilitate the levels of internal and external communication necessary for successful

innovation. However, experience has also demonstrated that a strong organizational

culture can be extremely dangerous, and cause substantial damage or even destruction of

the organization, if it is misused by organizational leaders (e.g., owners or senior

management) bent on engaging in illegal and/or unethical behavior. For example, if an

organizational culture that stresses conformity and adherence to rules and direction from

above is too strong employees may be fearful to disobey direction from superiors even

when employees are asked to engage in activities that they know, or should know, are of

questionable legal or ethical validity. Another possible risk associated with companies

that have an “institutionalized role orientation”, and thus likely to have more a more rigid

set of cultural values, is that the initial and ongoing socialization process may cause

substantial emotional and psychological damage to employees.74

§13 --Organizational culture and relationships with third parties

Organizational culture can also have a substantial impact on the type, quality and

effectiveness of the organization's relationships with third parties. One good example is

the difficulties that joint venture partners from Mexico and the United States might have

in communicating and working together because of the significantly different cultural

influences in their countries. Mexican companies are generally used to a much slower

pace of conducting business than their counterparts in the United States. Mexican

managers typically take a long time to make decisions and attempt to reach a consensus

among all involved parties rather than alienating a particular person or group. Managers

in Mexico come to work at 9:00 am, take long lunches during the middle of the day, and

then return to the office in the middle of the afternoon to continue with their duties until

late in the evening. The corporate culture in Mexico is quite paternalistic and

organizational structures are hierarchical and feature centralized authority that limits

decision making authority to a small group of managers at the top of the pyramid.

Loyalty and respect to superiors is a highly valued behavior within Mexican companies.

All this contrasts markedly with common practice in the United States--managers come

in early, take short lunches, and push to leave the office in time to get home in the early

evening to spend time with their families; and decision making authority is often

decentralized to allow mid- and lower-level managers to make choices and commitments

on behalf of their companies quickly and without the delays of seeking an answer from

senior management. If managers of United States companies want to conduct business

with Mexican firms they will need to understand Mexico's dominant business cultural

traits and be prepared to take a patient approach to slowly building trust and rapport with

their Mexican counterparts. In some cases, it may be impossible to reconcile the

differences. For example, if the managers of the United States company are under tight

deadlines to complete a particular project that is to be handled by a Mexican partner the

slow speed of decision making in Mexico may ultimately be too frustrating for the United

74

For discussion of “institutionalized role orientation”, see “Managing Organizational Culture” in “Organizational Culture: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed

by the Sustainable Entrepreneurship Project (www.seproject.org).


20 States managers and may lead to resentment by their Mexican counterparts if they feel

that are being pushed too hard for commitments.

§14 --Organizational culture and merger success

Another situation where differences in organizational culture can be very important in

when one company acquires another firm through merger or purchase of business assets

and turns to the challenge of integrating the managers and employees of the acquired

entity into the combined post-closing business and organization. Significant problems can

arise when a firm that has operated with decentralized decision making and a high

tolerance for risk-taking by mid-level managers and employees is acquired by a company

with a relatively conservative culture that prefers to centralize authority and make

decisions based on objective quantifiable criteria in accordance with detailed rules and

procedures. In that case the managers of the acquired firm may chafe under what they

perceive as a slow and plodding way to conduct business while managers of the acquiring

company may grow to distrust the decisions and motives of the new managers since they

appear to be based on subjective criteria rather than hard data and formal due diligence.

For example, if managers of the acquired firm had been in the habit of awarding contracts

based on personal relationships with vendors questions regarding their ethical values will

undoubtedly be raised by managers in the acquiring company who are used to following

rigid procurement procedures even if there is no evidence to indicate that the managers of

the acquired firm benefited from their decisions or selected vendors that took advantage

of their relationship with the firm. Unless the cultural differences can be resolved--a

difficult task to accomplish--the likely result will be the loss of a substantial number of

the former managers and key employees of the acquired firm who will also take with

them their knowledge of, and experience with, the tangible and intangible business assets

acquired in the transaction.75

§15 --External adaption and internal integration

Schein argued that organizational culture was an important tool developed by

organizations and their members to cope with problems of “external adaptation” and

“internal integration.” Specifically, organizational culture evolves into a recognized set of

“shared assumptions about the nature of the world in which [the organization] exists, how

to survive in it, and how to manage and integrate internal relationships so that [the

organization] can operate effectively and make life livable and comfortable for its

members.”76 In order to identify the elements of a particular organizational culture, one

must first have a working list and description of the “problems” that Schein referred to

and then analyze how the organization views itself with respect to each of the issues

raised by the problems that need to be addressed and resolved (i.e., what solutions has the

organization chosen for each of these problems). Schein goes on to assert that a review of

75

The relationship between organizational culture and merger success, particularly the “cultural fit” between the parties to the merger, is discussed in detail in “Organizational Culture: A Library of Resources

for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org). 76

E. Schein, “The Role of the Founder in Creating Organizational Culture”, in Organizational Dynamics (1983), 349.


21 the solutions selected by an organization for the various problems will uncover a “deeper

level of assumptions which ties together the various solutions to the various problems”

and that this “deeper level” deals with more ultimate questions and issues that must be

analyzed in order to get at what Schein identified as the “real cultural essence” of an

organization. Schein's list of the problems of “external adaptation and survival” includes

the following77

:

Developing consensus on the primary task, core mission, or manifest and latent

functions of the group--for example, strategy.

