Why Organisational Culture Is Important - Essay Example

Organisational Culture Introduction In the past decades, organisational scholars and practitioners have become overly fascinated with the concept of organisational culture (Miller 2008). In the early 1980’s particularly organisational culture became widely recoginised as a vital business phenomenon (Hofstede 1992; Ouchi 1981; Schein 1985). Much attention has been directed towards studying this concept mainly due to existing evidence in previous studies in different fields that have linked organisational culture to organisational performance and effectiveness (Chan, Shaffer & Snape, 2004; Hartnell, Ou & Kinicki, 2011; Denison, Haaland, & Goelzer, 2004). Many literature on organisational effectiveness have increasingly accentuated on the importance of organisational culture in motivating and maximising employee performance (Abu-Jarad, Yosuf & Nikbin 2010; George & Jayan 2012). Consequently, a lot of attention has been directed towards studying this concept in order to shed light on ways in which organisations can enhance employee performance and overall effectiveness. This paper seeks to critically and indepthly examine what the concept of organisational culture entails. Through a critical review of various relevant literature sources, it examines different issues and concepts revolving around organisational culture. Firstly, this paper explores the meaning, definitions and characteristics of organisational culture. Secondly, it examines different dimensions/ categories of organisational culture and compares them by examining their similarities and differences. Thirdly, this paper examines the connection between organisational culture and climate. Moreover, it explores the functions of organisational culture. It also examines how organisational culture develops and the role that leaders play in shaping organisational culture. It further examines the factors that determines an organisation’s culture. Furthermore, it looks into how organisational culture is communicated in the organisation and how it is learned. Subsequently, this paper critically examines different models and theoretical perspectives of organisational culture. In addition, it looks at the effects of organisational culture on people, processes and organisational outcomes. Lastly, this paper states the implications of the findings established in the paper and provides recommendations for organisational managers. What is Organisational Culture? Meaning, Definition and Characteristics Organisational culture is a broad and multidimensional concept that has been defined differently in many scholarly literatures. Edgar Schein (1985) one of the notable scholars of organisational culture defined this concept as a system comprising of shared values and beliefs that develop gradually over time within an organisation and that guide individual behaviour. Schein further views organisational culture as a pattern of shared assumptions that members of an organisation learn with time as they solve problems from their internal and external environment. On the other hand, Geert Hofstede (1992) another notable scholar in this field defined organisational culture as the collective programming of the mind which differentiates members of an organisation from other organisations. According to Pfiser (2009) organisational culture is a broad concept that encompasses an organisation’s collective beliefs, values, assumptions, norms, language, symbols and behaviours. Based on these definitions, it is evident that organisational culture is multidimensional concept that encompasses shared or collective beliefs , values, and patterns developed over time that determine how members of an organisation perceive situations and do things. This is the definition adopted for this study mainly because it is more concise and elaborate. Given the different aspects or variables embedded within organisational culture, it is plausible to argue that organisational culture varies from one organisation to the other. Nevertheless, some scholars argue that although organisational culture varies from one organisation to the other, there are several common characteristics of organisational culture. Kreitner (2008) particularly notes that there are six common characteristics of organisational culture. Firstly, organisational culture is collective. The shared norms, values and beliefs within an organisation are what make up organisational culture (Pfiser 2009). Although individuals may exert cultural influences, it takes collective consensus and action in order for an organisation’s culture to assume a life of its own (Kreitner 2008). Secondly, organisational culture is historically based. Organisation culture is not acquired instantaneously rather it is something that develops gradually over long periods of time. The shared experiences among members of an organisation over long periods of time tend to synchronize them such that they develop similar beliefs and patterns of doing things. Thirdly, organisational culture is inherently symbolic. Symbols such as artifacts, office décor, clothing and slogans among other things epitomise some aspect of the culture within an organisation. These symbols often act as triggers to remind people about the ideology, values, beliefs or culture of the overall organisation. For example, a slogan such as “Customer First”, may be an indicator that the organisation has a culture