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CHAPTER 14
Shaping Culture and Values
Chapter Outline
Organizational Culture
Culture Strength, Responsiveness, and Performance
Cultural Leadership
In the Lead
Flint Lane, Billtrust
Menlo Innovations
Aaron Levie, Box
Harvard Business School, Columbia Business School, Yale School of Management, Wharton
School of the University of Pennsylvania
Jim Sinegal and Craig Jelinek, Costco
Leader’s Self-Insight
Working in an Responsive Culture
Culture Preference Inventory
How Spiritual Are You?
Leader’s Bookshelf
Summary and Interpretation
Creating the right culture is one of the most important jobs of the leader. Culture is the set of key
values, norms, and assumptions that is shared by members of an organization and taught to new
members as correct. Culture serves two critically important functions—to integrate
organizational members so they know how to relate to one another and to help the organization
adapt to the environment. Strong, responsive cultures have a positive impact on organizational
outcomes. Creating and influencing a responsive culture is important because the right culture
can drive high performance. Leaders build high-performance cultures by emphasizing both
values and solid business operations as the drivers of organizational success.
Many types of values make up an organization’s culture; ethical values are considered among the
most important. Ethics is the code of moral principles and values that governs the behavior of a
person or group with respect to what is right or wrong. Leaders shape cultural values through
Your Leadership Challenge
After reading this chapter, you should be able to:
• Understand why shaping culture is a vital function of leadership.
• Recognize the characteristics of a responsive, as opposed to a resistant, culture.
• Know how to establish a high-performance culture by paying attention to both values and
results.
Key Terms
Culture: the set of key values, assumptions, understandings, and norms that is shared by
members of an organization and taught to new members as correct.
Culture strength: the degree of agreement among employees about the importance of specific
values and ways of doing things.
Culture gap: the difference between desired and actual values and behaviors.
High-performance culture: a culture that is based on a solid mission, embodies shared
responsive values that guide-decisions, and encourages individual ownership of both bottom-line
results and cultural values.
Organizational values: the enduring beliefs that have worth, merit, and importance for the
organization.
Adaptability culture: culture characterized by values that support the organization’s ability to
interpret and translate signals from the environment into new behavior responses.
Achievement culture: culture characterized by a clear vision of the organization’s goals and
leaders’ focus on the achievement of specific targets.
Involvement culture: culture with an internal focus on the involvement and participation of
employees to meet changing expectations from the external environment.
Consistency culture: culture with an internal focus and consistency orientation for a stable
environment.
Introduction
After sinking into bankruptcy and having to be bailed out by the U.S. government, General
Motors amazingly regained its position as the world’s largest automaker in 2011. Leaders have
been praised for making tough decisions that have led to impressive financial results, bringing
out new models that connect with customers, and fixing a myriad of operational and systems
issues. However, there is one area in which CEO Dan Akerson and other leaders admit
significant challenges remain—changing the bureaucratic, tradition-bound culture that crippled
GM in the past. Like leaders in other companies, GM executives are finding that changing
culture is the toughest part of leading a turnaround. One of Akerson’s goals is to get more
women into top jobs, partly because he believes they can lead the radical culture change the
company needs.
Annotated Lecture/Outline
Leadership Challenge #1: Understand why shaping culture is a critical function of leadership.
I. Organizational Culture
Corporate culture is powerful because it affects a company’s performance for better or worse. A
shifting environment often calls for new values and fresh approaches to doing business. Most
leaders now understand that when a company’s culture fits the needs of its external environment
and company strategy, employees can create an organization that is tough to beat.
A. What is Culture?
Some people think of culture as the character or personality of an organization. Culture can
be defined as the set of key values, assumptions, understandings, and norms that is shared by
members of an organization and taught to new members as correct. Norms are shared
Exhibit 14.1: Levels of Corporate Culture
Culture can be thought of as consisting of three levels, as illustrated in Exhibit 14.1, with each
level becoming less obvious:
• At the surface level are visible artifacts, such as manner of dress, patterns of behavior,
physical symbols, organizational ceremonies, and office layout—all the things one can
see, hear, and observe by watching members of the organization.