Developing consensus on goals, such goals being the concrete reflection of the core

mission.

Developing consensus on the means to he used in accomplishing the goals--for

example, division of labor, organization structure, reward system, and so forth.

Developing consensus on the criteria to he used in measuring how well the group is

doing against its goals and targets--for example, information and control systems.

Developing consensus on remedial or repair strategies as needed when the group is

not accomplishing its goals.

Schein's list of the problems of “internal integration” includes the following78

:

Consensus on common language and conceptual categories. If members cannot

communicate with and understand each other, a group is impossible by definition.

Consensus on group boundaries and criteria for inclusion and exclusion. One of the

most important areas of culture is the shared consensus on who is in, who is out, and

by what criteria one determines membership.

Consensus on criteria for the allocation of power and status. Every organization must

work out its pecking order and its rules for how one gets, maintains, and loses power.

This area of consensus is crucial in helping members manage their own feelings of

aggression.

Consensus on criteria for intimacy; friendship, and love. Every organization must

work out its rules of the game for peer relationships, for relationships between the

sexes, and for the manner in which openness and intimacy are to be handled in the

context of managing the organization's tasks.

Consensus on criteria for allocation of rewards and punishments. Every group must

know what its heroic and sinful behaviors are; what gets rewarded with property,

status, and power; and what gets punished through the withdrawal of rewards and,

ultimately, excommunication.

Consensus on ideology and “religion.” Every organization, like every society, faces

unexplainable events that must be given meaning so that members can respond to

them and avoid the anxiety of dealing with the unexplainable and uncontrollable.

§16 --GLOBE research

77

Id. at 350 (Figure 1). 78

Id.


22 Some researchers have touched on the interesting question of whether organizational

culture can overcome elements of the societal culture in which the organization operates.

For example, researchers involved in the Global Leadership and Organizational Behavior

Effectiveness project, commonly referred to as “GLOBE”, believed they found support

for the proposition that organizational culture could often override the impact of societal

level cultural values with respect to issues such as perceptions of outstanding leadership

and the appropriate role of woman as organizational managers. In their studies they

found that cultural “assertiveness,” which reflects beliefs as to whether people are or

should be encouraged to be assertive/aggressive or non-assertive/non-aggressive in social

relationships, was stronger at the organizational level than at the societal level and

organizations where assertiveness was high were less likely to prefer team-oriented and

participative leadership styles and more likely to prefer humane oriented and autonomous

leadership styles.79

Other researchers using data from the GLOBE study have found that

organizational culture values of humane orientation, gender egalitarianism and

performance orientation were positively related to the advance of women to managerial

roles in organizations.80

The relationship between organizational culture and performance, particularly cultural

aspects such as adaptability and goal achievement, can also be seen in the performance

orientation dimension developed by the GLOBE researchers, which reflects the extent to

which an organization encourages and rewards innovation, setting and meeting high

standards, excellence and performance improvement.81

High performance orientation

organizations value training and development; value assertiveness, competitiveness and

materialism; view formal feedback as necessary for performance improvement; value

what one does more than who one is (i.e., performance over people); expect direct and

explicit communication; and believe that members of the organizations have control over

their own destinies.82

Evidence from the GLOBE survey indicated that there is strong

sentiment across the globe for high performance orientation and that high performance

orientation has a strong and positive correlation with charismatic/value-based

79

See D. Den Hartog, “Assertiveness”, in R. House, P. Hanges, M. Javidan, P. Dorfman and V. Gupta (Eds.), Leadership, Culture, and Organizations: The GLOBE Study of 62 Societies (2004). 80

See Bajdo and Dickson, “Perceptions of Organizational Culture and Women's Advancement in Organizations: A Cross-Cultural Examination”, Sex Roles, 45(5-6) (2001), 399-414. 81

R.J. House, P.J. Hanges, M. Javidan, P.W. Dorfman & V. Gupta (Eds), Culture, Leadership, and

Organizations: The GLOBE Study of 62 Societies (Thousand Oaks CA: Sage, 2004), 30 and 239.

Performance orientation is similar to the dimension called “Confucian Dynamism” by Hofstede and Bond. See G. Hofstede and M. Bond. “The Confucius connection. From cultural roots to economic growth”, Organizational Dynamics, 1988:16, 4-21. In addition, the GLOBE researchers noted that performance

orientation was derived from McClelland’s work on need for achievement. See generally D. Den Hartog,

R. House, P. Hanges, S. Ruiz-Quintanilla, P. Dorfman and Globe Associates, “Culture specific and cross-

culturally generalizable implicit leadership theories: Are attributes of charismatic/transformational

leadership universally endorsed?” Leadership Quarterly (Special issue: Charismatic and Transformational

Leadership: Taking Stock of the Present and Future (Part I), 10(2) (1999), 219-256 (citing D. McClelland,

Human motivation (Glenview, IL: Scott Foresman, 1985)). For further discussion of the performance

orientation dimension, see “Globalization: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org). 82

I. Abu-Jarad, N. Yusof and D. Nikbin, “A Review Paper on Organizational Culture and Organizational

Performance”, International Journal of Business and Social Science, 1(3) (December 2010), 26, 41.


23 leadership.