that is customer-oriented (Samson & Daft 2012). Another characteristic of organisational culture is that it is dynamic. In this regard Kreitner (2008) argues that although in the long-run organisational culture promote stability, predictability and conformity, it is not static. Organisational culture changes or evolves from time to time. Organisational culture is also indistinct. It comprises of certain contradiction ambiguities and multiple meanings (Kreitner 2008). Dimensions/ Classifications of Organisational Culture Over time, scholars have come up with different ways of classifying organisational culture. Hofstede (1992) argued that organisational culture can be classified based on five key dimensions namely; power distance, uncertainty avoidance, individualism/ collectivism, masculinity/feminism, long-term and short-term orientation. Conversely, O’Reilly, Chatman & Caldwell (1991) developed a model that classified organisational culture based on seven key dimension namely; innovativeness, aggressiveness, stability, team oriented, people oriented, detail oriented and outcome oriented. This section examines the classifications of organisational culture based on Hofstede’s model. In reference to Hofstede’s model (1992), organisational culture can be classified based on power distance. Power distance refers to the degree of inequality or the unequal distribution of power within the organisation. There are organisational cultures characterised by high power distance while others are characterised by low power distance. In organisations characterised by high power distance, there is hierarchical distribution of power. The figures of authority or the managers are very authoritative. Employees perceive their managers as less approachable and are less likely to question or criticise with their managers out of respect for rank. Moreover, information in such organisations tends to flow predominantly downwards (Hofstede et al 2010). However, in organisations with low power distance the relationship between managers and employees is more democratic and consultative. Managers and employees relate to each other as equals regardless of ranks. Information also flows both upwards and downwards in such organisations (Hofstede & Minkov 2010). Secondly, organisational culture can be classified based on uncertainty avoidance. Uncertainty avoidance refers to the extent in which members of an organisation feel comfortable or uncomfortable with unusual or uncertain situations and how they deal with future uncertainties. There are organisational cultures characterised by high uncertainty avoidance and those characterised by low uncertainty avoidance. In organisations with high uncertainty avoidance organisational members are very uncomfortable with uncertainty hence they tend to adhere to rules, laws and procedures strictly in an attempt to avoid uncertainty. In contrast, organisations with low uncertainty avoidance tend to be more comfortable with unpredictable situations or the unknown. As a result, they have fewer rules to regulate situations (Hofstede & Minkov 2010). Thirdly, organisational culture can be classified based on the degree of masculinity or femininity. Masculinity is associated with assertiveness and competitiveness whereas femininity is associated with values such as modesty and care. In masculine organisations values as a competition and aggressiveness are accentuated on. These organisations also tend to be more goal-oriented than people-oriented. In contrast, feminine organisations tend to accentuate on values such as modesty, equality, solidarity and caring for others. Unlike masculine organisation, feminine organisations are more people-oriented than goal-oriented. Work-life balance is emphasised in such organisations (Hofstede & Minkov 2010). Another classification of organisational culture based on Hofstede’s (1992) model is based on individualism versus collectivism dimensions. Individualism can be defined as the extent to which individuals within an organisation exhibit independence and perceive themselves in term of “I”. On the other hand, collectivism can be defined as the extent in which individuals within an organisation are interdependent and integrated within strong cohesive groups and perceive themselves in terms of “we”. In individualistic organisations, performance reviews focus on each individual employee. Furthermore, motivation or promotion policies are based on individual merit. However in collectivist organisations performance reviews tend to focus more on groups than individuals and promotion is largely influenced by group considerations (Hofstede & Minkov 2010). Lastly, organisational culture can also be classified in terms of long-term orientation versus short-term orientation. In long-term oriented organisations emphasis is placed on future rewards whereas in short-term oriented organisations emphasis is placed on immediate rewards. Long-term oriented organisations austerity and saving are accentuated and resources are used frugally. However, in short-term oriented organisations organisational pride and reputation are highly emphasised on. Resources are allocated and used less sparingly (Hofstede & Minkov 2010). Organisational Culture and Climate Organisational climate can be defined as the nature of the work environment as perceived collectively by individuals within the organisation (Ashkanasy, Wilderom & Peterson 2011). Calahane & Sites 2008). It