The Relation Between Organizational Culture and Business Performance - Essay Example

Culture is freely referred to anything that has to do with beliefs, values, norms, ideology and managerial style (Schein, 1998). Organizational culture is the key to organizational excellence and the function of leadership is the creation and management of culture, observes Schein. It is the accumulated learning that the group has acquired over a period of time. This learning enables the organization to cope with the external adaptation and internal integration. Once these assumptions have been found to be valid and acceptable, they are transferred to the new members. How the culture is integrated depends upon the stability of the group. Hence culture remains largely unconscious and embedded in an organization’s daily actions. Thus organizational culture includes the artifacts (organizational structures and processes), values (strategies, goals and philosophies) and the underlying assumptions that are unconsciously taken for granted. According to Gordan (cited by Schraeder, Tears & Jordan, 2006) organization’s culture is the product of successfully adapting to the environment and thus will resist change. Culture further serves as an informal control mechanism which defines acceptable behavior within an organization. Organizations in the service industry benefit from strong cultures where values are shared and supported throughout the organization. A positive culture can also be associated with organizational commitment and job satisfaction. There is a definite co-relation between culture and performance, culture and economic results, culture and sustainability, culture and strategic growth, culture and recruitment, motivation and retention of human capital, including downsizing. Culture according to Hofstede (1997, p4) is “the collective programming of the mind which distinguishes the members of one group or category of people from another” (cited by Hope & Mühlemann, 2001). Societies have developed common set of beliefs and developed a set pattern of behavior which allows them to live harmoniously. These are handed from one generation to another. Hofstede further believes that the culture in which an individual is immersed since birth is likely to have a much stronger effect on him than the organizational culture. This demonstrates the importance of managing diversity to ensure that workforce is not weakened in the future. There is no single or best culture that companies should have. Culture is developed over time and is unique to a particular organization. It depends upon the nature and size of the firm, the location, the period for which the company has been in existence and the workforce diversity. Culture according to Schein (1998) is a property of a group. Schein emphasizes that to understand the culture is to understand the organization. Culture differentiates one organization from another and provides a sense of identity to the members. He says cultures are deep seated, pervasive and complex. He stresses that adaptation and change are not possible without making changes that affect culture. Culture within an organization can be very dominant and influence employee behavior. At the same time people from different lifestyles, different regions and social cultures converge in an organization for a common purpose. They bring their own culture with them. This does not affect the culture of the company while the individual adapts the culture of the organization where he works. Today the corporate stress a lot on their corporate culture and it is used as a paradigm to understand an organization. Training and the use of symbolism play an important role in bringing about change in an organization’s culture (Schraeder, Tears & Jordan, 2006). Suppose an organization wants to undergo change from a merit compensation system to an incentive compensation system, this can be enhanced through the right training. Apart from training, organization leaders can also enhance employee awareness and promote change through leading by example. Employees observe how leaders react to crisis, what they pay attention to, how they allocate scarce resources and how the leaders recruit, select, promote, retire and excommunicate organizational members. Thus leaders play an important role in imparting the organizational culture. Members of an organization think and act in the same way but differently from members of similar other organizations (Steen, 2003). This implies that each organization has its own personality that determines its behavior. Steen cites the example of Arthur D Little and McKinsey, who were essentially in the same business but worked differently. Arthur D Little had as many strategies as consultants and data analysis was not important. They took pride in their chaotic organization. McKinsey on the other hand backed every conclusion by data and followed strict format for presentations. They always improved upon their previous weakness. These differences in behavior reflected the difference in the attitudes of the senior managers. This becomes the company culture, which is adhered to individually, as well as a team. People understand the organization through this culture. Culture can be strong or weak and has been grouped in different ways by different authors. Handy (1993) describes four types of culture – power culture, role culture, task culture and people culture. Power culture control radiates from the centre like a web and reaches the staff through the rays. The group takes calculated risks and being cohesive, they react promptly to internal or external threats. Role cultures are highly formalized. They are bound with regulations and paperwork. These organizations form hierarchical bureaucracies and are like a pyramid in structure. This is compared to a Greek Temple which has a base on which columns are erected as support and then a pediment thrown on it. This provides a great deal of security to the employees and they prefer to use this culture to understand the organization. In a Task culture teamwork is the basis on which the jobs are designed. Such culture becomes necessary or is used when specific projects have to be carried out for instance a strategic change is warranted. Personal decisions and aspirations take a back seat. Age and other dissimilarities do not matter. People culture or Person culture is where each individual thinks of himself as superior to the organization. This is against the very nature of an organization which suggests that a group of people come together to pursue a common goal. This culture is detrimental to the growth of a company especially if they were to handle team projects. Many aspects of culture are intangible and difficult to be seen but organizational culture is central to the functioning of an organization. Researchers also agree that organizational culture is holistic, soft, and difficult to change, has a historical basis, and is socially constructed (Schraeder, Tears & Jordan, 2006). Researchers further agree that culture is to an organization what personality is to an individual. An awareness of the organization’s culture provides guidance to the employees to be supportive to the organization’s mission. Thus organizations with strong culture where employees share common values perform better than organizations with weak culture. Thus it is evident that there is no best culture and culture is unique to every organization. Culture is the sum total of the attitude, beliefs, values and the behavior that an organization adopts over time. It is usually passed on from generation to generation. For the success of an organization becoming a part of the culture is important. Culture is directly related to change, recruitment, productivity and performance. Different organizations may have different types of culture as has been classified by researchers. Every employee needs to be aware of the organizational culture to carry forward the mission of the organization. Culture becomes embedded in the organization and is usually taken for granted. What is interesting is that people from diverse backgrounds, geographical location, from different segments and class of the society and even different religious beliefs converge in an organization and adapt the same culture. References: Handy, C. (1993). Wikipedia. Available from: http://en.wikipedia.org/wiki/Corporate_culture#Charles_Handy [accessed 01 June 2008] Hope, C. A. & Mühlemann, A. O. (2001). The impact of culture on best practice production/operations management, International Journal of management Reviews, Vol. 3 No. 3 pp. 199-217 Schein, E. H. (1998). Organizational Culture. Available from: http://dspace.mit.edu/bitstream/1721.1/2224/1/SWP-2088-24854366.pdf [accessed 01 June 2008] Schraeder, M. Tears, R. S. & Jordan, M. H. (2006). Organizational culture in public sector organizations. Leadership & Organization Development Journal Vol. 26 No. 6, 2005 pp. 492-502 Steen, E. V. Den (2003). On the Origin and Evolution of Corporate Culture. Available from: http://www.people.hbs.edu/bhall/NOMTalks/papers/evds_culture_evolution.pdf [accessed 01 June 2008] Read More