83 The GLOBE researchers advised that leaders can contribute to instilling a

high value on performance orientation by setting ambitious goals, communicating high

expectations for their subordinates, building their subordinates’ self-confidence and

intellectually challenging their subordinates.84

In addition, the researchers noted that

high performance societies “seem to look to charismatic leaders who paint a picture of an

ambitious and enticing future, but leave it to the people to build it”.85

§17 Elements of organizational culture

Schein argued that the elements of a particular organizational culture can be identified by

probing for evidence of how the organization has addressed fundamental issues and

problems relating to both “external adaptation” and “internal integration”.86

For

example, with respect to external adaptation it is useful and necessary to identify how the

organization sees its core mission and goals and understand the consensus that has been

reached on how the organization and each of its members should act and behave in order

to accomplish those goals (i.e., the organizational strategy). Similarly, in terms of

understanding internal integration evidence should be collected regarding the

measurement systems and procedures used by the organization, the particular “jargon and

meaning system” employed within the organization and, finally, the organization’s

authority system, peer system, reward system and ideology.87

Once these organizational

“solutions” have been collected and analyzed, Schein suggested that the next step was to

determine how they may be tied together by assumptions adopted by organizational

members regarding the following issues88

:

“1. The organization's relationship to its environment. Reflecting even more basic

assumptions about the relationship of humanity to nature, one can assess whether

the key members of the organization view the relationship as one of dominance,

submission, harmonizing, finding an appropriate niche, and so on.

2. The nature of reality and truth. Here are the linguistic and behavioral rules

that define what is real and what is not, what is a "fact," how truth is ultimately to

be determined, and whether truth is "revealed" or "discovered"; basic concepts of

time as linear or cyclical, monochrome or polychronic; basic concepts such as

space as limited or infinite and property as communal or individual; and so forth.

3. The nature of human nature. What does it mean to be "human," and what

attributes are considered intrinsic or ultimate? Is human nature good, evil, or

neutral? Are human beings perfectible or not. Which is better, Theory X or

Theory Y?

4. The nature of human activity. What is the "right" thing for human beings to

do, on the basis of the above assumptions about reality, the environment, and

83

R.J. House, P.J. Hanges, M. Javidan, P.W. Dorfman & V. Gupta (Eds), Culture, Leadership, and

Organizations: The GLOBE Study of 62 Societies (Thousand Oaks CA: Sage, 2004), 711. 84

Id at 277. 85

Id at 278. 86

E. Schein, “The Role of the Founder in Creating Organizational Culture” in Organizational Dynamics (New York, NY: American Management Association, 1983), 348-364, 349. 87

Id. at 349. 88

Id. at 351 (Figure 2).


24 human nature: to be active, passive, self-developmental, fatalistic, or what? What

is work and what is play?

5. The nature of human relationships. What is considered to be the "right" way

for people to relate to each other, to distribute power and love? Is life cooperative

or competitive: individualistic, group collaborative, or communal; based on

traditional lineal authority, law, or charisma; or what?”

In other words, according to Schein organizational culture is, at its deepest level, a

reflection of the way that organizational members “view the world”, including complex

questions such as “the nature of reality and truth” and nature of human nature, activities

and relationships. It is here that organizational culture is related not only to the business

environment in which the organization operates, but also to the beliefs found in the

broader societal culture that is also part of the organization’s environment with respect to

fundamental matters such as the nature of human nature and human relationships.

Organizational culture is actually made up of several different basic components. At the

broadest and perhaps most abstract level are “values,” which describe the desired state or

outcome that the leaders of the organization wish to achieve through the activities of the

members of the organization. Norms are the established rules of behavior or standards of

conduct that exist within an organization to control the behavior of its members. Norms,

both formal and informal, contribute to the orderliness and predictability of the day-to-

day activities of the organization and are learned through various socialization processes.

Norms create strong bonds within the organization and members are likely to feel intense

guilt or shame if they should breach their obligations. Finally, organizations use various

“cultural forms,” including rites and rituals, myths and stories, symbols, language,

gestures, artifacts and physical surroundings, as linking mechanisms to develop networks

of understanding among members and communicate the prevailing cultural values and

norms of the organization. Taken together, these components provide guidelines that


While organizations should make an attempt to formally identify and codify their most

important cultural values and norms it should, of course, be recognized and accepted that

a large part of an organization’s culture will be created, practiced and handed down

informally through communications between, and behaviors of, founders, senior

executives, managers and employees. As the organizations evolves and members interact

with one another and with outsiders what begins to emerge is a complex set of shared

beliefs, assumptions and ways of thinking that guides the way that members see

situations and devise solutions to problems and issues. Eventually members begin to

behave in accordance with these values and norms without thinking and without having

to refer to written rules and procedures. In this way an “informal organization” begins to

emerge and take on a powerful role in the operation of the organization.

§18 --Values and norms

The “values” of an organization are essential element for every organization and include

the general criteria, standards, or guiding principles that the members of the organization


25 (e.g., managers and employees) refer to when determining which types of behaviors,

events, situations and outcomes relating to the organization’s activities are desirable or

undesirable. Hill and Jones defined organizational values as "beliefs and ideas about

what kinds of goals members of an organization should pursue and ideas about the

appropriate kinds or standards of behavior organizational members should use to achieve

these goals.”89 In order to effective and meaningful the values of an organization must be

formally articulated in some manner in the form of espoused values that set forth the

principles and values that the organization was formed to achieve. For example, the

espoused values of a religious organization will be centered on faith and providing

service to others. On the other hand, an organization form to support community

development will generally embrace economic independence and self-help as its core

values. For-profit organizations tend to mention profitability as one, but not the only,

value of importance. Regardless of the type of organization it is essential to be clear

about its values since this is one of the ways that leaders and members of the organization

can identify mutually shared goals and missions and track progress.

