CHAPTER 5

Organizational Culture and

Organizational theory
 ORGANIZATIONAL CULTURE
Culture is the set of values, norms, guiding
beliefs, and understandings that is shared by
members of an organization and taught to
new members as the correct way to think,
feel, and behave.

 It represents the unwritten, feeling part of the

organization.
 Organizational culture exists at two levels

Observable symbols, Underlying values,

ceremonies, stories, assumptions, beliefs,
attitudes, feelings
slogans, behaviours,
dress, physical
settings
 Observable symbols, ceremonies, stories, slogans,
behaviours, dress, physical settings

On the surface are visible artefacts and observable

behaviours: the ways people dress and act, the type of
control systems and power structures used by the company

The visible elements of culture, however, reflect deeper

values in the minds of organization members.
These underlying values, assumptions, beliefs, and thought
processes operate unconsciously to define the true culture
 Underlying values, assumptions, beliefs, attitudes,
feelings
The underlying values are an emphasis on
openness, collaboration, teamwork, innovation, and
constant change.

The attributes of culture display themselves in many ways

but typically evolve into a patterned set of activities carried
out th rough social interactions.

Those patterns can be used to interpret culture

 Emergence and Purpose of Culture

Culture provides people with a sense of

organizational identity and generates in them a
commitment to beliefs and values that are larger
than themselves.

Organization’s culture generally begins with a founder or

early leader who articulates and implements particular
ideas and values as a vision, philosophy, or business
strategy.
When these ideas and values lead to success, they
become institutionalized, and an organizational
culture emerges that reflects the vision and
strategy of the founder or leader

To integrate members , so that they

Cultures serve know how to relate to one another
two critical
functions in
organizations To help the organization adapt to
the external environment
Internal integration means that members develop a
collective identity and know how to work together
effectively.

It is culture that guides day-to-day working

relationships and determines how people
communicate within the organization, what
behaviour is acceptable or not acceptable, and how
power and status are allocated.
External adaptation refers to how the
organization meets goals and deals with
outsiders.
 Culture helps guide the daily activities of workers
to meet certain goals.
It can help the organization respond rapidly to
customer needs or the moves of a competitor.
The organization’s culture also guides employee
decision making in the absence of written rules or
policies.

Thus, both functions of culture are related to

building the organization’s social capital, by forging
either positive or negative relationships both within
the organization and with outsiders.
 Organization Design And Culture

Managers want a corporate culture that reinforces

the strategy and structural design that the
organization needs to be effective within its
environment.

Cultures can be assessed along many dimensions,

such as the extent of collaboration versus isolation
among people and departments
  It will focus on two specific dimensions
 The extent to which the competitive environment
requires flexibility or stability

The extent to which the organization’s strategic focus and

strength are internal or external

Four categories of
Adaptability,
culture associated Mission,
with these Clan, and
Bureaucratic
differences
The Adaptability Culture:
 It is characterized by strategic focus on the external
environment through flexibility and change to meet
customer needs.

 The culture encourages entrepreneurial values, norms,

and beliefs that support the capacity of the
organization to detect, interpret, and translate signals
from the environment into new behaviour responses.

 Innovation, creativity, and risk taking are valued and

rewarded.
The Mission Culture

 It is characterized by emphasis on a clear vision of the

organization’s purpose and on the achievement of goals,

such as sales growth, profitability, or market share, to help

achieve the purpose
 Individual employees may be responsible for a specified
level of performance, and the organization promises
specified rewards in return.

 Managers shape behaviour by envisioning and

communicating a desired future state for the organization.
The Clan Culture

 The clan culture has a primary focus on the involvement and

participation of the organization’s members and on rapidly
changing expectations from the external environment.

 This culture focuses on meeting the needs of employees as

the route to high performance.

 Involvement and participation create a sense of

responsibility and ownership and, hence, greater
commitment to the organization.
The Bureaucratic Culture
 has an internal focus and a consistency orientation for a
stable environment. This type of culture supports a
methodical approach to doing business.

 Symbols, heroes, and ceremonies reinforce the values of

cooperation, tradition, and following established policies
and practices as ways to achieve goals.

 Today, most managers are shifting away from bureaucratic

cultures because of a need for greater flexibility
 Culture and the learning organization

A strong culture that encourages adaptation and

change enhances organizational performance by
energizing and motivating employees, unifying
people around shared goals and a higher mission,
and shaping and guiding behavior so that everyone’s
actions are aligned with strategic priorities.
Creating and influencing an adaptive culture is one
of a manager’s most important jobs.
The right culture can drive high performance.

Healthy cultures not only provide for smooth

internal integration but also encourage adaptation
to the external environment.

Non-adaptive cultures encourage rigidity and

stability
Strong adaptive cultures often incorporate the
following values:
 The whole is more important than the parts, and boundaries between
parts are minimized

 Equality and trust are primary values.

 The culture encourages risk taking, change, and improvement.

 Ethical values in organizations

Ethics refers to the code of moral principles and values that

governs the behaviours of a person or group with respect to
what is right or wrong.

Ethical values set standards as to what is good or bad in

conduct and decision making.

Ethics are personal and unique to each individual, although

in any given group, organization, or society there are many
areas of consensus about what constitutes ethical
behaviour
 Sources of Individual Ethical Principles and Actions

History History leads to the development of societal

morality
Religion,
Philosophy
Geographic Society
Environment
Nationality, Societal Laws, Codes,
Society, norms and and
values Regulations
Culture

Local
Environment Society shapes the local environment
Organizations
Geographic
Individual Ethics
Regions/Comm
The local environment and Actions
unity
Family/Clan shapes individual
behaviour
 Managerial Ethics

The rule of law arises from a set of codified

principles and regulations that describe how people
are required to act, that are generally accepted in
society, and that are enforceable in the courts.

Ethical standards for the most part apply to behaviour not

covered by the law, and the rule of law applies to
behaviours not necessarily covered by ethical standards
Current laws often reflect combined moral
judgments, but not all moral judgments are codified
into law.

Many behaviours have not been codified, and

managers must be sensitive to emerging norms and
values about those issues.
Managerial ethics are principles that guide the decisions
and behaviours of managers with regard to whether they
are right or wrong.
Examples of the need for managerial ethics are as follows:
 How Leaders Shape Culture and Ethics

Values can be communicated in a number of ways:

speeches, company publications, policy statements, and,
especially, personal actions.

Top leaders are responsible for creating and sustaining a

culture that emphasizes the importance of ethical
behaviour for every employee
Values-Based Leadership

Organizational values are developed and

strengthened primarily through values-based
leadership,

A relationship between a leader and followers that is

based on shared, strongly internalized values that are
advocated and acted upon by the leader

Employees learn about values, beliefs, and goals from

watching managers
Characteristics of Values Based Leaders
Personal Actions and
Interpersonal Behaviours
Expectations
Treat people with care
Hold self to high ethical
Be helpful and kind
standards
Support others
Strive for honesty, humility,
Maintain positive
integrity
relationships
Accept responsibility for ethical
failings
Values-Based
Leader

Organizational Leadership
Fairness with Others Articulate and communicate
ethical vision
Treat everyone equitably
Hold people accountable
Never be condescending
Put ethics above short-term
Accept others’ mistakes interests