2.5 Organisational Corporate Culture

(HL ONLY)

Definition:

Organizational culture refers to the way internal stakeholders (managers, employees and owners) behave and interact with each other and with external stakeholders. Corporate culture is determined by many factors, including the organizations's history, the industry, the local culture, and the individuals themselves.

Example of a Type of Corporate Culture: Charles Handy

In 1972, Charles Handy developed a theory on four types of corporate culture

power culture

role culture

task culture

person culture

The Power Culture is illustrated by a spider web because everything depends upon the spider (or spiders). The formal structure may be ill defined or may not reflect reality. Relations with the spider are more important than formal structures and roles. Because authority is concentrated in the hands of a single person, organizations with a power culture can decide and act quickly. On the other hand, the domination of the spider can lead to poor motivation and possibly mistakes, if there are no controls on the spider’s decision-making.

Advantages: Fast decision making and more "effecient" movement within the company

Disadvantages: Poor decisions affect the entire company and often the employees are hurt the most

The Role Culture is a bureaucracy with a highly formalized structure, often with many hierarchical layers. Employees are expected to do the job assigned to them, no more, no less. These organizations are effective in stable environments, but are slow to respond to change. Employees may enjoy a feeling of job security, but may be frustrated because individual initiatives may not be rewarded and may even be discouraged. The role culture is symbolized by a Greek temple because organizations with a role culture are often old and associated with government and public services.

A Person Culture exists in organizations where individuals are more concerned about their own work than that of the organization as a whole. University professors, for example, must pursue research and publish articles in order to succeed. Their responsibilities to their employer may come after their own work.

Professional partnerships such as law firms and architectural firms may also resemble person cultures. These organizations are notoriously difficult to manage, as members may be unwilling to compromise their own interests, careers and values for the sake of the organization. The person culture is represented by stars (individuals) grouped in a constellation (the organization).

Task Cultures are organized in order to get the job done. Teams are formed, disbanded, and reformed according to the projects to be accomplished. Power flows naturally to those individuals who are most able to drive the team towards the end result. Formal roles are of secondary importance.

The Task Culture can be effective, but it can also be destabilising for those who prefer a more stable environment. The task structure can also be a problem when difficult decisions must be made. The task culture is symbolized by a net, as all individuals in the team are linked to each other.

Bonus: Entrepreneurial Culture

In an entrepreneurial culture, managers and employees are encouraged to take risks in order to develop new ideas and procedures that can benefit the organization. (see: intrapreneurship)

How do we identify corporate culture? (Edgar Schein)

Elements of corporate culture

  1. Artifacts are physical and visible elements that indicate and reinforce culture. They include how employees dress, how the office space is organized, and even the exterior of the buildings. Processes can also be included in artifacts.

  2. Espoused values express the way the organization sees its values and culture and may be included in vision and mission statements

  3. Basic assumptions are not explicitly stated but may be assumed by internal stakeholders. They are the beliefs that are taken for granted.

Culture Clash

What is culture clash?

Corporate culture is often overlooked until it becomes a problem for the company. Cultural conflict is a type of conflict that occurs when different cultural values and beliefs clash.

For example:

  • A bureaucratic organization with a role culture is suddenly faced with competition. The company has to adapt and modify its culture in order to succeed in the new environment.

      • Example: Electric utilities under deregulation

      • FranceTelecom

  • Mergers often fail to create value because employees coming from two different cultures are unable to work together

      • Example: AT&T merger with Time Warner