Values may be further broken down into two separate, yet highly related, categories:

terminal and instrumental. A “terminal” value is a desired and state or outcome that

members seek to achieve. Examples of commonly mentioned terminal values, which are

generally publicized in mission statements that are widely distributed to members and

outside stakeholders, include such things as excellence, responsibility, reliability,

profitability, innovativeness, economy, morality, and equality. An “instrumental” value

is a desired mode or pattern of specific behavior by members, such as “working hard,”

respect for traditions and authority, proceeding with caution, being creative and

embracing risks, and acting with honesty and integrity. Instrumental values are defined

and disseminated through standard rules of procedures and in training and other

socialization efforts.

In order for the organization’s value system to be effective there must be proper and

strong alignment between the terminal and instrumental values and, in particular, the

instrumental values must relate to and support and the announced terminal values. For

example, if one of the terminal values of the organization is “innovativeness” than the

instrumental values should include such things as hard work, collaboration, creativity and

risk-taking. Taken together, this combination of terminal and instrumental values should

provide a foundation for an entrepreneurial culture that is considered to be important to

success in certain industries and markets. On the other hand, when the organization is

competing in markets where competition is based on reducing and controlling costs and

production efficiency, which would be terminal values, it should have instrumental

values that emphasize conformity and standard operating procedures. The result in that

situation is a relatively conservative culture that would only be viable in situations where

the external environment is stable and changes occur infrequently.

A “norm” can be defined as a standard or style of behavior that is considered typical or

acceptable by members of the organization. Hill and Jones explained that organizational

norms are “guidelines or expectations that prescribe appropriate kinds of behavior by

89

C.W. L. Hill and G.R. Jones, Strategic Management (New York: Houghton Mifflin, 2001).


26 employees in particular situations and control the behavior of organizational members

towards one another".90

Norms serve as implicit rules and expectations supporting the

development and maintenance of the organization’s instrumental values, and it is

generally assumed that members of the organization should know, understand and follow

commonly accepted norms after an initial period of socialization. Norms can be

proscriptive, which means that they outline what members of the organization should or

can do, or prescriptive, which means that they establish boundaries as to what members

should not do. Norms often begin as informal agreements among members engaged in

interrelated activities regarding the manner in which they will interact with one another;

however, once norms have been formed they can be difficult to change and act as

powerful influences on the way in which members act on behalf of the organization.

Norms should be aligned with the instrumental values of the organization and thus will

also act as support for pursuing and achieving terminal values. For example, where

collaboration is one of the instrumental values designed to facilitate the terminal value of

innovation it is important for the universe of organizational norms to include courtesy

and mutual respect. Some norms may be formalized as written rules and procedures with

accompanying rewards for compliance and sanctions for non-conformity. While norms

are important they can also be dangerous since they can become so strong that they turn

into formidable obstacles to change since they can become solidly embedded in the

traditions of the organization.

§19 --Cultural forms

In addition to values and norms, organizational culture is also defined and supported by

other cultural forms including stories, rites and ceremonies, organizational language,

symbols and routines and rituals. Cultural forms have been recognized as important

mechanism for linking members of an organization together in a way that facilitates and

supports the creation and maintenance of networks of understanding among those

members. The various cultural forms can be used by the leaders of the organizations,

such as the founders and senior executives of a company, to communicate the desired

values and norms and thus influence the way that members think and behave with respect

to organizational activities. Cultural forms can also be used to create camaraderie and

emotional bonds among members of the organization.91

Mobley et al. caution, however,

that the foundation of the various culture forms is the largely unseen core values, beliefs

and shared assumptions among the members of the organization that help define the

organization culture and that it would be folly to expect that the culture can be changed

simply by switching logos, rearranging the layout of the organization’s office space or

emphasizing certain types of heroic acts by employees.92

§20 ----Stories

90

Id. 91

H.M. Trice, “Rites and Ceremonials in Organizational Culture”, in S.B. Bacharach and S.M. Mitchell (Eds.), Perspectives on Organizational Sociology: Theory and Research (Vol. 4) (Greenwich, CT: JAI

Press, 1988). 92

W. Mobley, L. Wang and K. Fang, Organizational Culture: Measuring and Developing It in Your

Organization, The Link (China Europe International Business School), 11 (Summer 2005), 12.

http://www.denisonconsulting.com/model-surveys/denison-model/organizational-culture.

http://www.denisonconsulting.com/model-surveys/denison-model/organizational-culture


27

Organizations often have and share stories about certain organizational heroes, such as

one of the founders, as a way to illustrate the cultural values and norms of the

organization and the reasons that members, such as managers and employees, were

selected to join the organization. A “story” may be defined as a narrative based on events

that actually happened; however, stories often include some combination of truth and

fiction.93

Stories often provide good clues as to what type of behavior is expected and

celebrated as well as the sorts of actions that will not be tolerated. Stories should be

broadly defined to include all of the past events and personalities relating to the

organization that are discussed by managers and employees and by outside parties.

Organizational tales may come in other forms that have just as much power and

authenticity as the stories referred to above. For example, organizations may develop

“myths,” which are dramatic narratives of imagined events that are typically used as a

means for explaining the origins of transformations of something. A myth has also been

referred to as an unquestioned belief regarding the practical benefits of certain techniques

and behaviors that is not supported by demonstrated facts. Some organizations depend

on “sagas,” which have been defined as historical narratives that describe the unique

accomplishments of the organization in a dramatically heroic way. Organizational

legends describe important events in the development of the organization relying on a

mixture of fact and embellishment with fictional details. Finally, organizations may

attempt to illustrate specific values and norms through the use of “folktales,” which are

entertaining narratives that are based wholly on fiction.94

An effort should be made to catalog the most popular stories about the organization and

identify the key lessons that these stories provide for members about the organization’s

cultural values and norms. Each story should be evaluated for what it says about how the

organization has evolved and what types of behavior are celebrated and vilified. Stories

can also be used to identify the heroes and villains in the organization’s history as well as

other “characters” who may have acquired a reputation for “out-of-the-box” behavior that

illustrates a particular cultural value. Technology is now being used to capture and

preserve important organizational stories so that they can be passed on in a single and

consistent version to newcomers. For example, organizations may hire professional

videographers to record interviews with founders and other key personalities in the

organization’s development and thus create a permanent record of inspiring stories from

the early days of the organization when its cultural values were being formed.

§21 ----Rites and ceremonies

Ceremonies are used as opportunities to publicly demonstrate and reinforce the desired

cultural values and norms to individual members and to larger groups of members. Many

organizations regularly use social events, such as picnics, to bring employees together to

celebrate and communicate the cultural values of the organization and senior managers

93

H.M. Trice and J.M. Beyer, “Studying organizational cultures through rites and ceremonials”, Academy of Management Review, 9 (1984), 653-669. 94

Id.


28 may regularly join non-managerial employees in their day-to-day activities as a way to

directly communicate the vision of the managers regarding the values and business goals

of the organization. The ceremonial aspect of the organization’s culture can also be seen

in the form of various organizational rites, which have been defined as a relatively

elaborate, dramatic, planned set of activities that consolidates various forms of cultural

expressions into one event, which is carried out through social interactions, usually for

the benefit of an audience.95

A commonly used term is a “rite of passage,” which can be

used to refer to ceremonies that occur whenever employees achieve certain milestones in

the employment relationship with the organization such as initial entry, promotions,

attainment of seniority levels and, eventually, retirement. For example, the rite of

passage when a new employee joins a company is completion of a mandated basic

socialization process to learn and internalize the basic rules of company operation and the

cultural values and norms of the company and to establish the desired role orientation.

Other employment-related rites of passage along a typical career path include new job

titles, plaques and other forms of special recognition. Rights of integration, such as

picnics and holiday parties sponsored by the organization, are used to communicate and

reinforce organizational values and norms. Finally, rights of enhancement, such as

presentation of awards and laudatory articles, provide employees with public recognition

of desired behavior and serve as motivators to conform to cultural values and norms.

§22 ----Organizational language

Organizational language is obviously an important cultural element since it allows

members to express their thoughts and feelings and is the principal means of

communicating and applying the cultural values and norms of the company. The term

“language” has been defined to include any particular form or manner in which members

of the organization use vocal sounds and written signs to convey meanings to each

other.96

Words that are commonly used when managers and employees speak or

otherwise communicate with one another can reveal important instrumental values. For

example, if consensus and collaboration are important beliefs a strong statement of

disagreement by a manager or employee involved in a particular project will carry great

weight and will likely lead to abandonment of the project or renewed efforts to make

changes that may bring the dissident around to supporting the work of the group. Also,

the formality of the language used by managers and employees when addressing one

another provides insight into the degree of hierarchy in the organizational structure and

the level of mutual respect that is expected among members. In addition to the spoken

words, clues regarding organizational language can be found in texts and documents

produced and disseminated by the organization including job descriptions, form letters,

rules and procedures, training manuals, press releases, and memoranda and other

communications from senior management. Many organizations purposely or accidently

develop their own customized set of technical words and phrases that allow members to

quickly and clearly communicate with one another to describe common operational

problems that arise frequently as they carry out their routine tasks and activities.

95

Id. 96

Id.


29 §23 ----Symbols

Organizational culture is also illustrated and reinforced by non-verbal symbols that serve

as visual representations of organizational values. A “symbol” has been defined as any

object, act, event, quality, or relation that serves as a vehicle for conveying meaning,

usually by representing another thing.97

Examples include logos, formal and informal

dress codes, the size and location of offices, the size and style of company vehicles, and

the allocation of parking spaces. For example, companies that have adopted a

hierarchical organizational structure and where senior management values certain

symbols of status and authority are likely to segregate the offices of the executive team

and limit access to those offices as a way of separating the top of the organizational

pyramid from the rest of the company. Additional perquisites, such as private dining

rooms and separate parking garages, may also reinforce the exalted status of the senior

management group. In stark contrast to this approach is the accessible informality

demonstrated by organizational leaders such as Andy Grove at Intel who preferred to go

about his activities in the same type of cubicle used by employees at all levels of the

company. Similarly, executives at non-profit organizations often decide to use simple

offices as part of their effort to show that the organization is focused on thrift and averse

to the frills associated with for-profit organizations and their activities. The size and style

of company vehicles sends a message to employees and members of the public regarding

the type of image that the company wishes to portray.

