Chapter 16
Organizational Culture
LEARNING OBJECTIVES
After studying this chapter, students should be able to:
16-1. Describe the common characteristics of organizational culture.
16-2. Compare the functional and dysfunctional effects of organizational culture on people and
the organization.
16-3. Identify the factors that create and sustain an organization’s culture.
16-4. Show how culture is transmitted to employees.
16-5. Describe the similarities and differences in creating an ethical culture, a positive culture,
and a spiritual culture.
16-6. Show how national culture can affect the way organizational culture is transported to
another country.
INSTRUCTOR’S RESOURCES
Instructors may wish to use the following resources when presenting this chapter.
Text Exercises
Myth or Science?: “An Organization’s Culture Is Forever”
An Ethical Choice: A Culture of Compassion
CareerOBjectives: How Do I Learn to Lead?
Personal Inventory Assessment: Comfort With Change Scale
Point/Counterpoint: Organizations Should Strive to Create a Positive Organizational
Culture
Questions for Review
Experiential Exercise: Greeting Newcomers
Ethical Dilemma: Culture of Deceit
Text Cases
Case Incident 1: The Place Makes the People
Case Incident 2: Active Cultures
Instructor’s Choice
This section presents an exercise that is NOT found in the student’s textbook. Instructor’s Choice
reinforces the text’s emphasis through various activities. Some Instructor’s Choice activities are
centered on debates, group exercises, Internet research, and student experiences. Some can be
used in class in their entirety, while others require some additional work on the student’s part.
The course instructor may choose to use these at any time throughout the class—some may be
more effective as icebreakers, while some may be used to pull together various concepts covered
in the chapter.
Web Exercises
At the end of each chapter of this Instructor’s Manual, you will find suggested exercises and
ideas for researching OB topics on the Internet. The exercises “Exploring OB Topics on the
Web” are set up so that you can simply photocopy the pages, distribute them to your class, and
make assignments accordingly. You may want to assign the exercises as an out-of-class activity
or as lab activities with your class.
Summary and Implications for Managers
Exhibit 16-6 depicts organizational culture as an intervening variable. Employees form an overall
subjective perception of the organization based on factors such as degree of risk tolerance, team
emphasis, and support of individuals. This overall perception represents, in effect, the
organization’s culture or personality and affects employee performance and satisfaction, with
stronger cultures having greater impact. Specific implications for managers are below:
Realize that an organization’s culture is relatively fixed in the short term. To affect change,
involve top management and strategize a long-term plan.
Hire individuals whose values align with those of the organization; these employees will
tend to remain committed and satisfied. Not surprisingly, “misfits” have considerably
higher turnover rates.
Understand that employees’ performance and socialization depend, to a considerable
degree, on their knowing what to do and not do. Train your employees well and keep them
informed of changes to their job roles.
As a manager, you can shape the culture of your work environment, sometimes as much as
it shapes you. All managers can especially do their part to create an ethical culture and to
consider spirituality and its role in creating a positive organizational culture.
Be aware that your company’s organizational culture may not be “transportable” to other
countries. Understand the cultural relevance of your organization’s norms before
introducing new plans or initiatives overseas.
This chapter begins with a discussion of decision making in organizations. Just as tribal cultures have totems and
taboos that dictate how each member should act toward fellow members and outsiders, organizations have rules
and norms that govern how members behave. We call these expectations the organizational culture. Every
organization has a culture that, depending on its strength, can have a significant influence on the attitudes and
behaviors of organization members, even if that effect is hard to measure precisely. As the opening discussion of
incorporating big data illustrates, even strong improvements to decision making in organizations challenge the
organizational culture. In this chapter, we’ll discuss what organizational culture is, how it affects employee attitudes
and behavior, where it comes from, and whether it can be changed.
BRIEF CHAPTER OUTLINE
I. What Is Organizational Culture?
A. Definition of Organizational Culture
1. Organizational culture refers to a system of shared meaning held by members that
distinguishes the organization from other organizations.
2. Research identifies seven primary characteristics that capture the essence of an
organization’s culture:
a. Innovation and risk taking.
b. Attention to detail.
c. Outcome orientation.
d. People orientation.
e. Team orientation.
f. Aggressiveness.
g. Stability.
3. Each of the characteristics exists on a continuum from low to high.
a. Exhibit 16-1 shows how companies can be very different along these dimensions.
