Organizational Culture as a Source of the Companys Competitive Advantage - Essay Example

Organizational culture and Competitive advantage Organizational culture is a basic tool for any organization to control its employee’s behavior in order to have a coordinated and effective way of accomplishing or achieving its goals. In this regard, organizational culture defines values and norms that members of an organization must adhere to; for instance, it defines how the firm understands the nature of human behavior particularly in social groups thus providing the basis on which this behavior can be controlled (Martin, 20020). Organizational culture is described as having massive influence on the organization and management which is as a result of its nature and content. According to Jani (2011, 70), organizational culture is referred to as a system of assumptions, values, norms and attitudes that are manifested through symbols which members of a given organization have developed and adopted through shared experience and which is essential in determining the meaning of the world around them and how to behave in it (Martin, 20020). Competitive advantage on the other hand is that advantage that a firm or organization has over its competitors that empowers it to generate greater sales, acquire and maintain a larger customer base than its competitors. The competitive advantage grants a company an edge over its rivals as well as gives it the ability to generate greater value for the organization together with its shareholders (Coffey, 2010). The above discussion has established that organizational culture is a system of assumptions, values, norms, and attitudes that are manifested through symbols which members of a given organization have developed and adopted based on shared experience that help them determine the meaning of the world around them and how they should behave in it (Schein, 2010). The shared values, assumptions, attitudes and norms help the organization’s members to shape their interpretive schemes; these interpretive schemes are significantly important for members of an organization to assign meaning to occurrences within and outside the organization together with understanding the reality that surrounds them (Deal & Kennedy, 2011). For this matter, employees’ behavior, actions, and interactions emerge from the meaning that the reality of the company has for them. In other words, organizational culture is defined as a form of collective interpretive scheme shared by employees of an organization due to which they assign meaning to occurrences, people and events in and outside of the organization in a similar way and treat them similarly (Schein, 2004) Organizational culture due to its influence on the interpretive schemes and behavior of employees, it participates in shaping other organizational components and management (Gottschalk, 2007). These components include: organizational strategy, system rewards, leadership style, organization structure, and organization learning. It is vitally important to note that, these components are as a result of the way the management and employees as a whole understand organizational reality and how to behave in it (Deal & Kennedy, 2011). Accordingly, with regard to the values and norms stated within the organizational culture, the firm’s top management use or selects the strategy which helps in designing the organizational structure, shape their leadership style, employees understand their motives and needs while the human resource management develop the compensation system for the organization. There are various types of organizational culture that based on the method of employee behavior control (Deal & Kennedy, 2011). These include: power culture, task culture, role culture, and people culture. These types of organizational culture are independently discussed. Power culture is also known as family culture: it is an organizational culture where power is concentrated or vested in the leader who is a powerful figure at the head (Zhu, 2000). The culture is highly centralized where interpersonal relations dominate over work structure and tasks. The level of relations formalization within the organization is extremely low and hence the culture is informal and thus does not have formal developed structures, systems, or procedures. Under this type of organizational culture the implementation of the leader’s decisions is through his/her direct and personal influence on employees. Employees substantially rely on the leader who makes all decisions, coordinates and controls all organizational processes (Zhu, 2000). The leader derives his/her power from the control he/she has over resources and charisma while employees draw their power from their closeness to the leader. This culture has high levels of flexibility as employees readily comply with all changes coming from the leader. Role Culture also known as Eiffel Tower culture is a bureaucratic where rationality is highly valued thus it has high levels of standardization, formalization, specialization and depersonalization (Cameron and Quinn, 2011). This type of organizational culture displays the company as a machine in which every part must perform its role in a prescribed manner. Following this understanding, role culture has formal rules, procedures, systems and structures that are highly respected; they are precisely designed and have a vital role in the overall functioning of the firm (Zhu, 2000). Companies with role culture operate through dependence on work structure together with division of labor and tasks. The interpersonal relations are of secondary importance in this type of organizational culture. There is unequal distribution of power in the organization since the rules that employees are obliged to obey are prescribed by the top management. It is not a flexible type of organizational culture because any change occurring in the organization affects or disturbs the normal harmonious functioning of the company (Zhu, 2000). Task or guided missile culture; this culture defines the organization as a tool for problem solving and task accomplishment. This culture is characterized with results, competence, creativity, achievement and change. Here, tasks are perceived to be complex and hence the entire teams are needed to solve them thus teamwork a highly regarded aspect (Lencioni, 2012). Accordingly, the complex tasks and problems solving is wholly entrusted to the professionals who have the necessary skills and competencies and in order to achieve the desired results these professionals must have autonomy in their work. In this regard, power within the organization is distributed relatively evenly among employees (Zhu, 2000). The organization with task culture focus on tasks; relationships and social structures are not strongly emphasized. People or Incubator Culture: in this organizational culture the company is understood as an incubator of ideas and people; individualism and individual growth is significantly valued. For this matter, personal goals are more important as compared to organizational goals to the employees. The organization is regarded as a suitable environmental context where personal goals can be achieved. In the same line of discussion, the context may be more or less adjusted to fit the individual’s needs of the employee; this is a fundamental criterion for valuation of quality of the organization (Zhu, 2000). This culture results into egalitarianism in power distribution within the organization. The members of organizations that use this type organizational culture comprise of experts who participate in organizational decision making in order to provide the necessary conditions for their individual development. This culture focuses on social structure and interpersonal relation, however, work structure is a secondary concern. Organizational culture determines the way employees interact at their workplace. Health work principles and values motivate employees to perform outstandingly thus helping the organization to achieve its goals (Lund, 2003). Favorable attitudes at the workplace enhance employee morale to work to their full potentials. This is key in increasing the organization’s productivity which results into reduced costs of production (Lund, 2003). The norms and principles incarnated in the organizational culture helps in the development of competition at the workplace where employees compete amongst themselves. This increases the overall company productivity and efficiency (Lund, 2003). The values, norms and principles described within the organizational culture guide employees to work according to the set company organizational policies. This serves as a direction for workers to perform their duties as per predefined and strategies of the company. The common values and norms provide a common platform that brings employees to work effectively for the organization. In this regard every employee is treated equally thus instilling confidence in them to work as a team for the profitability and growth of the company (Lund, 2003). Organizational culture can impact negatively on startups particularly when employees do not reach a consensus as to how things should be done (Deal and Kennedy, 2011). When the consensus is entrenched, leading employees can be very difficult while the default culture becomes a drag on the owner’s efforts to run the company (Lund, 2003). Organizational culture can also be hard to change as it gives employees a sense of identity and belonging encouraging participation in the company. When the organization decides to change the latter, employees feel threatened and hence may refuse to readily accept the change. The corporate culture also provides the means for translating the company’s mission and mission statements. However, the mission and vision may not inspire employees if they are not supported by the company’s culture (Lund, 2003). The earlier studies with regard to the relationship between organizational culture and competitive advantage (firm’s performance) focused on traits or organizational values that gave a company superior performance. An organization was postulated to have a strong culture; culture widely shared by employees, has well developed rituals together with organizational stories. These traits predicted the future organizational performance (Barney, 1986). For instance, firms with stronger organizational culture have superior performance due to its pervasive influence on employees throughout the organization (Girard and Girard, 2010). Accordingly, other studies also established that the organization of work and the decision making process within any firm are vitally important to the company’s performance. Similarly, the organizational culture only predicted the firm’s performance in the short term. With regard to this, it was concluded that strong culture despite of its content in which substantive value was placed on the value of adaptability, is directly related to stronger performance at least in the preceding three years. In accordance with the preceding discussion, there is a strong relationship between organizational culture and the company’s competitive advantage. Barney (1986) argued that organizational culture can only be a source of competitive advantage if it is valuable, rare, and imperfectly imitable. In accordance with this, culture can be defined as a set of values and belief held by employees. For this matter, a strong organizational culture implies a homogeneity and pervasiveness of the held values. Accordingly, a strong culture as already mentioned impacts on a wide range of organizational process (Barney 1986). Given this, it positively impacts on the employee commitment, loyalty, and reduces bureaucratic costs through social control. This is an important factor as it allows the company to achieve a competitive advantage. However, critiques of this relationships, argue that there are companies with strong organizational cultures but have poor performance as well as companies with weak organizational culture with excellent performance. Nimeth (1997) found out that strong organizational culture is a recipe for stifling creativity and innovations among the firm’s employees through a blind commitment to a set of ideas. For example, employees are vulnerable to groupthink while not being ready to accept new ideas or new modes of thinking. This reduces the company’s intellectual diversity together with its competitive advantage. Strong organizational culture although instrumental implementing creative ideas, it does not help in generating them (Lencioni, 2012). The current economy is characterized with a sophisticated adaptive system than a close equilibrium systems; markets exhibit periods of punctuated equilibrium where there are times of relative calm and stability which are disturbed by stormy periods (Chawla and Renesch, 2006). In this regard it is difficult for organizations to survive for long since their strategies, culture, and skills are finely developed for stable periods; when there is a sudden tilt in market, they become obsolete when the organization is restructured (Barney 1986). Companies with strong organizational cultures are only stable or can have competitive advantage when they display the adaptive and learning qualities; otherwise they become a liability during times of accelerated change. A company with a rare organizational culture has the ability to attain the competitive advantage in the industry. In this regard, the company that has unique cultural elements is positioned to have a competitive advantage. The cultural elements of each company are extremely important in determining its performance (Barney 1986). The company’s culture should be imperfectly imitable for it to sustain superior performance. If other rival organizations can easily manipulate these unique cultural elements then the company will lose its competitive advantage. Organizational culture is a vital entity that gives the organization the power to control employee behavior thus directing them towards superb company performance. Organizational culture is referred to as a system of assumptions, values, norms and attitudes that are manifested through symbols which members of a given organization have developed and adopted through shared experience and which is essential in determining the meaning of the world around them and how to behave in it. The corporate culture provides the company with a myriad of advantages; however, it can also be detrimental if not properly implemented as discussed from the above. There is a relationship between organizational culture and the company’s competitive advantage. Strong organizational culture that is unique and imperfectly imitable gives the company a competitive advantage over its rivals. Bibliography Barney, J. (1986). Organisational culture: can it be a source of competitive advantage? Academy of Management Review, vol. 11, no. 3, pp. 656-65. Cameron, K., and Quinn, R. 2011. Diagnosing and Changing Organizational Culture: Based on the Competing Values Framework, 2nd Ed. 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