§24 ----Routines and rituals

A number of the everyday activities and behaviors within an organization take the form

of routines and rituals. A routine can be thought of as something that is done on a

regularly scheduled basis and in the same way every time. Employees follow certain

routines as they go through their work day—certain things are done when they first

arrive, certain procedures are followed when problems arise during the day, and specified

steps must be taken as they leave the workplace at the end of their work day. A ritual is a

routine that has a special meaning that brings members of the organization together, such

as weekly or monthly meetings that occur on a set schedule and at which news of

promotions or new business developments is announced. Each routine and ritual

provides clues regarding the preferred values of the organization and the how employees

are expected to behave.

Principles of Leadership and Organizational Culture at Amazon

Kantor and Streitfeld offered a captivating and often dramatic picture of elements of the organizational

culture and climate at Amazon in an August 2015 article that appeared in the New York Times. According

to the article, new employees are immersed in the following “leadership principles” which are “inscribed

on handy laminated cards” and posted on the company’s website and which serve as guides for them to

break the “poor habits” they learned at their previous jobs and on how they are expected to interact with

customers, co-exist with their colleagues and assess their own performance:

97

H.M. Trice and J.M. Beyer, Studying organizational cultures through rites and ceremonials, Academy of

Management Review 9 (1984) 653-669.


30 (1) Customer Obsession: Leaders start with the customer and work backwards. They work

vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over

customers.

(2) Ownership: Leaders are owners. They think long term and don’t sacrifice long-term value for

short-term results. They act on behalf of the entire company, beyond just their own team. They never say

“that’s not my job.”

(3) Invent and Simplify: Leaders expect and require innovation and invention from their teams and

always find ways to simplify. They are externally aware, look for new ideas from everywhere, and are not

limited by “not invented here.” As we do new things, we accept that we may be misunderstood for long

periods of time.

(4) Are Right, A Lot: Leaders are right a lot. They have strong business judgment and good instincts.

(5) Hire and Develop the Best: Leaders raise the performance bar with every hire and promotion.

They recognize exceptional talent, and willingly move them throughout the organization. Leaders develop

leaders and take seriously their role in coaching others.

(6) Insist on the Highest Standards: Leaders have relentlessly high standards – many people may

think these standards are unreasonably high. Leaders are continually raising the bar and driving their teams

to deliver high quality products, services and processes. Leaders ensure that defects do not get sent down

the line and that problems are fixed so they stay fixed.

(7) Think Big: Thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold

direction that inspires results. They think differently and look around corners for ways to serve customers.

(8) Bias for Action: Speed matters in business. Many decisions and actions are reversible and do not

need extensive study. We value calculated risk taking.

(9) Frugality: We try not to spend money on things that don’t matter to customers. Frugality breeds

resourcefulness, self-sufficiency, and invention. There are no extra points for headcount, budget size, or

fixed expense.

(10) Vocally Self Critical: Leaders do not believe their or their team’s body odor smells of perfume.

Leaders come forward with problems or information, even when doing so is awkward or embarrassing.

Leaders benchmark themselves and their teams against the best.

(11) Earn Trust of Others: Leaders are sincerely open-minded, genuinely listen, and are willing to

examine their strongest convictions with humility.

(12) Dive Deep: Leaders operate at all levels, stay connected to the details, and audit frequently. No

task is beneath them.

(13) Have Backbone; Disagree and Commit: Leaders are obligated to respectfully challenge

decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction

and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined,

they commit wholly.

(14) Deliver Results: Leaders focus on the key inputs for their business and deliver them with the right

quality and in a timely fashion. Despite setbacks, they rise to the occasion and never settle.

New employees are given quizzes after a few days on the job and those able to achieve a perfect score on

their recollection and understanding of the principles are given a virtual award that allows them to proclaim

“I’m Peculiar”, an important indicator of the company’s intent to develop and maintain a unique workplace

in which employees are held to standards described by the company itself as “unreasonably high”.

Parts of the article suggested that Amazon was an extremely difficult place to work, a place where

“workers are encouraged to tear apart one another’s ideas in meetings … [and] … toil long and late (emails

arrive past midnight, followed by text messages asking why they were not answered)” and an internal

phone directory provides instructions to employees on how to send secret feedback to colleagues’ supervisors that employees complained was often used to sabotage their work. The article included stories

of complaints about 80-hour work weeks, interrupted vacations and little tolerance from managers and co-

workers when employees struggled with life-threatening illnesses and family tragedies.

Jeff Bezos, the company’s founder who had successfully built Amazon to become the most valuable

retailer in the US and had himself become the fifth wealthiest person in the world as of 2015 according to

Forbes, encouraged employees to read the article, but commented that “… [t]he article doesn’t describe the

Amazon I know or the caring Amazonians I work with every day … [and] … I don’t think any company


31 adopting the approach portrayed could survive, much less thrive, in today’s highly competitive tech hiring

environment”. Needless to say, the article created a high level of controversy and debates among

proponents and opponents of the Amazon culture emerged and persisted; however, the article was a useful

case study of the development, articulation and application of organizational culture.

The “principles” listed above provide a map to the core characteristics of the company’s organizational

culture and were explicitly developed by Bezos himself during the company’s early growth period in the

mid-1990s. The article noted some of the things that Bezos didn’t want to see in his business model—bureaucracy, profligate spending, lack of rigor—and his desire for the principles to serve as a codification

of Bezos’ ideas about the workplace that included instructions that were simple enough to be followed by

any new worker, applicable to any of the company’s enormous range of businesses and “stringent enough

to stave off the mediocrity he feared”. By all accounts, Bezos’ effort to design the organizational culture to

work the way he wanted it to has been very successful and the article noted: “In contrast to companies

where declarations about their philosophy amount to vague platitudes, Amazon has rules that are part of its

daily language and rituals, used in hiring, cited at meetings and quoted in food-truck lines at lunchtime.

