What is Organizational Culture?

Organizational culture refers to the shared values, beliefs, and assumptions

that guide how members of an organization think, feel, and behave. It shapes the
identity of an organization, providing employees with a sense of stability and
direction. Culture helps employees understand the expectations in the workplace,
guides decision-making, and influences interactions with both colleagues and
external stakeholders. It is often an invisible force, but it plays a significant role in
how an organization functions and how it is perceived externally.

Key Features of Organizational Culture

1. Shared: Culture is a collective phenomenon. It is something that is

experienced and accepted by everyone within the organization. It serves as a
reference point for members to navigate both internal challenges (like conflicts or
team dynamics) and external challenges (such as market competition or
regulatory changes). For example, if a company like Google values innovation, all
employees share in this value and contribute to it in their own roles.

2. Learned: New members of an organization typically learn the culture over

time. This learning occurs through interactions, observation, and formal or
informal training. New hires are often mentored by more experienced employees,
and they pick up cultural norms through these interactions. For example, in
companies like Apple, new employees learn the importance of design simplicity
and user experience through both structured onboarding and observing senior
staff.

3. Influential: Culture has a profound effect on the perceptions, thoughts, and

behaviors of members. It influences decision-making, how problems are solved,
and how employees relate to one another. For example, at Zappos, the culture of
going above and beyond for customers influences all employees to prioritize
customer satisfaction in their daily work.

Elements of Organizational Culture

Organizational culture can be broken down into two main components:

• Manifest (Observable) Culture: These are the visible aspects of culture.

Manifest culture includes things like the behaviors exhibited by employees, the
language they use, the dress code, and the types of technologies or tools the
organization uses. These are tangible things that can be seen and directly
experienced by anyone interacting with the company. For example, the open-plan
offices at Facebook are an observable reflection of its culture of collaboration and
transparency.

• Non-Observable Culture: These are the underlying values, beliefs, and

assumptions that are not immediately visible but explain why things are done the
way they are. For instance, the belief in customer-centricity at Amazon drives
decisions at every level, but it’s not something you can directly observe. It is an
internal cultural value that guides behavior in subtle ways.

Functions of Organizational Culture

1. Boundary-Defining: Culture helps distinguish one organization from
another. It defines what is acceptable within the organization and what is not,
creating clear boundaries between the organization and the outside world. For
example, Tesla’s culture is distinct for its focus on innovation and sustainability,
setting it apart from other automakers.

2. Identity Creation: Culture gives members a sense of belonging. It provides

them with an understanding of what the organization stands for and how they fit
into the bigger picture. For example, Nike’s culture of “Just Do It” fosters a
shared identity of excellence, determination, and personal achievement among
its employees and customers.

3. Commitment: A strong organizational culture promotes employee

commitment to the organization’s goals. When employees share the same values
and vision, they are more likely to be dedicated to the company’s success.
Starbucks employees, for instance, are deeply committed to the company’s
mission of creating a third place for customers by embodying values of inclusivity
and community.

4. Stability: A consistent culture provides stability by setting clear expectations

and norms, making behaviors predictable. This stability is essential for managing
risk and ensuring smooth operations. Toyota’s focus on continuous improvement
(kaizen) is an example of a culture that emphasizes long-term stability and
efficiency.

5. Control: Culture acts as a mechanism for controlling and guiding employee

actions and attitudes. In organizations like McDonald’s, culture establishes clear
procedures for customer service and food preparation that employees are
expected to follow consistently.

Uniformity and Subcultures

While organizations typically have a dominant culture, there can also be subcultures
within the organization. These subcultures emerge in specific departments, teams,
or groups based on their unique experiences or challenges. For example, in a tech
company like Microsoft, the software development team may have a different
subculture from the marketing team, with distinct approaches to problem-solving
and innovation.

Subcultures are not necessarily negative; they can enhance organizational diversity
and innovation. However, the key challenge is ensuring that the dominant culture is
strong enough to integrate subcultures into a cohesive whole.

Creating and Sustaining Culture

The creation and sustenance of organizational culture starts at the top with the
organization’s founders. The values, vision, and actions of the founders set the
stage for what the culture will be like. Here’s how it is sustained:

• Selection: Organizations hire individuals who fit well with the desired culture.
For instance, Google seeks employees who align with its values of creativity and
collaboration.

• Socialization: New employees are introduced to the culture through

onboarding processes and ongoing socialization efforts. For instance, Disney
instills its culture of “magic” in new employees through training and mentorship.
• Top Management Actions: Leaders model cultural values and behaviors.
For example, Apple’s top management has always emphasized design and user
experience, and this is reflected in every level of the organization.

The Liabilities of Organizational Culture

While culture has numerous benefits, a strong culture can also present challenges:

1. Barriers to Change: When an organization has a rigid culture, it can be

difficult to adapt to changing market conditions or customer needs. For example,
Blockbuster failed to adapt to the digital revolution because its strong culture
focused on physical rentals, leading to its downfall when streaming became
popular.

2. Barriers to Diversity: A dominant culture can unintentionally stifle diversity.

If an organization’s culture emphasizes certain traits (e.g., high individualism),
employees who don’t fit those traits may feel excluded. Apple, for example, has
faced criticism for lacking diversity in its workforce due to its strong,
homogenized culture.