can also be viewed as the quality of the internal work environment as experienced by members of the organisation. The internal qualities of a work environment such as values and attitudes significantly influences the behaviour of organisational members. In this regard Ali & Patnaik (2014) note that, organisational culture encompasses a set of characteristics that distinctively define an organisation, shapes people’s behaviours and distinguishes it from other organisations (Ali & Patnaik 2014; Dorthe et al 2008). Although there is clear definition in literature on what the concept of organisational climate entails, it is sometimes conflated or considered synonymous with organisational culture. Nonetheless, there exist a positive and sometimes ambiguous correlation between organisational climate and organisational culture (Ashkanasy et al 2011). In their study Ali & Patnaik (2014) found that similar to the concept of organisational culture which encompasses attitudes and values, organisational climate also encompasses values and attitudes (Calahane & Sites 2008). Some studies have also found that both organisational culture and organisational climate are likely to influence employee behaviour and performance within the organisation (Ali & Patnaik 2014; Pfiser 2009; Zhang 2010). Although organisational culture and organisational climate correlate in some aspects, these two concepts are distinct. For instance, Ali & Patnaik (2014) observe that one of the key distinction between organisational culture and organisational climate is that organisational climate reflects the way in which people perceive things whereas organisational culture organisational culture reflects the way in which things are done. A further distinction between these two concepts lies in the fact that organisational climate encompasses shared perceptions about an organisation’s work environment whereas organisational culture encompasses shared assumptions and beliefs (Ashkanasy et al 2011; Ali & Patnaik 2014; Pfiser 2009). Models and Theoretical Perspectives of Organisational Culture Over time, different scholars have come up with a number of models and theoretical perspectives in a bid to illustrate and provide insight on organisational culture. In his book, “Organisational Culture and Leadership”, Schein (1985), illustrates a model that provides invaluable insight organisational culture. Schein’s model of organisational culture postulates that organisational culture encompasses three distinct levels; artifacts, espoused values and basic assumptions. The first level i.e artifacts is the most visible element. It comprises of the social and physical environment that members of the organisation have developed gradually overtime. Artifacts may include aspects such as building architecture, furniture, technology, written documents clothing and art. It may also include visible behavioural patterns such as communication approaches (forms of address) or decision making styles. Schein (1985) suggest that these are the most obvious and visible aspects that manifest an organisation’s culture. However, he notes that whereas it may be easy to observe artifacts, it is difficult to decipher what they mean. The second level of organisational culture according to this model encompasses espoused values. Schein (1985) argues that, values epitomise preference of what should happen. There are individual and group values. In a nut shell, this level of organisational culture represents both individual and group beliefs about how things “ought” to be done within an organisation. Values within the organisation are often expressed in terms of philosophies, public statements, strategies and goals. Lastly, the third level of organisational culture encompasses shared assumptions. Schein (1985) notes that shared assumptions are unconscious and deeply-rooted beliefs, thoughts and perceptions that are not easy to identify. However, they significantly determine how things happen the way they do within the organisation. Assumptions may be about issues such as gender roles, human nature and relationships among many other general issues. Visible but meaning not easy to decipher Higher level of awareness Invisible/unconscious Figure 1: Schein (1985) model of organisational culture Although Schein’s model provides a suitable framework for examining multiple indicators of organisational culture, it has been criticised for oversimplifying the nature of organisational culture. According to Miller (2008), this model tends to overlook a number of things. Firstly, it does not take into account the issues pertaining to organisational subcultures. Miller asserts that organisations do not have values rather, individuals do. Given the fact that individuals are likely to have different values, this is likely to contribute to the emergence of organisational subcultures. In addition to this, the model does not take into account the role that the communication plays in creating and maintaining organisational culture (Miller 2008). Besides Schein’s (1985) model there are also other theoretical models that provide invaluable insight on organisational culture. For instance, Hofstede (1992) model postulates organisational culture can be classified based on five key dimensions namely; power distance, uncertainty avoidance, individualism/ collectivism, masculinity/feminism, long-term and short-term orientation. Similar to Schein’s (1985) model, this theoretical