B. Culture Is a Descriptive Term
1. Organizational culture is concerned with employees’ perception of the characteristics
of the culture—not whether they like them.
2. Research has sought to measure how employees see their organization:
a. Does it encourage teamwork?
b. Does it reward innovation?
c. Does it stifle initiative?
3. Organizational culture differs from job satisfaction: organizational culture is
descriptive, whereas job satisfaction is evaluative.
C. Do Organizations Have Uniform Cultures?
1. Most organizations have a dominant culture and numerous sets of subcultures.
2. Dominant culture expresses the core values that are shared by a majority of the
organization’s members.
3. Subcultures tend to develop in large organizations to reflect common problems,
situations, or experiences that members face.
D. Strong Versus Weak Cultures
1. Strong culture: core values are intensely held and widely shared.
2. The more members who accept core values and the greater their commitment to those
values, the stronger the culture is.
3. A strong culture should reduce employee turnover because it demonstrates high
agreement about what the organization represents.
4. Such unanimity of purpose builds cohesiveness, loyalty, and organizational
commitment.
E. Culture Versus Formalization
1. High formalization creates predictability, orderliness, and consistency.
2. Formalization and culture are two different roads to a common destination.
a. The stronger an organization’s culture, the less management needs to develop
formal rules and regulations.
b. Employees internalize guides when they accept the organization’s culture.
II. What Do Cultures Do?
A. Cultures can be positive or negative for organizations.
1. The Functions of Culture:
a. Boundary-defining role.
b. Conveys a sense of identity for members.
c. Facilitates the generation of commitment.
d. Enhances the stability of the social system.
e. Culture serves as a sense-making and control mechanism; guides and shapes
attitudes and behavior of employees.
2. Today’s trend toward decentralized organizations makes culture more important than
ever, but ironically it also makes establishing a strong culture more difficult.
3. When formal authority and control systems are reduced, culture’s shared meaning
points everyone in the same direction.
4. In virtual organizations, the lack of frequent face-to-face contact makes establishing a
common set of norms very difficult.
5. Individual–organization “fit”—that is, whether the applicant’s or employee’s attitudes
and behavior are compatible with the culture—strongly influences who gets a job
offer, a favorable performance review, or a promotion.
B. Culture Creates Climate
1. Organizational climate refers to the shared perceptions organizational members
have about their organization and work environment.
2. A positive overall workplace climate has been linked to higher customer satisfaction
and financial performance.
3. Dozens of dimensions of climate have been studied, including safety, justice,
diversity, and customer service, to name a few.
4. A person who encounters a positive climate for performance will think about doing a
good job more often and will believe others support his or her success.
5. Someone who encounters a positive climate for diversity will feel more comfortable
collaborating with coworkers regardless of their demographic background.
6. Climates can interact with one another to produce behavior.
7. Climate also influences the habits people adopt.
C. The Ethical Dimension of Culture
1. Organizational cultures are not neutral in their ethical orientation, even when they are
not openly pursuing ethical goals.
2. Over time, the ethical work climate (EWC), or the shared concept of right and
wrong behavior in that workplace, develops as part of the organizational climate.
a. The ethical climate reflects the true values of the organization and shapes the
ethical decision making of its members.
3. Researchers have developed ethical climate theory (ECT) and the ethical climate
index (ECI) to categorize and measure the ethical dimensions of organizational
cultures.
4. Of the nine identified climate categories, five are found to be most prevalent in
organizations: instrumental, caring, independence, law and code, and rules.
a. Each explains the general mindset, expectations, and values of the managers and
employees in relationship to their organization.
b. Organizations often progress through different categories as they move through
their business life cycle.
5. An organization’s ethical climate powerfully influences the way its individual
members feel they should behave, so much so that researchers have been able to
predict organizational outcomes from the climate categories.
a. Instrumental climates are negatively associated with employee job satisfaction
and organizational commitment, even though those climates appeal to self-interest
(of the employee and the company).
b. They are positively associated with turnover intentions, workplace bullying, and
deviant behavior.
c. Caring and rules climates have a positive association with job satisfaction.
d. Caring, independence, rules, and law and code climates also reduce employee
turnover intentions, workplace bullying, and dysfunctional behavior.
6. Studies of ethical climates and workplace outcomes suggest that some climate
categories are likely to be found in certain organizations.
a. Industries with exacting standards such as engineering, accounting, and law tend
to have a rules or a law and code climate.
b. Industries that thrive on competitiveness such as financial trading often have an
instrumental ethical climate.
c. Industries with missions of benevolence are likely to have a caring climate, even
if they are for-profit as in an environmental protection firm.
7. Research is exploring why organizations tend to fall into certain climate categories by
industry, especially successful organizations.
a. We cannot conclude that instrumental climates are always bad, or that caring
climates are always good.
b. Instrumental cultures may foster the individual success their companies need to
thrive, for example, and they may help under-performers to recognize their
self-interest is better served elsewhere.
c. Managers in caring cultures may be thwarted from making the best decisions
when only choices that serve the greatest number of employees are acceptable.
8. The Ethical Climate Index (ECI) is one new way researchers are seeking to
understand the context of ethical drivers in organizations.
a. By measuring the collective levels of moral sensitivity, judgment, motivation, and
character of our organizations, we may be able to judge the strength of the
influence our ethical climates have on us.
D. Culture and Sustainability
1. As the name implies, sustainability refers to practices that can be maintained over
very long periods of time because the tools or structures that support the practices are
not damaged by the processes.
a. One survey found that a great majority of executives saw sustainability as an
important part of future success.
2. Social sustainability practices address the ways social systems are affected by an
organization’s actions over time, and in turn, how changing social systems may affect
the organization.
a. For example, farmers in Australia have been working collectively to increase
water use efficiency, minimize soil erosion, and implement tilling and harvesting
methods that ensure long-term viability for their farm businesses.
b. In a very different context, 3M has an innovative pollution-prevention program
rooted in cultural principles of conserving resources, creating products that have
minimal effects on the environment, and collaborating with regulatory agencies to
improve environmental effects.
3. Sustainable management doesn’t need to be purely altruistic.
4. To create a truly sustainable business, an organization must develop a long-term
culture and put its values into practice.
a. In other words, there needs to be a sustainable system for creating sustainability!
b. In one workplace study, a company seeking to reduce energy consumption found
that soliciting group feedback reduced energy use significantly more than simply
issuing reading materials about the importance of conservation.
c. In other words, talking about energy conservation and building the value into the
organizational culture resulted in positive employee behavioral changes.
5. Like other cultural practices we’ve discussed, sustainability needs time and nurturing
to grow.
E. Culture and Innovation
1. The most innovative companies are often characterized by their open,
unconventional, collaborative, vision-driven, accelerating cultures.
2. Startup firms often have innovative cultures by definition since because they are
usually small, agile, and focused on solving problems in order to survive and grow.
F. Culture as an Asset
1. Culture can also significantly contribute to an organization’s bottom line in many
ways.
2. There are many more cases of business success stories due to excellent organizational
cultures than there are of success stories despite bad cultures, and almost no success
stories because of bad ones.
G. Culture as a Liability
1. Introduction
a. Culture enhances organizational commitment and increases the consistency of
employee behavior.
2. Institutionalization
a. When an organization undergoes institutionalization and becomes
institutionalized—that is, it is valued for itself and not for the goods or services it
produces—it takes on a life of its own, apart from its founders or members.
b. It doesn’t go out of business even if its original goals are no longer relevant.
3. Barriers to change
a. Culture is a liability when the shared values are not in agreement with those that
will further the organization’s effectiveness.
b. Most likely to occur when the environment is dynamic.
c. Where there is rapid change, an entrenched culture may no longer be appropriate.
4. Barriers to diversity
a. Diverse behaviors and strengths are likely to diminish in strong cultures as people
attempt to fit in.
b. Strong culture can be liabilities when they effectively eliminate the unique
strengths that people of different backgrounds bring to the organization.
c. Strong cultures can also be liabilities when they support institutional bias or
become insensitive to people who are different.
5. Strengthening Dysfunctions
a. Coherence around negativity and dysfunctional management systems in a
corporation can produce downward forces that are equally powerful.
i. One study of thousands of hospitality-industry employees in hundreds of
locations found that local organizational cultures marked by low or decreasing
job satisfaction had higher levels of turnover.
b. As we know from this text, low job satisfaction and high turnover indicate
dysfunction on the organization’s part.
c. Negative attitudes in groups add to negative outcomes, suggesting a powerful
influence of culture on individuals.
6. Barriers to acquisitions and mergers
a. Cultural compatibility has become the primary concern when considering
acquisitions and/or mergers.
b. A survey by Bain and Company revealed that 70 percent of mergers failed to
increase shareholder values.
III. Creating and Sustaining Culture
A. Introduction
1. Once an organization’s culture is established, it rarely fades away.
B. How a Culture Begins
1. Ultimate source of an organization’s culture is its founders.
2. Founders have a vision of what the organization should be.
3. Unconstrained by previous ideologies or customs.
4. New organizations are typically small; facilitates the founders’ imparting of their
vision on all organizational members.
5. Culture creation occurs in three ways:
a. Founders hire employees who think and feel the way they do.
b. Employees are indoctrinated and socialized into the founders’ way of thinking.
c. Founders’ behavior acts as a role model.
C. Keeping a Culture Alive
1. Selection
a. The explicit goal of the selection process is to identify and hire individuals with
the knowledge, skills, and abilities to perform successfully.
b. Selection also provides information to applicants.
c. Selection thus becomes a two-way street, allowing employer or applicant to avoid
a mismatch and sustaining an organization’s culture by selecting out those who
might attack or undermine its core values.
2. Top management
a. The actions of top management also have a major impact on the organization’s
culture.
i. Through words and behavior, senior executives establish norms that filter
through the organization about, for instance, whether risk taking is desirable,
how much freedom managers give employees, what is appropriate dress, and
what actions earn pay raises, promotions, and other rewards.
3. Socialization (Exhibit 16-2)
a. The process of helping new employees adapt to the organization’s culture is
socialization.
b. Three stage process:
i. Pre-arrival
(a) Recognizes that each individual arrives with a set of values, attitudes, and
expectations.
ii. Encounter
(a) Individual confronts the possible dichotomy between expectations and
reality.
iii. Metamorphosis (Exhibit 16-3)
(a) Process of working out any problems discovered during the encounter
stage.
(b) The options presented in Exhibit 16-3 are alternatives designed to bring
about the desired metamorphosis.
(c) Most research suggests high levels of institutional practices encourage
person–organization fit and high levels of commitment, whereas
individual practices produce more role innovation.
c. The three-part entry socialization process is complete when:
i. New members have internalized and accepted the norms of the organization
and their work group, are confident in their competence, and feel trusted and
valued by their peers.
ii. They understand the system—not only their own tasks but the rules,
procedures, and informally accepted practices as well.
iii. They know what is expected of them and what criteria will be used to measure
and evaluate their work.
d. As Exhibit 16-2 showed, successful metamorphosis should have a positive impact
on new employees’ productivity and their commitment to the organization, and
reduce their propensity to leave the organization.
e. Researchers have begun to examine how employee attitudes change during
socialization by measuring them at several points over the first few months.
D. Summary: How Cultures Form (Exhibit 16-4)
1. Exhibit 16-4 summarizes how an organization’s culture is established and sustained.
2. The original culture derives from the founder’s philosophy and strongly influences
hiring criteria as the firm grows.
3. Top managers’ actions set the general climate, including what is acceptable behavior
and what is not.
4. The way employees are socialized will depend both on the degree of success achieved
in matching new employees’ values to those of the organization in the selection
process, and on top management’s preference for socialization methods.
IV. How Employees Learn Culture
A. Introduction
1. Culture is transmitted to employees through stories, rituals, material symbols, and
language.
B. Stories
1. Stories such as these circulate through many organizations, anchoring the present in
the past and legitimating current practices.
C. Rituals
1. Repetitive sequences of activities that express and reinforce the key values of the
organization are rituals.
D. Symbols
1. Layout of corporation headquarters, types of automobile top executives are given,
aircraft, size of offices, executive perks, etc. are examples of material symbols.
E. Language
1. Many organizations and subunits within them use language to help members identify
with the culture, attest to their acceptance of it, and help preserve it.
V. Influencing an Ethical Organizational Culture
A. An Ethical Culture
1. How can management create a more ethical culture?
a. Be a visible role model.
b. Communicate ethical expectations.
c. Provide ethical training.
d. Visibly reward ethical acts and punish unethical ones.
e. Provide protective mechanisms.
