PART FIVE – ORGANIZATIONAL PROCESSES AND
CHARACTERISTICS
Chapter Fifteen – Organizational Culture
Chapter Overview
Organizational culture is essential to organizational performance. Not only does it influence the decisions
and behaviors of employees, but it also explains what is happening in an organization and why it is
happening. Just as organizational structure can be thought of as an organization’s skeleton, organizational
culture can be thought of as its personality because it influences the way employees behave.
Understanding and managing organizational culture is an important management role that can improve
your own and your organization’s performance. After reading this chapter, you should better understand
organizational culture and how to manage it.
Learning Outcomes
After studying this chapter, students should be able to:
1. Describe the meaning, importance, and origins of organizational culture.
2. Discuss cultures of conflict and cultures of inclusion.
3. Identify and discuss how technology and innovation affect organizational culture.
4. Describe how effective organizations manage their culture.
Real World Challenge: Culture Change at Avaya
Summary: Avaya is a global business communications company that was spun off from Lucent. When
the company was taken private by two private equity firms, Avaya’s strategy needed to focus on being a
business collaborator and provider of unified communication including web conferencing rather than just
voice telephony.
Real World Challenge: How can Avaya change its business culture to better support creativity and
collaboration?
Real World Response: Avaya began its culture change initiative by identifying its desired culture and
comparing it to its current culture. Avaya learned that loyalty, integrity, and trust were a strong part of its
culture and that innovation was truly valued by employees. Success profiles and performance
management were identified and communicated which have led to Avaya making strides towards
changing its culture.
Chapter Outline
I. THE MEANING AND DETERMINANTS OF ORGANIZATIONAL CULTURE
Organizational culture is a system of shared values, norms, and assumptions that guides members’
attitudes and behaviors3 and influences how they perceive and react to their environment.
An organization’s culture is reflected in how it gets work done and how employees interact with
each other.
When a positive culture becomes strong enough, employee interactions become more efficient.
When culture supports business strategy, the firm can become high performing.
Common organizational culture themes include ethics, innovation, being casual or formal, and
collaboration.
Cultures are made up of formal and informal practices, artifacts, espoused values and norms, and
assumptions.
Artifacts are physical manifestations of the culture including the myths and stories told about the
organization or its founder, awards, ceremonies and rituals, decorations, office space allocations,
the dress code, how people address each other, published lists of organizational values, and so on.
Espoused values and norms are those that are explicitly stated by the organization.
Nokia communicates its espoused values through videos, its intranet, and in its communications on
company strategy.
Enacted values and norms are those that employees exhibit based on their observations of what
actually goes on in the organization.
Performance management, feedback, and compensation systems all help align espoused and
enacted values and norms.
Assumptions are those organizational values that have become so taken for granted over time that
they become the core of the company’s culture.
These basic assumptions are highly resistant to change, and guide organizational behavior.
Figure 15.1 illustrates these four levels of culture.
Formal practices that influence culture include compensation strategies like profit sharing, benefits,
training and development programs, and even the use of teleconferencing to enable some
employees to work from home.
Informal practices include “open-door management” to promote upward communication and the
sharing of ideas, employees helping each other, and employees of different ranks eating lunch
together to share ideas.
A. Does Culture Matter?
Research has shown that by actively managing culture, your organization and its employees
will be more likely to deliver on strategic objectives over the long run.
In particular, culture boosts organizational performance when it (1) is strategically relevant, (2)
is strong, and (3) emphasizes innovation and change to adapt to a changing environment.
The effects of culture on a firm’s effectiveness are even stronger when employees have positive
attitudes.
A company’s culture should reinforce its business strategy, and can give a firm a competitive
advantage.
Creating a culture that supports sharing and helping other employees can have positive
performance results.
Organizational cultures can be strong or weak.
Strong cultures can enhance organizational performance in two ways. First, they improve
performance by energizing employees.
Second, strong cultures improve performance by coordinating employee behavior. This makes
strong cultures particularly helpful for dealing with changing environments.
Strong cultures are not always better than weak cultures, however—whether the culture is
positive or negative also matters.
A strong positive culture promotes employee commitment to the firm’s value system and helps
to align employee and company values.
In a strong negative culture, employees have shared norms and values that are not consistent
with what the organization wants or values.