• At a deeper level of culture are the expressed values and beliefs, which are not
observable but can be discerned from how people explain and justify what they do.
B. Importance of Culture
Culture gives employees a sense of organizational identity and generates a commitment to
particular values and ways of doing things. Culture serves two important functions in
organizations
• It integrates members so that they know how to relate to one another.
• It helps the organization adapt to the external environment.
New Leader Action Memo: As a leader, you can pay attention to organizational culture and
develop an awareness of how cultural values, norms, and beliefs influence people’s behavior in
the organization.
Internal Integration
Culture helps employees develop a collective identity and know how to work together
effectively. Culture can imprint a set of unwritten rules inside employees’ minds.
In the Lead: Flint Lane, Billtrust
Over a two-year period, Billtrust grew from 45 to 145 employees, and increasing business meant
more new people would be coming on board. That was good news, but founder Flint Lane
wanted to be sure the culture that promoted fun, open communication, teamwork, and
interdepartmental interaction remained strong.
External Adaptation
Culture determines how the organization meets goals and deals with outsiders. The right
cultural values can help the organization respond rapidly to customer needs or the moves
of a competitor. Culture can encourage employee commitment to the core purpose of the
organization, its specific goals, and the basic means used to accomplish goals.
The culture should embody the values and assumptions needed by the organization to
succeed in its environment. All effective cultures encourage adaptation to the environment
in order to keep the organization healthy and profitable.
Consider This: Here is Your Assignment
2. You will learn lessons. You are enrolled in a full-time, informal school called life. Each day
3. There are no mistakes, only lessons. Growth is a process of trial and error, experimentation.
4. A lesson is repeated until it is learned. A lesson will be presented to you in various forms
until you have learned it, then you can go on to the next lesson.
6. “There” is no better than “here.” When your “there” has become a “here,” you will simply
obtain another “there” that will, again, look better than “here.”
8. What you make of your life is up to you. You have all the tools and resources you need;
what you do with them is up to you. The choice is yours.
10. Whether you think you can or can’t, in either case you’ll be right. Think about it.
Discussion Question #3: Describe the culture for an organization you are familiar with. Identify
some physical artifacts—such as logo, mascot, building, advertising images—associated with the
company and discuss what underlying values these suggest. What did you learn?
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Leadership Challenge #2: Recognize the characteristics of a responsive, as opposed to a
resistant culture.
II. Culture Strength, Responsiveness, and Performance
Culture strength refers to the degree of agreement among employees about the importance of
specific values and ways of doing things. If widespread consensus exists, the culture is strong
New Leader Action Memo: As a leader, you can build a responsive culture by showing concern
for customers and other stakeholders and by supporting people and projects that bring about
useful change. To improve your understanding of responsive versus resistant cultures, go to
Leader’s Self-Insight 14.1.
A strong culture increases employee cohesion and commitment to the values, goals, and
strategies of the organization, but companies can sometimes have unethical values or values that
A. Responsive Cultures
Cultures can be thought of as either responsive or resistant.
Exhibit 14.2: Responsive versus Resistant Cultures
As illustrated in Exhibit 14.2, responsive corporate cultures have different values and
behavior from resistant cultures. In responsive cultures, leaders are concerned with customers
and with people, processes, and procedures within the organization that bring about useful
change. In resistant cultures, leaders are concerned with themselves or their own special
projects, and their values tend to discourage risk taking and change.
An organization’s culture may not always be in alignment with the needs of the external
environment. The difference between desired and actual values and behaviors is called the
culture gap. An important step toward shifting the culture toward more adaptive values is to
recognize when people are adhering to the wrong values or when important values are not
held strongly enough.
Discussion Question #4: Name one or two companies in the news that seem to have strong
corporate cultures, and describe whether the results have been positive or negative. Discuss how
a culture could have either positive or negative consequences for an organization.
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Discussion Question #5: As a leader, how might you recognize a culture gap? What are some
techniques leaders might use to influence and change cultural values when necessary?
Notes_________________________________________________________________________
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Discussion Question #7: If you were the leader of a small technology firm, how might you
imprint in people’s minds the values shown in Exhibit 14.2 for responsive cultures in order to
create a high performance culture? Be specific with your ideas.
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Leadership Challenge #3: Know how to establish a high-performance culture by paying
attention to both values and results.
B. The High-Performance Culture
In Corporate Culture and Performance, Kotter and Heskett provided evidence that companies in
which leaders intentionally managed cultural values outperformed similar companies whose
leaders did not. Companies that succeed have leaders who pay careful attention to both cultural
values and business performance.
Exhibit 14.3: Combining Culture and Performance
Exhibit 14.3 illustrates four organizational outcomes based on the relative attention leaders
pay to cultural values and business performance. For example, leaders in Quadrant C of
Exhibit 14.3 pay little attention to either cultural values or business results, and the company
holds the organization together—that is, shared cultural values—is missing.
Companies that maintain success over the long term have leaders who fit into Quadrant B.
They put high emphasis on both culture and solid business performance as drivers of
organizational success. Quadrant B organizations represent the high-performance culture, a
culture that:
• Is based on a solid organizational mission or purpose
In the Lead: Menlo Innovations
Richard Sheridan, James Goebel, Robert Simms, and Thomas Meloche founded Menlo
Innovations to create custom software for organizations, but one of their primary goals was to
create a unique culture that embraces the values of equality, teamwork, learning, and fun. The
founders say they were inspired by the collaborative and creative work environment
demonstrated at Thomas Edison’s Menlo Park, New Jersey, “Invention Factory” more than 120
years ago.
At many software companies developers work alone and are driven to meet rigorous
performance goals, but at Menlo, collaboration is valued above anything else. Everyone works in
Discussion Question #1: How difficult would it be for you as a leader to fire someone who is
bringing in big sales and profits for the company but not living up to the cultural values?
Explain.
Notes_________________________________________________________________________
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Leadership Challenge #4: Understand and apply how leaders shape culture and values through
ceremonies, stories, symbols, language, selection and socialization, and daily actions.
III. Cultural Leadership
An organization exists only because of the people who are a part of it, and those people both
shape and interpret the character and culture of the organization. Leaders in particular formulate
a viewpoint about the organization and the values that can help people achieve the organization’s
mission, vision, and strategic goals.
A cultural leader defines and uses signals and symbols to influence corporate culture. Cultural
leaders influence culture in two key areas:
• The cultural leader articulates a vision for the organizational culture that employees can
believe in. This means the leader defines and communicates central values that employees
Some of the mechanisms leaders use to enact cultural values are ceremonies, stories, symbols,
and specialized language. In addition, they emphasize careful selection and socialization of new
employees to keep cultures strong.
A. Ceremonies
A ceremony is a planned activity that makes up a special event and is generally conducted for
the benefit of an audience. Leaders can schedule ceremonies to provide dramatic examples of
what the company values. Ceremonies reinforce specific values, create a bond among
B. Stories
A story is a narrative based on true events that is repeated frequently and shared among
employees. Leaders can use stories to illustrate the company’s primary values. In some cases,
stories may not be supported by facts, but they are consistent with the values and beliefs of
the organization.
C. Symbols
A symbol is an object, act, or event that conveys meaning to others. Leaders can use physical
artifacts to symbolize important values.
D. Specialized Language
Leaders sometimes use slogans or saying to express key corporate values. Slogans can easily
E. Selection and Socialization
To maintain cultural values over time, leaders emphasize careful selection and socialization
of new employees. Companies with strong, healthy cultures, such as Google and Zappos often
have rigorous hiring practices.
New Leader Action Memo: As a leader, you can shape cultural values through rites and
ceremonies, stories, symbols, and language. You can keep the culture strong by carefully
selecting and socializing people, and by making sure your actions match the espoused values.
Socialization is the process by which a person learns the values, norms, perspectives, and
expected behaviors that enable him or her to successfully participate in the group or
F. Daily Actions
One of the most important ways leaders build and maintain the cultures they want is by
signaling and supporting important cultural values through their daily actions. For example,
Discussion Question #2: How might leaders use symbolic acts to strengthen a cultural value of
teamwork and collaboration? How about a value of customer care and responsiveness?
Notes_________________________________________________________________________
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Leadership Challenge #5: Identify the cultural values associated with adaptability, achievement,
involvement, and consistency cultures and the environmental conditions associated with each.
IV. The Competing Values Approach to Shaping Values
Organizational values are the enduring beliefs that have worth, merit, and importance for the
organization. Changes in the nature of work, globalization, increasing diversity in the workforce,
and other shifts in the larger society have also made the topic of values one of considerable
concern to leaders.
In considering what values are important for the organization, leaders consider the external
New Leader Action Memo: Determine your own cultural preferences by completing the
exercise in Leader’s Self-Insight 14.2.
Organizational cultures can be assessed along many dimensions, such as the extent of
collaboration versus isolation among people and departments, the importance of control and
where control is concentrated, or whether the organization’s time orientation is short-range or
long-range. Two specific dimensions are:
Exhibit 14.4: Four Corporate Cultures
Four categories of culture associated with these differences, as illustrated in Exhibit 14.3, are
A. Adaptability Culture
The adaptability culture is characterized by strategic leaders encouraging values that support
In the Lead: Aaron Levie, Box
“My main goals are to innovate and to disrupt,” says Aaron Levie, the young CEO of Box.
“Also, I want to avoid being disrupted.” Those goals are reflected in the company’s culture,
which emphasizes speed, flexibility, and pushing the boundaries. Levie is constantly reminding
people that they can do things “10 times bigger, 10 times better, and 10 times faster,” a core
value he calls “10X.” Other core values are “Get s—done” and “Take risks. Fail fast.”
B. Achievement Culture
The achievement culture is characterized by a clear vision of the organization’s goals, and
leaders focus on the achievement of specific targets such as sales growth, profitability, or
market share. This is a results-oriented culture that values competitiveness, aggressiveness,
New Leader Action Memo: As a leader, you can align the organization’s culture to its strategy
and the needs of the external environment. You can choose to implement the appropriate culture
(adaptability, achievement, clan, or bureaucratic) depending on environmental requirements and
the organization’s strategic focus.
C. Involvement Culture
The involvement culture has an internal focus on the involvement and participation of
D. Consistency Culture
The consistency culture has an internal focus and a dependability orientation for a stable
environment. The culture supports a methodical, rational, orderly way of doing business.
The relative emphasis on various cultural values depends on the organization’s strategic focus
and the needs of the external environment. Leaders might have preferences for the values
Discussion Question #6: Compare and contrast the achievement culture with the involvement
culture. What are some possible disadvantages of having a strong involvement culture? A strong
achievement culture?
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V. Ethical Values in Organizations
Organizations incorporate many types of values into their cultures. Of the values that make up an
organization’s culture, ethical values have gained renewed emphasis in today’s era of financial
scandals and moral lapses. Ethics is the code of moral principles and values that governs the
behavior of a person or group with respect to what is right or wrong. Ethics sets standards as to
In the Lead: Harvard Business School, Columbia Business School, Yale School of
Management, Wharton School of the University of Pennsylvania
Some members of the 2009 graduating class of Harvard Business School did something unusual.
They signed a voluntary student-led pledge saying that the goal of a business leader is to “serve
the greater good” and promising that they will act responsibly and ethically and refrain from
advancing their “own narrow ambitions” at the expense of others.
At Harvard and other business schools, there has been an explosion of interest in ethics classes
and activities that focus on personal and corporate responsibility. Many students, as well as
educators, are recognizing a need to give future leaders a deeper understanding of how to
Changing how future leaders are trained could be one key to solving the ethics deficit pervading
organizations. Leaders can create and sustain a climate that emphasizes ethical behavior for all
employees.
Leadership Challenge #6: Act as a value-based leader and instill healthy values in the
organizational culture.
VI. Values-Based Leadership
A. Personal Values
Employees learn about values from watching leaders. Values-based leaders generate a high
level of trust and respect from employees based not just on stated values but on the courage,
determination, and self-sacrifice they demonstrate in upholding those values.