model has been criticised for not taking into account issues pertaining to organisational subcultures (Miroshnik 2013). Hatch & Cunliffe (2006) theoretical model of organisational culture also offers invaluable insight on organisational culture. This model explains how different aspects of organisational culture (artifacts, values and assumptions) as envisioned in Schein’s (1985) model interact. Additionally, this model provides a framework that can be used to facilitate organisational culture change. Generally, this model proposes that aspects of organisational culture are interrelated and influence each other. It accentuates on multiple vague interactions between different aspects of organisation proposing that each aspects is linked to all other aspects. For instance, the assumption among employee that hard work is not necessary might lead to the organisation developing values of close monitoring and control. It may also contribute artifacts such as open-plan offices or time clocks (Hatch & Cunliffe 2006). In the recent past, Dauber & Fink & Yolles (2012) developed a configuration model of organizational culture. This model explores the dynamic relationship between organisational culture, structure, strategy and operations of the organisation in the internal and external and external environment. It accentuates on the need to distinctively understand processes and culture domain in order to comprehend the dynamics of organisational culture. A key feature of this model encompassess its well-defined processes, which link the elements systematically to each other. As compared to other models of organisational culture, the configuration model of organisational culture is more complex, but systematic and logical (Dauber et al 2012). Dauber et al (2012) configuration model of organisational culture is selected as the preferred model mainly because it is a recent model that integrates different perspectives from a wide range of models and literatures on organisational culture. This model offers a comprehensive, holistic and interdisciplinary approach of examining cultural dynamics in organisations. It also provides a suitable framework for examining cultural effects in organisations. Impact of Organisational Culture on People, Processes and Organisational Outcomes In the recent past, a number of studies have been conducted to examine to the impact of organisational culture on people, processes and organisational outcomes. A number of studies have established that organisational culture can significantly affect people and processes within the organisation as well the outcomes realised by organisation. In a study conducted by George & Jayan (2012), it was established that organisational culture has a significant impact on personal effectiveness. The study found that shared values, beliefs, norms and assumptions within the organisation significantly affect factors that facilitate personal effectiveness such as personal focus, personal growth, customer relationships, team effectiveness and personal adaptability (George & Jayan 2012). The findings of this study as consistent with studies carried out by Zheng, Yang & Mclean (2010) and Sharma & Sharma (2008) also found that organisational culture can have a profound impact on personal effectiveness. In a study conducted by Shahzad, Luqman, Khan & Shabbir (2012), it was established that organisational culture has a profound impact on the performance of employees. The culture on an organisation was found to exert social control in a way that influence the decisions and behaviours of employees. Moreover, Shazhad et al (2012) found that organisational culture acts as a social glue that bonds employees together and makes them feel that they belong. This in turn helped to enhance team effectiveness. The study also found that organisational culture played a valuable role in helping employees understand and internalise organisational vision, mission and goals, this in turn helped to enhance employee’s effectiveness and efficiency. On this basis, the study concluded that organisational culture has a profound impact on the performance of employees. Similar to the findings of this study, Gallagher (2008) observes that over 60 research studies conducted between 1990 and 2007 have established that organisational culture affects organisational performance. Results of these studies suggest that there is a positive correlation between a strong organisational culture and improvements in performance (Gallagher 2008). Organisational culture has also been found to impact on organisational outcomes such as; level of profitability and competitive advantage in the market. In a study conducted by Abu-Jarad, Yosuf & Nikbin (2010), it was established that aspects of organisational cultures such as norms and beliefs affect the profitability and overall performance of the organisation. For example, in organisations characterised by norms or beliefs such as; “Doing enough just to get by is okay” the profitability and overall performance of the organisation is bound to be mediocre. However, in organisations characterised with beliefs such as “excellency is rewarded in our organisation”, the profitability and overall performance is likely to be top notch (Abu-Jarad, Yosuf & Nikbin 2010). In line with findings of this study, Coffey (2010) suggests that organisational culture can influence sales/revenue growth, market share and overall profitability of an organisation. On