Some Amazonians say they teach them to their children.”

Overriding themes come from Bezos and other executives beginning with Bezos’ own caution that “it’s not

easy to work here” and employees must be committed to working long, hard and smart, a challenge

expressed in the “bias for action” in the principles. The admonition to employees to “think big” is

consistent with the mission of Bezos and his executive team to continuously pursue “big, innovative,

groundbreaking things”. Several of the principles focus on personal goals for each employee such as being

“the best”, taking “ownership”, and being able and eager to “dive deep” to find new ideas and solve

problems. Other principles touch on the way things operate in the workplace and how colleagues interact

with one another: “frugality”, vocal self-criticism, high standards and regular practice of disagreement in

advance of full commitment to decisions. First and foremost, however, is principle No. 1: “customer

obsession”. Adherence to the principles is clearly a priority within the organization and the article quoted

an interview that Bezos gave in 2014 in which he said: “My main job today: I work hard at helping to

maintain the culture.”

Amazonians are expected to “deliver results” (principle No. 14) and their performance against the

principles is rigorously and relentlessly measured and critically analyzed, not surprising given Bezos’ long-

standing obsession with data and data-driven management. The article documents ranking of employees

followed by departures of those who fall at the bottom of the charts. Many other employees leave because

they simply cannot or will not keep up with the pace and demands of the organizational culture. The article

quoted a former Amazon human resources executive as describing the process as “Purposeful Darwinism”

focused on finding the “stars” who are most committed to the mission of the company. Company officials

wave away the complaints by emphasizing that new employees are on notice that they will be driven and

pushed and not everyone will survive. The article cited an Amazon recruiting video in which one of the

speakers bluntly counseled: “You either fit here or you don’t. You love it or you don’t. There is no middle

ground.” Amazon also pointed out that many of those that leave the company take away skills and a work

ethic that make them highly desirable recruits for other technology businesses such as Facebook and

LinkedIn.

Among other things Bezos’ settled on his principles of organizational culture based on his personal

enthusiasm for using data and his beliefs regarding how successful companies should be designed and

operated. His values can clearly be seen throughout Amazon’s organizational culture. Will the culture

survive and flourish? The near-term outlook would appear promising as long as there is a steady stream of

new candidates willing to take on the challenge. Long-term prospects are unclear since configuration

models of organizational culture suggest that societal debates regarding work-life balance and the actions

of competitors to recruit from the same pool of workers will eventually influence Amazon’s organizational

culture.

Sources: J. Kantor and D. Streitfeld, “Amazon’s Bruising, Thrilling Workplace”, The New York Times

(August 16, 2015), A1. The Amazon “leadership principles” included in the article above are published at

http://www.amazon.jobs/principles. Bezos’ response to the original article is chronicled in D. Streitfeld

http://www.amazon.jobs/principles


32 and J. Kantor, “Bezos Says Amazon Has No Room for ‘Callous’ Acts”, New York Times, August 18,

2015, B1.

Summing Up

1. A number of definitions of organizational culture have been offered; however, if managers and

employees are consulted they may simply respond that culture is “how we do things around here”. Experts

in management science and organizational behavior and communication see organizational culture as an

explicit product of the choices that a group of people make with respect to accepted behavior as they

interact with one another and key stakeholders outside of the organization (e.g., customers, suppliers and

regulators) and attempt to develop ways to confront their broader social environment. According to Schein,

organizational culture is actually a pattern of shared basic assumptions that have been validated by

organizational members as they grappled with solving problems of external adaptation and internal

integration. In light of the apparent success of these assumptions in assuring the survival of the

organization, existing members are empowered and obligated to teach them to new members as the correct

way for them to perceive, think, and feel in relation to the problems of external adaptation and internal

integration. These basic assumptions become the basis for the espoused values of the organizations and the

artifacts developed and championed by organizational members.

2. The “dimensions approach” to organizational culture focuses on measuring organizational culture

empirically along scales, in some cases bipolar, which can be related to other, most dependent, variables of

interest. A wide range of models of dimensions of organizational cultures have been proposed, often

accompanied by suggestions on how organizational leaders can use the various dimensional models in

connection with their efforts to assess and evaluate their organizational cultures and implement changes to

those cultures that might lead to improvements in productivity, efficiency and other tangible measures of

organizational performance. Hofstede, who is best known for his work in studying how societal culture

impacts organizational behavior, also conducted smaller studies that focused on organizational culture and

identified the following dimensions of organizational culture that could be used a descriptive framework

for organizational cultures: process-oriented versus results-oriented; job-oriented versus employee-

oriented; professional versus parochial; open systems versus closed systems; “tight” versus “loose” control;

and pragmatic (flexible) versus normative (rigid). The researchers involved in the GLOBE project on

cross-cultural aspects of leadership identified the following factors that might be appropriate when

attempting to construct a list of organizational culture dimensions: organizational

collectivism/commitment; humane orientation; assertiveness; a combination of uncertainty avoidance and

future orientation; gender egalitarianism; and individualism-collectivism. Factors incorporated into other

dimension-based models have included embeddedness versus autonomy; mastery versus harmony;

hierarchy versus egalitarianism; adaptability, mission, involvement and consistency; and supportiveness,

innovation, competitiveness, performance orientation, stability, emphasis on rewards, and social

responsibility.