In the Lead : Jim Sinegal and Craig Jelinek, Costco
In 2009, as the recession deepened and many employers were slashing jobs and cutting salaries,
Costco CEO Jim Sinegal was handing out raises. Costco is the second-largest retailer in the
United States, behind Walmart, and while Walmart leaders are seeing growing troubles, Costco
leaders seem to be seeing nothing but growing sales and profits. In early 2013, the company’s
profit soared to $537 million, proving that paying employees above-average wages and treating
them well in other ways can pay off. Since 2009, Costco’s sales have grown 39 percent and the
stock price has doubled.
Several factors contribute to an individual leader’s values. Every individual brings a set of
personal beliefs, personality characteristics, and behavior traits to the job. The family
backgrounds and spiritual beliefs of leaders often provide principles and values by which they
conduct business, and these are sometimes incorporated into the organizational culture.
New Leader Action Memo: As a leader, you can be ethical and act on high moral principles in
your daily behavior. You can help people find deeper fulfillment in their jobs. Complete Leader’s
Self-Insight 14.3 to see if you might be a leader who incorporates spiritual values as part of the
corporate culture.
Discussion Question #9: If a leader directs her health-care company to reward hospital
managers strictly on hospital profits, what kind of values is she encouraging within the company
culture? Discuss.
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Leadership Challenge #7: Apply the principles of spiritual leadership to help people find
deeper life meaning and a sense of membership through work.
B. Spiritual Values
Managers who incorporate spiritual values in addition to the traditional mental and behavioral
aspects of leadership tend to be successful as leaders. Values and practices considered as
spiritual ideals include integrity, humility, respect, appreciation for the contributions of others,
fair treatment, and personal reflection.
Spiritual leadership is the display of values, attitudes, and behaviors necessary to
intrinsically motivate oneself and others toward a sense of spiritual expression through calling
and membership.
Exhibit 14.5: Model of Spiritual Leadership
As illustrated in Exhibit 14.5, spiritual leaders start by creating a vision through which
organization participants experience a sense of calling that gives meaning to their work.
Second, spiritual leaders establish a corporate culture based on altruistic love. Spiritual
leaders also engage hope and faith to help the organization achieve desired outcomes.
Spiritual leadership behaviors enable employees to have a sense of calling that provides
deeper life meaning through work. Spiritual leadership also provides a sense of membership
through a work community in which one feels understood and appreciated. The outcome for
the organization is improved commitment and productivity.
Spiritual leadership can decrease or eliminate negative emotions and conflicts in the
workplace and provide a stronger foundation for personal well-being. The four main types of
destructive emotions are:
• Fear, including anxiety and worry
• Anger, including hostility, resentment, and jealousy
provides both service and meaning.
Discussion Question #8: Discuss the meaning of calling and membership, as related to spiritual
leadership. Identify an organization or leader that uses these concepts. To what extent were these
concepts present where you have worked?
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Discussion Question #10: Some mortgage company leaders have said that providing subprime
mortgages (earn a commission by making loans to people at high interest rates who may have
difficulty making the payments) was based on the noble purpose of giving poor people a chance
to participate in the American dream of home ownership. Discuss your opinion of this
explanation.
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Discussion Question #11: Some people believe that all good leadership is spiritual in nature.
Others think spiritual values have no place at work. Discuss these two opposing viewpoints.
Notes_________________________________________________________________________
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Discussion Questions
1. How difficult would it be for you as a leader to fire someone who is bringing in big sales
and profits for the company but not living up to the cultural values? Explain.
Students’ answers may vary. Some may say that though it would be tough for a leader to
fire someone who is bringing in big sales for the company, if such employees don’t live up
2. How might leaders use symbolic acts to strengthen a cultural value of teamwork and
collaboration? How about a value of customer care and responsiveness?
Students’ answers may vary. A symbol is one of the tools used by the leaders for
conveying cultural values. A symbol is an object, act, or event that conveys meaning to
others. In order to strengthen a cultural value of teamwork and collaboration:
3. Describe the culture for an organization you are familiar with. Identify some physical
artifacts—such as logo, mascot, building, advertising images—associated with the
company and discuss what and underlying values these suggest. What did you learn?