B. The work of setting a positive ethical climate has to start at the top of the organization.
1. One study demonstrated that when top management emphasizes strong ethical values,
supervisors are more likely to practice ethical leadership.
a. Positive ethical attitudes transfer down to line employees, who show lower levels
of deviant behavior and higher levels of cooperation and assistance.
2. A study involving auditors found perceived pressure from organizational leaders to
behave unethically was associated with increased intentions to engage in unethical
practices.
a. Clearly the wrong type of organizational culture can negatively influence
employee ethical behavior.
3. Finally, employees whose ethical values are similar to those of their department are
more likely to be promoted, so we can think of ethical culture as flowing from the
bottom up as well.
VI. Creating a Positive Organizational Culture
A. Introduction
1. There is a trend today for organizations to attempt to create a positive organizational
culture.
2. A positive organizational culture emphasizes building on employee strengths,
rewards more than it punishes, and emphasizes individual vitality growth.
B. Building on Employee Strengths
1. Although a positive organizational culture does not ignore problems, it does
emphasize showing workers how they can capitalize on their strengths.
C. Rewarding More Than Punishing
1. Although most organizations are sufficiently focused on extrinsic rewards such as pay
and promotions, they often forget about the power of smaller (and cheaper) rewards
such as praise.
2. Part of creating a positive organizational culture is “catching employees doing
something right.”
D. Emphasizing Vitality and Growth
1. No organization will get the best from employees who see themselves as mere cogs in
the machine.
E. A positive culture recognizes the difference between a job and a career.
F. Limits of Positive Culture
1. Not a panacea for all companies.
2. All cultures don’t value being positive.
3. There may be benefits to establishing a positive culture, but an organization also
needs to be careful to be objective and not pursue it past the point of effectiveness.
VII. Spirituality and Organizational Culture
A. What Is Spirituality?
1. Workplace spirituality is not about organized religious practices. It is not about God
or theology.
2. Workplace spirituality recognizes that people have an inner life that nourishes and is
nourished by meaningful work that takes place in the context of community.
B. Why Spirituality Now? (Exhibit 16-5)
1. As we noted in our discussion of emotions in Chapter 4, the myth of rationality
assumed the well-run organization eliminated feelings.
2. Concern about an employee’s inner life had no role in the perfectly rational model.
3. But just as we’ve now come to realize that the study of emotions improves our
understanding of organizational behavior, an awareness of spirituality can help us
better understand employee behavior in the twenty-first century.
4. Of course, employees have always had an inner life. So why has the search for
meaning and purposefulness in work surfaced now?
5. Summarized reasons in Exhibit 16-5.
C. Characteristics of a Spiritual Organization
1. The concept of workplace spirituality draws on our previous discussions of values,
ethics, motivation, and leadership.
2. Although research remains preliminary, several cultural characteristics tend to be
evident in spiritual organizations.
a. Benevolence.
b. Strong sense of purpose.
c. Trust and respect.
d. Open-mindedness.
D. Achieving a Spiritual Organization
1. Many organizations have grown interested in spirituality but have had difficulty
putting its principles into practice.
2. Several types of practices can facilitate a spiritual workplace, including those that
support work–life balance.
E. Criticisms of Spirituality
1. Critics of the spirituality movement in organizations have focused on three issues.
a. First is the question of scientific foundation. What really is workplace spirituality?
b. Second, are spiritual organizations legitimate? Do organizations have the right to
impose spiritual values on their employees?
c. Third is the question of economics: are spirituality and profits compatible?
2. As you might imagine, there is comparatively little research on workplace spirituality.
3. An emphasis on spirituality can clearly make some employees uneasy.
a. Critics have argued that secular institutions, especially business firms, have no
business imposing spiritual values on employees.
4. If the concerns listed in Exhibit 16-5 truly characterize a large segment of the
workforce, then perhaps organizations can do so.
VIII. Global Implications
A. We considered global cultural values (collectivism–individualism, power distance, and so
on) in Chapter 5. Here our focus is a bit narrower.
1. How is organizational culture affected by a global context?
2. But that doesn’t mean organizations should, or could, be blissfully ignorant of local
culture.
B. Organizational cultures often reflect national culture.
1. The culture at AirAsia, a Malaysian-based airline, emphasizes openness and
friendships. The carrier has lots of parties, participative management, and no private
offices.