Because strong cultures create stable and consistent employee values and behaviors, they are
slow to change.
Research has found that long-term financial performance is highest for organizations with an
adaptive culture receptive to change and innovation.
Strong ethical cultures are known to influence employees’ ethical behavior and commitment
through formal and informal organizational structures and systems.
Culture matters to organizations because it influences employees’ discretionary behaviors,
including what they do in situations when the rules and expectations are unclear or when there
is no direct supervision.
Understanding your corporate culture can create a personal competitive advantage by reducing
the chances of your offending superiors or making a social blunder.
B. How Leaders Create and Maintain Culture
Different industries develop different cultures. Company founders and leaders also influence a
firm’s culture.
Shaping an organization’s culture is harder to learn in school and takes personal involvement.
It can be very time-consuming to create and maintain an organizational culture.
An organization’s founder and early management team shape a firm’s culture, which then
influences the company’s structure, compensation system, customer relations policies, human
resources policies, and individual behavior and motivation, which reinforce the culture.
So how can leaders create, maintain, or change an organization’s culture? Table 15.1 highlights
some tactics several experts recommend.
Changes in strategy, technology, and organizational structure all trigger a need for changes in
employees’ attitudes, behaviors, values, and skills. This can require changes in the
organization’s culture to reinforce these new employee behaviors and values.
Organizational culture has many layers. Outer layers of the culture, such as marketing strategies
and customer service perceptions, can change fairly quickly. Inner layers, including
fundamental values and ideologies, are much slower to change.
Organizations can also have different cultures in different areas. Different business units or
subgroups of organizations can develop unique cultures supporting their unique business needs.
II. CULTURES OF CONFLICT AND CULTURES OF INCLUSION
To better understand organizational culture, let’s now discuss two specific types of culture: cultures
of conflict and cultures of inclusion.
A. Cultures of Conflict
Conflict cultures are one example of a specific type of culture.
Firms develop distinct conflict cultures, or shared norms for managing conflict, which reflect
different degrees of active versus passive and agreeable versus disagreeable conflict
management norms.
Active conflict management norms resolve conflict openly, whereas passive conflict
management norms tend to avoid addressing conflict.
Agreeable conflict management norms resolve conflict in a cooperative manner, whereas
disagreeable conflict management norms resolve conflict competitively.
This results in four types of conflict cultures: dominating, collaborative, avoidant, and passive-
aggressive, as shown in Figure 15.2.
1. Dominating Conflict Cultures
Dominating conflict cultures are active and disagreeable—open confrontations are accepted
as well as heated arguments and threats.
2. Collaborative Conflict Cultures
Collaborative conflict cultures are active and agreeable. Employees actively manage and
resolve conflicts cooperatively to find the best solution for all involved parties.
3. Avoidant Conflict Cultures
Avoidant conflict cultures are passive and agreeable. This type of culture strives to preserve
order and control and/or to maintain harmony and interpersonal relationships.
Typical behaviors include accommodating or giving in to the other’s point of view,
changing the subject, or evading open discussion of the conflict issue.
4. Passive-Aggressive Conflict Cultures
Passive-aggressive conflict cultures are both passive and disagreeable. Rather than dealing
openly with conflict, this culture develops norms to handle it via passive resistance such as
refusing to participate in conflict-related discussions, giving the silent treatment,
withholding information, or withdrawing from work and from interactions with coworkers.
National and regional culture can influence which type of conflict culture develops in an
organization.
Global Issues: Cross-Cultural Influences on Conflict Cultures
Summary: Societal culture influences aspects of an organization’s culture, including its conflict cultures.
Dominating conflict cultures may occur more often in national cultures emphasizing individualism, as in
the U.S. In the U.S. media and institutions, for example, conflict is often referred to adversely as “a war”
or something that should be “won.”
Collaborative-conflict cultures may be more common in egalitarian and collectivistic cultures and those
that value cooperation over competition, such as the Netherlands.
Conflict-avoidant cultures occur in cultures higher in uncertainty avoidance and collectivism, where
people are motivated to submit to authorities and maintain group harmony, as in Asian cultures.
Passive-aggressive conflict cultures are more likely in societal cultures with higher power distance, or
where less powerful members of society and organizations and accept unequal power distribution.
Passive-aggressive cultures may also be more prevalent in societies where there are abusive leaders.
B. Cultures of Inclusion
Organizational culture is an important part of effective diversity management. An
organization’s values and culture interact with its demographic composition to influence social
interaction, conflict, productivity, and creativity.
Research has supported the idea that pro-diversity cultures are related to lower turnover among
blacks, whites, and Hispanics.
An organization’s culture of inclusion reflects the extent to which majority members value
efforts to increase minority representation, and whether the qualifications and abilities of
minority members are questioned.
These perceptions may be affected by the firm’s diversity actions as well as by the extent to
which diversity is salient to a particular individual.
CASE STUDY: Building a Culture for Inclusion at Whirlpool
Summary: Diversity and inclusion are central to Whirlpool Corporation’s goal of placing its appliances
in “every home, everywhere.” Whirlpool believes that differences create value, and they practice
inclusion because it enables the company to best respond to the needs of its diverse customers. Whirlpool
understands that its leaders must first show an understanding of and interest in diversity before it can
become part of the company culture.
1. Do you agree that Whirlpool can realize a competitive advantage through its diverse
employees?
Yes. Whirlpool can gain a competitive advantage by making use of everyone’s talents. Whirlpool
2. How else can technology be used to enhance Whirlpool’s culture of inclusion?
Whirlpool uses technology to enhance the culture of inclusion. To involve busy senior leadership and
3. Do you feel that Whirlpool’s efforts to create a culture of inclusion are worthwhile? Explain
your answer.
Yes, Whirlpool was among Diversity Inc’s Top 10 Companies for Lesbian Gay Bisexual and
III. EFFECTS OF TECHNOLOGY AND INNOVATION ON CULTURE
Creating and maintaining a desired culture can be facilitated by technology, but at the same time
can be made more difficult by the consequences of using technology to work remotely. Innovation
and culture also have major impacts on each other.
A. Using Intranets to Build and Maintain Culture
By building and fostering a sense of community among employees, intranets can help reinforce
an organization’s culture.
The key issue for organizations is not about using the latest information technologies, but about
leveraging the right technologies for creating and maintaining a culture of trust, openness,
relationship building, and information sharing.
Each intranet design reflects a different type of organizational culture, and in turn reinforces the
firm’s culture by controlling the flow of information and establishing norms of behavior.
Following are some of the ways intranets can both reflect and influence organizational culture:
1. Their scope – narrow intranets reinforce a culture of secrecy and information hoarding
2. Their openness to employee feedback and contributions – tools allowing feedback and
participation reflect a participative culture
3. The frequency with which they are updated – rarely updated intranets are unlikely to
influence the company’s culture
4. The number of intranets – one company intranet, or several, serving different groups
5. The use of symbols, stories, and ceremonies – expresses a company’s culture
B. Building and Maintaining Culture with Remote Employees
Being virtual challenges an organization’s identity and culture, particularly when the company
relies on free agents or alliances with other firms that have their own cultures.
It is also harder for the organization to reinforce its cultural values among remote employees.
This has important implications for employee identification with the organization and for the
management of employee behaviors.
C. Innovation and Culture
Innovation is the process of creating and doing new things that are introduced into the
marketplace as products, processes, or services.
One of the organization’s biggest challenges is to bring innovative technology to the needs of
the marketplace in the most cost-effective manner possible.
Note that innovation does not just involve the technology to create new products: true
organizational innovation is pervasive throughout the organization.
Many risks are associated with being an innovative company. The most basic is the risk that
decisions about new technology or innovation will backfire. For this reason, organizations
commit considerable resources to testing innovations.
A second risk is the possibility that a competitor will make decisions enabling it to get an
innovation to the market first.
Some feel “innovation,” has become a cliché and call for the term to be reserved for major
disruptive or radical shifts in products, services, or processes.
While these criticisms may have some merit, organizations still need to be wary of simply
maintaining the status quo and risk getting surpassed by more innovative practices by their
competition or by new technological breakthroughs.
1. Types of Innovation
A radical innovation (sometimes called disruptive innovation) is a major breakthrough that
changes or creates whole industries.
Systems innovation creates a new functionality by assembling parts in new ways.
Incremental innovation continues the technical improvement and extends the applications
of radical and systems innovations.
There are many more incremental innovations than there are radical and systems
innovations. Incremental innovations force organizations to continuously improve their
products and keep abreast or ahead of the competition.
2. New Ventures
New ventures based on innovations require entrepreneurship and good management to
work.
Entrepreneurship can occur inside or outside large organizations. Outside entrepreneurship
requires all of the complex aspects of the innovation process. Inside entrepreneurship
occurs within a system that usually discourages chaotic activity.
For a large organization to be innovative and develop new ventures, it must actively
encourage entrepreneurial activity within the organization.
This form of activity, often called intrapreneurship, usually is most effective when it is a
part of everyday life in the organization and occurs throughout the organization rather than
in the research and development department alone.
3. Corporate Research
The most common means of developing innovation in the traditional organization is
through corporate research, or research and development.
Corporate researchers are responsible for keeping the company’s products and processes
technologically advanced.
The corporate culture can be instrumental in fostering an environment in which creativity
and innovation occur.
IV. MANAGING ORGANIZATIONAL CULTURE
The three elements of managing organization culture are (1) taking advantage of the existing
culture, (2) teaching the organization culture, and (3) changing the organization culture.
A. Taking Advantage of the Existing Culture
Most managers are not in a position to create an organization culture; rather, they work in
organizations that already have cultural values. Here, the central issue in managing culture is
how best to use the existing cultural system.
To take advantage of an existing cultural system, managers must develop a deep understanding
of how organizational values operate in the firm—an understanding that usually comes only
through experience.
This understanding, once achieved, can be used to evaluate the performances of others in the
firm.
Senior managers who understand their organization’s culture can communicate that
understanding to lower-level individuals.
B. Teaching the Organization Culture: Socialization
Socialization is the process through which individuals become social beings. In complex
societies, the socialization process takes many years.
Organizational socialization is the process through which employees learn about their
organization’s culture and pass their knowledge and understanding on to others.
They learn both through observation and through efforts by managers to communicate this
information to them.
A variety of organizational mechanisms can affect the socialization of workers in organizations.
Through observing examples, new employees develop a repertoire of stories they can use to
guide their actions.
In some organizations, the culture described in pamphlets and presented in formal training
sessions conflicts with the values of the organization as they are expressed in the actions of its
people.
Employees who are socialized into this system usually come to accept the actual cultural values
rather than those formally espoused.
C. Changing the Organization Culture
Much of our discussion to this point has assumed that an organization’s culture enhances its
performance.
Research suggests that while some firms have performance- enhancing values, others have
performance-reducing values.
What should a manager who works in a company with performance-reducing values do?
The answer to this question is, of course, that top managers in such firms should try to change
their organization’s culture. However, this is a difficult thing to do.
When managers attempt to change organization culture, they are attempting to change people’s
basic assumptions about what is and is not appropriate behavior in the organization.
Changing from a traditional organization to a team-based organization is one example of an
organization culture change.
Some organizations have changed their cultures from performance-reducing to performance-
enhancing.
1. Managing Symbols
Managers interested in changing cultures should attempt to substitute stories and myths that
support new cultural values for those that support old ones. They can do so by creating
situations that give rise to new stories.
An upper-level manager interested in creating a new story, one that shows lower–level
managers that their ideas are valuable, might ask a subordinate to prepare to lead a
discussion in a meeting and follow through by asking the subordinate to take the lead when
the topic arises.
2. The Difficulty of Change
Changing a firm’s culture is a long and difficult process.
A primary problem is that upper-level managers, no matter how dedicated they are to
implementing some new cultural value, may sometimes inadvertently revert to old patterns
of behavior.
This mistake generates a story that supports old values and beliefs.
3. The Stability of Change
In the long run, a firm that successfully changes its culture will find that the new values and
beliefs are just as stable and influential as the old ones.
If a firm can change its culture from performance-reducing to performance-enhancing, the
new values are likely to remain in place for a long time.
Summary and Application
Organizational culture is a system of shared values, norms, and assumptions that guides members’
attitudes and behaviors and influences how they perceive and react to their environment.
Creating and maintaining a desired culture can be facilitated by technology, but at the same time can be
made more difficult by the consequences of using technology to work remotely.
Innovation is the process of creating and doing new things that are introduced into the marketplace as
products, processes, or services.
The three elements of managing organization culture are (1) taking advantage of the existing culture, (2)
teaching the organization culture, and (3) changing the organization culture.