3. Barriers to Mergers and Acquisitions: When organizations merge, their

cultures must blend. Cultural clashes between two organizations can lead to
conflict and failure. For example, when Daimler-Benz merged with Chrysler,
cultural differences between the German and American work styles created
tensions that led to the eventual unraveling of the merger.

Transmitting Culture
Culture is passed down through stories, rituals, symbols, and language. These
transmission methods ensure continuity and reinforce the values of the organization.
For example, at Walt Disney, stories about the company’s origins and its founder,
Walt Disney, are shared frequently, reinforcing the core cultural values of creativity,
imagination, and excellence.

Creating a Positive Organizational Culture

A positive organizational culture focuses on the following principles:

• Building on Employee Strengths: Encouraging employees to grow and

maximize their strengths fosters a sense of personal accomplishment and
increases overall performance. Southwest Airlines is known for hiring people
with strong interpersonal skills and emphasizing a positive work environment.

• Rewarding More Than Punishing: Fostering a culture where achievements

are recognized, rather than focusing solely on mistakes, boosts morale and
motivates employees. Google rewards innovation through perks and promotions,
contributing to a high-performing culture.

• Emphasizing Vitality and Growth: Supporting both the professional and

personal development of employees leads to engagement and long-term
satisfaction. IBM is known for providing its employees with opportunities for
growth and skill development, which helps them stay engaged and committed to
the company.

In Summary
Organizational culture is a powerful force that shapes how employees behave, make
decisions, and interact with each other. It provides stability and a sense of identity,
but it can also create challenges, particularly when it is too rigid or doesn’t align with
evolving needs. Positive organizational cultures foster employee engagement,
growth, and satisfaction, leading to overall success for the company.

Easier version

To make these concepts easier to remember for your exam, here’s a simplified
summary of Organizational Culture:

What is Organizational Culture?

• Definition: It’s the shared values, beliefs, and assumptions that guide how
people behave in an organization. It shapes decisions, interactions, and
expectations, creating a sense of identity and stability within the organization.

Key Features of Organizational Culture

1. Shared: Culture is experienced and accepted by everyone in the organization

(e.g., Google values innovation).

2. Learned: New employees learn the culture over time through mentorship and
observation (e.g., Apple teaches simplicity).

3. Influential: It influences how people think, solve problems, and interact (e.g.,
Zappos’ focus on customer service).

Elements of Organizational Culture

• Manifest (Observable): Visible aspects like behavior, language, dress code,

and office layout (e.g., Facebook’s open-plan offices).

• Non-Observable: Underlying beliefs and values that aren’t immediately

visible but guide decisions (e.g., Amazon’s customer-centric approach).

Functions of Organizational Culture

1. Boundary-Defining: It helps distinguish one organization from another (e.g.,

Tesla’s focus on innovation).

2. Identity Creation: It gives members a sense of belonging (e.g., Nike’s “Just

Do It” mentality).

3. Commitment: A strong culture promotes employee dedication (e.g.,

Starbucks’ inclusivity).

4. Stability: A consistent culture ensures predictability and efficiency (e.g.,

Toyota’s focus on continuous improvement).

5. Control: Culture helps control actions and behaviors (e.g., McDonald’s clear
procedures).

Uniformity and Subcultures

• Subcultures: Smaller groups within an organization may develop their own
unique culture based on department or team needs (e.g., Microsoft’s software
team may differ from the marketing team).

Creating and Sustaining Culture

1. Selection: Hire people who fit the culture (e.g., Google hires for creativity
and collaboration).

2. Socialization: New employees learn the culture through training and

interactions (e.g., Disney’s “magic” culture).

3. Top Management Actions: Leaders model cultural behaviors (e.g., Apple’s

emphasis on design).

Liabilities of Organizational Culture

1. Barriers to Change: A rigid culture can prevent adaptation to new market

conditions (e.g., Blockbuster’s failure to shift to streaming).

2. Barriers to Diversity: A dominant culture can exclude diverse perspectives

(e.g., Apple’s lack of diversity).

3. Barriers to Mergers/Acquisitions: Cultural clashes can cause problems

when companies merge (e.g., Daimler-Benz and Chrysler’s failed merger).

Transmitting Culture

• How culture is passed down: Through stories, rituals, symbols, and

language (e.g., Disney shares stories about its founder, Walt Disney).

Creating a Positive Organizational Culture

1. Building on Strengths: Encouraging employees to use and develop their

strengths (e.g., Southwest Airlines focuses on interpersonal skills).

2. Rewarding Achievements: Recognizing successes boosts morale (e.g.,

Google rewards innovation).

3. Supporting Growth: Offering opportunities for personal and professional

development (e.g., IBM’s training programs).

Summary for Your Exam

• Culture = Shared values and behaviors that shape identity and stability in
organizations.

• Manifest vs Non-Observable: Observable behaviors vs underlying beliefs.

• Functions = Boundary-defining, identity-creating, commitment-promoting,

stabilizing, and controlling.
• Challenges = Cultural rigidity can block change, diversity, and successful
mergers.

• Positive Culture = Focus on strengths, rewards, and growth to boost

employee engagement and company success.

This simplified summary breaks down the key points in a way that’s easy to
remember for your exam!