Back to Top

What is Organizational Culture?

Every organization has a culture!

Organizational culture is a dominant force that operates continuously in an organization. It has a powerful effect on business performance and on the overall long term effectiveness of an organization.

Over time, organizational culture becomes ingrained in the organization’s operating norms and in a code of conduct that is unwritten and often unstated. As a force of shared meaning for an organization, it influences and shapes the behavior of internal stakeholders which in turn affects overall business productivity and outcomes.

Although always present, organizational culture is not something that one can easily identify. In other words, it’s not one thing that you can point to in an organization and say that this is its organizational culture. Rather, much of organizational culture operates below the surface of workplace operations (most often at an implied or understood level) to enforce its will on its members.

So, what exactly is this mysterious force, organizational culture, that is shaping and influencing workplace behavior and outcomes?

Edgar Schein, a social psychologist who revolutionized our understanding of organizational culture defined it as follows:

Organizational culture is the basic assumptions and beliefs that are shared by members of an organization that operate unconsciously and that define in a basic taken for granted fashion an organization’s view of itself and its environment. These assumptions and beliefs are learned responses to a group’s problems. They come to be taken for granted because they solve those problems repeatedly and reliably.

A shorthand version of this definition that I like to use to show how organizational culture works in practice is the following:

Organizational culture is how we do business here!

Back to Top

How Does Organizational Culture Develop?

Organizational culture is formed over time!

It begins with the foundational DNA of (1) the organization’s founders and of (2) the leaders that the founders bring in to help them establish and run the organization. This foundational DNA is their initial beliefs and values about how the organization should operate.

As the organization develops and succeeds, the foundational DNA, organizational history, operating standards, and cumulative learning all come together to form a dominant organizational culture that is shared by members of the organization.

Back to Top

Where Does Organizational Culture Exist?

An organization’s culture exists everywhere in the organization!

Over time organizational culture becomes deeply embedded in the organization’s institutional systems and practices including the following:

• reward systems
• management practices
• organizational structure
• physical layout
• communication methods
• human resources practices
• business operating procedures
• financial practices
• code of conduct

As this organizational culture becomes embedded in an organization, it will exist at three levels. Dr. Schein identified these three distinct levels as artifacts and behaviors; espoused values; and underlying assumptions.

Artifacts and Behaviors are visible elements within an organization that identify characteristics of an organization’s culture. They are easily identifiable tangible elements of the organization (physical, visual, or audible) that demonstrate how the organization should function and how its members should behave. Examples of artifacts and behaviors are the physical layout of the workplace, dress code, communication practices, etc.

Espoused Values are discoverable elements within an organization that identify characteristics of an organization’s culture. They are the organization’s stated values that explain how the organization should function and how its members should behave. Examples of espoused values include mission and vision statements, code of conduct statements, value statements, etc.

Underlying Assumptions are invisible and unspoken elements that identify characteristics of an organization’s culture. They are deeply embedded, unspoken, and hard-to-identify beliefs and values about how the organization should function and how its members should behave. Some examples of underlying assumptions include the following:

• An unspoken belief that avoiding negative publicity is more important than taking risks
• An unspoken belief that generating sales is more important than customer service
• An unspoken belief that employee competition is more important than employee collaboration

Back to Top

What Are the Major Types of Organizational Culture?

There are four major types of organizational cultures!

The Competing Values Framework (#CommissionsEarned) that was developed by academic researchers John Rohrbaugh, Kim Cameron and Robert Quinn is a useful model for understanding these four types of organizational cultures. Their model is useful because (1) it is based on values (beliefs about what is acceptable and unacceptable) and because (2) values are at the core of organizational culture.

The Competing Values Framework measures competing organizational values on two different dimensions (Flexibility and Discretion vs. Stability and Control) and (Internal Focus and Integration vs. External Focus and Differentiation).

The dimensions on the first pair of competing values are defined as follows:

• Flexibility and Discretion refers to an organizational preference for dynamism (changing, adaptable, and organic)
• Stability and Control refers to an organizational preference for consistency (stable, predictable, and mechanistic)

The dimensions on the second pair of competing values are defined as follows:

• Internal Focus and Integration refers to an organizational preference for cohesion (internal harmony, integration, and unity)
• External Focus and Differentiation refers to an organizational preference for independence (competition, differentiation, boundary challenging)

The results of these two dimensions form four quadrants for classifying an organization’s dominant culture (hierarchy, clan, adhocracy, or market). The characteristics of these four major types of organizational culture are as follows:

• Hierarchy is an organizational culture that values efficiency (rules, policies, structure)
• Market is an organizational culture that values results (competitiveness, profitability, productivity)
• Clan is an organizational culture that values teamwork and collaboration (interpersonal harmony, participation, consensus)
• Adhocracy is an organizational culture that values flexibility (adaptability, creativity, entrepreneurship)

In practice, no organizational culture rests solely in one of these four quadrants. An organization’s culture will consist of some combination of all of these four competing values. However, when analyzing an organization’s overall culture, a dominant competing value will emerge among these four competing values. This dominant competing value is what forms the core basic and non-negotiable assumptions and beliefs of the organization. Identifying the dominant competing value for an organization can give you a deep understanding of why an organization behaves in a certain manner.

NOTE: The organizational values for the four quadrants of the Competing Values Framework are very similar to the personal values for the four personality styles.

Back to Top

Why Organizational Culture Matters!

Organizational culture is a powerful and underlying force in organizations that influences and controls workplace operations and human behavior.  In his book on organizational behavior, Dr. Robbins explains the following about the functions of organizational culture within an organization:

• It has a boundary defining role that creates a distinction for an organization
• It conveys a sense of identity for organizational members
• It facilitates the generation of commitment to something larger than one’s individual self-interest
• It enhances social system stability
• It is the social glue that helps hold the organization together by providing appropriate standards for what employees should say and do.

In conclusion, organizational culture is not something that managers can ignore! It is always present in everything that an organization does. Managers need to understand it — particularly at the underlying assumptions level —  if they want to be effective in their leadership roles and if they want to be effective agents of change in their organizations.

References: