Chapter 8

ORGANIZATIONAL CULTURE
Learning Objectives

1. Describe three aspects of organizational culture: how it is determined, its dimensions, and how
it is learned.

2. Describe how organizational culture can also be understood in terms of organizational types.

3. Explain some of the major consequences and implications of organizational culture.

Chapter Outline

I. ORGANIZATIONAL CULTURE

Organizational culture is a system of shared values and beliefs that influence worker behavior.

A. The Determinants of Organizational Culture

Often the origin of culture lies in the values, administrative practices, and personality of the
founder or founders. Culture responds to and mirrors the conscious and unconscious choices,
behavior patterns, and prejudices of top-level managers. The societal culture also helps
determine the culture of the firm. The industry a firm belongs to helps shape its culture, such as
household goods carriers having a culture different from a consulting firm.

B. Dimensions of Organizational Culture

The dimensions, or elements, of a culture help explain the nature of the subtle forces that
influence employee actions.

1. Values. The foundation of any organizational culture is based on values that guide
behavior.
2. Organizational stories with underlying meanings. Stories that circulate through the
organization convey a message about shared values.
3. Myths. Myths are dramatic narratives or imagined events about the firm’s history. These
myths can spur employees toward high levels of achievement.
4. Degree of stability. A fast-paced dynamic organization has a different culture than a slow-
paced, stable one.
5. Resource allocation and rewards. The investment of resources sends a message about
what the firm values.
6. Rites and rituals. Part of an organization’s culture is its traditions, or rites and rituals.
7. A sense of ownership. An ownership culture based on stock purchases includes increased
loyalty, improved work effort, and worker interests aligned with those of the company.
8. Belief in a higher purpose. A dominant characteristic of many of the companies judged to
be The 100 Best Companies to Work For is that employees have a sense of purpose.
9. Innovativeness. An environment that encourages innovation contributes to individual
creativity.
 In addition to the dominant culture of a firm, the subculture also influences behavior. A
subculture is a pocket in which the organizational culture differs from that of other pockets
and the dominant culture.

C. How Workers Learn the Culture

Employees learn the organizational culture primarily through socialization, the process of
coming to understand the values, norms, and customs essential for adapting to the organization.
Socialization is carried out formally and informally. Employees also learn the culture through
the teachings of leaders. Organizational members learn the culture to some extent by observing
what leaders pay attention to, measure, and control.

D. The Organizational Culture as Organizational Types

Organizations have personalities, similar to the human personality. Based on an online survey,
Booz Allen Hamilton has developed seven organization types, resembling personality. The first
three are healthy types, and the last four unhealthy.

1. Resilient. A resilient organization is highly adapted to shifts in the external market, yet
stays focused on a coherent business strategy like being a cost leader.
2. Just-in-Time. The just-in-time firm is not always prepared for change but can arise to an
unforeseen challenge without losing sight of the overall picture. Successes are pulled off at
the last minute, and there is a can-do attitude.
3. Military Precision. Everyone in a military-precision organization knows his or her role and
implements it well, as characteristic of a successful bureaucracy. This type of firm is
dominated by a small, committed team.
4. Passive-Aggressive. Here is the seething, smiley-faced organization. Workers are congenial
and seemingly conflict free, and consensus is easily achieved. A major problem is that the
poor implementation of agreed-upon plans.
5. Overmanaged. An overmanaged organization has multiple layers of management, analyzes
problems to the point of diminishing returns, and emphasizes politics in decision making.
6. Overgrown. This type of organization has become too large and complex to be effectively
managed by a small team, yet has not decentralized decision making. Top management
resists suggestions for change stemming from below, and reacts slowly to market
developments, such as getting beyond an outdated technology.
7. Fits and Starts. The organization has loads of smart, motivated and talented people who
rarely coordinate their efforts to achieve important goals. A person can take an idea and run
with it, yet direction from above is confusing, and a solid core of values is absent from
below, so most initiatives falter.

According to the survey the most common organizational type is the passive-aggressive. The
passive-aggressive organization would need to undergo organizational change to become more
successful. If the survey is valid, too many firms are ineffective based on a flawed personality.
E. The Consequences and Implications of Organizational Culture

A strong organizational culture can have a pervasive impact on organizational effectiveness.

1. Competitive advantage and financial success. The right organizational culture contributes
to gaining competitive advantage.
2. Productivity, quality, and morale. A culture that emphasizes productivity including high
quality, encourages workers to be productive. A culture that values the dignity of human
beings fosters high morale and job satisfaction.
3. Innovation. A corporate culture that encourages creative behavior is a major contributor to
innovation. Encouragement includes setting very high expectations, creating a passionate
cause, and encouraging radical ideas.
4. Compatibility of mergers and acquisitions. A reliable predictor of success in merging two
or more firms is compatibility of their respective cultures.
5. Person-organization fit. An important success factor for the individual is finding an
organization that fits his or her personality. The organization also prospers when the
personality of most members fits its culture.
6. Direction of leadership activity. A key leadership role is to establish what type of culture
is needed for the firm and then shaping the existing culture to match that ideal.