the other hand, Madu (2012) found that organisational culture is a key driver of an organisation’s competitive advantage in the market. He argues that an organisation’s culture stands out as a vital component that leaders often employ to develop and maintain competitive advantage in the market. Other studies have established that organisational culture impacts on organisational processes such as decision making and resource allocation and innovation (Sever 2008; Tierney 2008). With regards to decision making, Tierney (2008) argues that values and beliefs entrenched within an organisation’s culture may influence the priorities of the organisation in the course of decision making or resource allocation. For instance, organisations which value and believe in employee development are likely to priorities on issues such as training and mentoring when decision or allocating resources making allocating resources. Additionally, a considerable number of studies have found that an organisation’s culture can promote or hinder innovativeness within the organisation (Lee, Tan & Chiu 2008; Sarros, Cooper & Santora 2008). March-Chorda & Moser (2010) argue that an organisation’s ability to produce beneficial and consistent innovations largely hinges on its culture. Similarly, Naranjo-Valencia, Jimenez & Sanz-Valle (2011) found that organisational culture is a major determinant of an organisation’s innovation strategy. How Organisational Culture in Developed and the Role of Leaders in Shaping Organizational Culture Schein (1985) notes that, organisational culture is learned gradually with time as members solve problems and deal with issues within their internal and external environment. Similar to Schein’s sentiments, Hellriegel & Slocum (2008) argue that organisational culture is often developed when organisations respond to two major challenges namely; internal integration and external adaptation and survival. Internal integration refers to the creation and maintenance of effective work relationships amongst organisation members. In order to ensure internal integration Hellriegel & Slocum (2008) note that many organisations tend to develop work roles, team and group boundaries, reward and punishment systems and shared meanings of cores values. These aspects cumulatively lead to the gradual development of organisational culture. Hellriegel & Slocum (2008) further argue that the challenge of ensuring external adaptation and survival also compel organisations to come up with strategies so as to cope with their constantly changing external environment. Alluding to Hofstede’s (1992) model of organisational culture, they note that depending on national culture, some organisations may come up with strict rule or procedures in order to avoid the uncertainties in their external environment and vice versa. Some companies can may adopt more goal-oriented than people-oriented in order to ensure external adaptation and survival (Hellriegel & Slocum 2008; Hofstede & Minkov 2010). Conversely, Robbins (2013) argues that development of organisational culture is mainly rooted in the philosophy of its founder(s). The founder’s philosophy strongly determines the creteria used in appointments of top officials and other employees. Subsequently, the actions of the top officials sets an overall climate regarding what behaviour or actions are acceptable or unacceptable (Robbins 2013). Besides these findings, there is compelling evidence in literature that suggest leaders play a critical role in shaping organisational culture (Dorthe et al 2008; Schein 2010; Tsai 2011). Martindale (2011) argue that the leadership style that a leader employs plays a significant role in shaping organisational culture. For example in an organisation with an authoritarian leader, the organisation culture is likely to be characterised by strict regulations, direct supervision, little consultation and hierarchical power relationships. However, in organisations where a leader exercise leisure-faire leadership the organisational culture is likely to be marked by flexibility, innovativeness and autonomy (Martindale 2011). Leaders also play a critical role in communicating organisations beliefs, values, objectives and priorities to employees. This in turn reinforces an organisation’s culture (Ashkanasy et al 2011; Dorthe et al 2008). Functions of Organisational Culture. What do Organisational Cultures Do? According to Radovic-Markovic (2012) organisational culture plays three key functions. Firstly, it provides identity for members within the organisation. It acts as a social glue that bonds employees together and gives them a sense of belonging (Shazhad et al 2012). Secondly organisational culture delineates employee behaviour and enables them to adapt to their work environment. In this regard, Hellriegel & Slocum (2008) argue that organisational culture often develops in response to an organisations need to adapt and survive in its external environment. Thirdly, Radovic-Markovic (2012) argue that organisational culture promotes social stability within the organisation. It sets standards regarding what behaviour or actions are acceptable or unacceptable (Robbins 2013). Similarly, Shazhad et al (2012) argues that the culture of an organisation exerts social control in a way that influences the decisions and behaviours of employees. Factors Determining Organizational Culture In their study, Doina, Mirela & Constantin (2008) explored a