3. A number of attempts have been made to identify categories of organizational culture as a means

for describing certain aggregates of cultural characteristics and facilitating comparisons among

organizations. The simplest typology of organizational culture relies on classification on a continuum from

“strong” to “weak” and a key determinant of where an organization falls on this continuum is the degree of

homogeneity. A strong culture is one where the mutually agreed and understood values and norms have an

overriding influence on the ways in which members conduct their activities on a day-to-day basis and

interact with external stakeholders. On the other hand, if the culture is weak it provides little or no

guidance to members and control of behavior is exercised primarily through formal written guidelines and

procedures. Organizational cultures identified in other typology-based models have included the “tough-

guy macho” culture, typical of stock brokers during the trading day, in which feedback on actions comes

quickly, members can anticipate high rewards for the right decision and stress levels are quite high;

“process-based” cultures, often referred to as bureaucracies, that stress learning and following a “process”

and in which members get little or no feedback and tend to focus on how things are done (i.e., process) as

opposed to the value of the end product of all of the activities; power cultures (high concentration of

authority among a relatively few individuals); role cultures (highly organized structure with authority based


33 on position); task cultures (emphasis on specialization and expertise); person cultures (individuals believe

they are more valuable than the organization); innovative, outcome-oriented cultures; and team-oriented

cultures.

4. While it may be difficult to describe with certainty the basic assumptions underlying an

organization’s culture, researchers have argued that culture leads to observable differences among

organizations with respect to how employees relate to one another (e.g., degree of formality); how

employees view authority (e.g., egalitarianism versus hierarchy); ways of thinking and learning within the

organization; attitudes toward people; ways of changing; the methods that would be most effective for

motivating and rewarding employees; and the processes used for delivering criticism and resolving

conflicts and disputes.

5. The complexity of organizational culture makes it impossible to identify with certainty all of the

factors that determine the culture of a particular organization; however, it is likely that organizational

culture is heavily influenced by such things as the personal and professional characteristics of the

organizational members, particularly the founders; organizational ethics; the manner in which property

rights are created and allocated within the organization; the structure used by the organization for

communication and coordination of activities; the systems used by the organization to control its internal

activities; and the power structures within the organization. In many cases the organizational culture is also

heavily influenced by the characteristics of the industry in which the organization operates and

organizations within a particular industry share the cultural characteristics that are most appropriate for

survival and growth in the face of the competition and other environmental factors that they are facing.

Other factors that are likely contributors to the development of organizational culture include the history

and background of the organization; the size and evolution of growth of the organization; societal culture;

the function and purpose of the organization (i.e., organizational tasks and the nature of the organization’s

business, clients and operating processes); the technology used in the conduct of the organization’s

activities (i.e., job design, complexity and interdependence); the goals and objectives of the organization;

training, appraisal and rewards systems; and the leadership and communications skills of those at the top of

the organizational hierarchy.

6. Research has indicated that the culture of an organization has a strong influence on how the

organization tackles problems and questions, sets strategy and creates the structures that determine the

work activities and relationships of organizational members and also on how members behave when

carrying out their organizational activities. There is also evidence that organizational culture plays a big

part in defining the competitive position of the organization in its environment and the way in which the

organization is perceived by external stakeholders. For example, it has been argued that organizational

culture is a key factor in whether or not an organization can achieve and maintain an entrepreneurial

orientation, which has been defined as a strategic focus on risk-taking, proactive pursuit of new

opportunities and new product or process innovation. Organizational culture is an important determinant of

the level of risk-taking that a firm is willing to tolerate.

7. Organizational culture is made up of several different basic components. At the broadest and

perhaps most abstract level are “values,” which describe the desired state or outcome that the leaders of the

organization wish to achieve through the activities of the members of the organization. Norms are the

established rules of behavior or standards of conduct that exist within an organization to control the

behavior of its members. Norms, both formal and informal, contribute to the orderliness and predictability

of the day-to-day activities of the organization and are learned through various socialization processes.

Norms create strong bonds within the organization and members are likely to feel intense guilt or shame if

they should breach their obligations. Finally, organizations use various “cultural forms,” including rites

and rituals, myths and stories, symbols, language, gestures, artifacts and physical surroundings, as linking

mechanisms to develop networks of understanding among members and communicate the prevailing

cultural values and norms of the organization. Taken together, these components provide guidelines that



34 References and Resources The Sustainable Entrepreneurship Project’s Library of Resources for Sustainable Entrepreneurs relating to

Organizational Culture is available at https://seproject.org/organizational-culture/ and includes materials

relating to the subject matters of this Guide including various Project publications such as handbooks,

guides, briefings, articles, checklists, forms, forms, videos and audio works and other resources;

management tools such as checklists and questionnaires, forms and training materials; books; chapters or

articles in books; articles in journals, newspapers and magazines; theses and dissertations; papers;

government and other public domain publications; online articles and databases; blogs; websites; and

webinars and podcasts. Changes to the Library are made on a continuous basis and notifications of

changes, as well as new versions of this Guide, will be provided to readers that enter their names on the

Project mailing list by following the procedures on the Project’s website.

08.2017

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