number of factors that determine organisational culture. They note that, an organisation’s characteristics such as its history, size, and the industry it operates in among many other factors can determine its organisational culture. They particularly observe that organisations which are big in size often tend to have high degree of specialization, subcultures and are impersonal in nature. However, small organisations are more homogenous (Doina et al 2008). Moreover, the history of the organisation profoundly determines it organisational culture. As Kreitner (2008) observes organisational culture is historically based. The shared experiences among members of an organisation over long periods of time tend to synchronize them such that they develop similar beliefs and patterns of doing things. The industry that organisation operates in or the nature of business/activities that an organisation engages in also determines organisational culture. For example, organisations that focus on providing financial services e,g banking or stock-broking often tend to focus on external factors such as earning per share, supply and demand and so on. These organisations are likely to be goal-oriented than people-oriented ((Doina et al 2008; Hofstede & Minkov 2010). The founders or owners of the organisation also tend to determine the culture of the organisation. The founders of an organisation often create a philosophy that determines the basic beliefs and values of an organisation. As previously observed by Robbins (2013)the founder’s philosophy strongly determines the creteria used in appointments of top officials and other employees. Subsequently, the actions of the top officials sets an overall climate regarding what behaviour or actions are acceptable or unacceptable (Robbins 2013). In addition to this, the leadership style employed in the organisation considerably determines an organisation’s culture. As previously established in this paper there is compelling evidence in literature that suggest leaders play a critical role in shaping organisational culture (Dorthe et al 2008; Schein 2010; Tsai 2011). How Organisational Culture is Communicated Dwyer (2012) argues that organisational culture is learned by employees and communicated through rituals, stories, symbols and language. Similarly, Mcshane (2000) concurs that organisational culture can be communicated through artifacts, rituals and ceremonies and language. According to Mcshane (2000) rituals and ceremonies play a significant role in communicating organisational culture. He defines rituals as the programmed routines that occur regularly within the organisation. Rituals may include; how people communicate, how often supervisors visit their subordinates, how often performance is reviewed or how much time is the lunch break and so on. On the other hand ceremonies include planned events or activities. Ceremonies may include; reward or performance celebration events, product launch among other events (Mcshane 2000). Stories told to employees about an organisation’s history, experiences in the market, failures and successes also help to convey organisational culture (Dwyer 2012; Mcshane 2000). Artifacts or observable physical aspects of an organisation such as artifacts, office décor, clothing and slogans among other things also help to convey organisational culture. These symbols often act as triggers to remind people about the ideology, values, beliefs or culture of the overall organisation (Dwyer 2012; Mcshane 2000; Samson & Daft 2012). Furthermore, language speaks volumes about the culture of an organisation. Language in form of metaphors, phrases, vocabularies and slogans used by organisational leaders often highlights values held by organisations. For instance, a slogan such as “Customer First”, may communicate that the organisation has a culture that is customer-oriented (Samson & Daft 2012). Conclusion The findings established through this literature review demonstrate that organisational culture is vital organisational phenomenon that plays a critical role in almost all facets on an organisation. Through the various literatures reviewed, a positive correlation was established between organisational culture and employees’ performance, organisational effectiveness and overall organisational outcomes. These findings imply that, organisational culture is a major driving force and determinant of organisational outcomes. Drawing on these finding, it is plausible to argue that in order for organisations to enhance their performance or improve their overall outcomes, they should tap into their culture. By developing a strong culture characterised by values, beliefs and norms that create a conducive work environment that supports employee performance, it is possible for managers to improve organisational outcomes. As demonstrated in some of the literatures reviewed leadership can play a significant role in shaping organisational culture (Dorthe et al 2008; Schein 2010; Tsai 2011). On this basis, there is need for leaders or managers in organisations to employ suitable leadership skills and approaches in order to exert positive influence on the culture of their organisation. References Abu-Jarad, I. Y., Yosuf, A. & Nikbin, D. (2010). “A Review on Organizational Culture and Organizational Performance”. International Journal of Business and Social Science 1(3), 26-46. Ali, A. & Patnaik, B. 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