CHAPTER 04

MANAGING
ORGANIZATIONAL
CULTURE
 LEARNING OUTCOMES

AFTER STUDYING THIS CHAPTER, YOU SHOULD

BE ABLE TO:
 Define organizational culture.
 Explain the evolution of culture.
 Discuss the impact of culture on strategy.
 List the elements of organizational culture.
 Discuss the importance of culture and leadership.
 4.1 INTRODUCTION

 Culture is vital.
 It is a way of life, affecting not only how an
organization creates values but also how the
organization is perceived.
 The ideas, customs, and social behavior of a particular
people or society.
 An organization will develop its own unique culture —
two organizations belonging to the same industry and
location will display distinctively different ways of
operating.
 4.2 ORGANIZATIONAL CULTURE
AND MANAGEMENT

 Organizational culture is the specific collection of values

and norms that are shared by people and groups in an
organization.
 Enables an organization to adapt to environmental
changes, and coordinate and integrate its internal
operations.
 Presents as a factor which influences:-
 performance, the integration process of mergers,
knowledge transfer, shareholder values, competitive
advantage and the adoption of the marketing concept by
organizations.
 INTEGRATION PROCESS
 Process of integrating multiple business
processes within an organization in order to
achieve company-wide goals.
 A way of improving efficiency within an
organization by ensuring that all parts are working
together towards the same goal
 KNOWLEDGE TRANSFER
 “A practical method for transitioning knowledge
from one part of your business to another.
 Both a theory and a practice – which means that it
can be applied to your company culture and to your
business systems.
 More than just communication, though. It involves
the circulation of information, ideas, tasks, processes,
tools, documents, and so much more.
 SHAREHOLDER VALUE
 it's the value provided to equity (the value of the
shares issued by a company) investors of a
business.
 A combination of management's capacity to
raise sales, free cash flow and earnings increase
dividends and shareholders' capital gains.
 This value supports a company's operational
success and creates shareholder interest in
investing in the business.
 SHAREHOLDER VALUE (CONTINUED)
 External factors, such as the political and
economic environment, can impact a company's
ability to generate shareholder value.
 For example, an increase in taxes that a
company needs to pay could negatively impact
the amount of money the business has available to
reinvest back into the company or distribute to
shareholders.
 COMPETITIVE ADVANTAGE
 Refers to factors that allow a company to produce
goods or services better or more cheaply than its
rivals.
 These factors allow the productive entity to generate
more sales or superior margins compared to its market
rivals.
 Competitive advantages are attributed to a variety of
factors including cost structure, branding, the quality of
product offerings, the distribution network, intellectual
property, and customer service.
 MARKETING CONCEPT
 A strategy that companies implement to satisfy
their customers' needs, increase sales, maximize
profit and get ahead of their competition.
 There are five common marketing concepts that
organizations adopt for this.
 The Marketing department designs strategies that will
build profitable engagements and relationships with
their target market and buyer persons.
 4.2.1 EVOLUTION OF CULTURE

 The founder of an organization is usually the main

influence on its culture.
 The founder’s assumptions about success form the
foundation of the organization’s culture.
– A set of beliefs about the organization’s distinctive
competence will differentiate the organization from others in
new organizations.
– These beliefs will directly affect organizational strategies
and operations.
 DISTINCTIVE COMPETENCE
 Refers to a superior characteristic, strength, or
quality that distinguishes a company from its
competitors.
 This distinctive quality can be just about
anything:
 Innovation, a skill, design, technology, name
recognition, marketing, workforce, customer
satisfaction, or even being first to market.
 4.2.2 IMPACT OF CULTURE ON
STRATEGY

 Organizational culture can either facilitate or hinder an

organization’s strategic actions.
 Successful organizations developed cultures that
emphasized three key groups of stakeholders
 Customers
 Shareholders
 Employees.
 4.2.3 BUILDING A STRATEGY
SUPPORTIVE CULTURE

 Organization intending to create a fit between

organizational strategy and culture has to consider
the following elements:
– Symbolic actions and substantive actions.
– Building a culture or spirit of high performance.
– Fostering a strategy supportive of climate and culture
 4.2.3 BUILDING A STRATEGY
SUPPORTIVE CULTURE (CONTD.)

– Maintaining internal responsiveness and innovativeness

– Dealing with organization politics
– Enforcing ethical behavior.
– Leading the process of making corrective adjustments.
 SUBSTANTIVE ACTIONS
 The real actions taken by an organization to meet
certain expectations and often require changes in
core practices, long-term commitments and
investments in corporate culture.
 ETHICAL BEHAVIOR
 Means team operates according to fair and
transparent standards, not just complying with
legal rules or regulatory requirements, but going
above and beyond to ensure decisions are applied
through an ethical lens
 INTERNAL RESPONSIVENESS
 An organization's ability to identify and
effectively adapt to the continuous changes in their
industry and in their customers' preferences.
 Companies who effectively adapt to changes are
better able to manage disruption and
consistently meet their customers.
 4.3 COMMUNICATING
ORGANIZATIONAL CULTURE

 Organizational culture usually tends to influence an

organization’s philosophy, style and behavior.
 Managers must carefully consider the type of culture,
they want for their organization and strive to foster it
via communicating with every organizational member.
 To use culture to an organization’s advantage, managers
must accomplish several tasks which depend on
effective communication.
 4.3 COMMUNICATING
ORGANIZATIONAL CULTURE
(CONTD.)
– They must clearly understand the culture.
– They must transmit that culture to others in the
organization.
– They must sustain that culture by rewarding and
promoting those who understand it and work towards
maintaining it.
 4.3.1 ELEMENTS OF
ORGANIZATIONAL CULTURE
 VALUES
 SYMBOLS
 STORIES (MAY BE
INSPIRATIONAL)
 HEROES
 RITUALS AND CEREMONIES
 4.3.1 ELEMENTS OF
ORGANIZATIONAL CULTURE
ORGANIZATIONAL CULTURE INCLUDES:
VALUES
 Values like Respect for the Individual, Integrity, Performance,
Passion, Diversity, Innovation, Customer Commitment, Teamwork,
Quality…are commonly seen in vision and mission statements of
most organizations across the world.
SYMBOLS
 Perhaps the most crucial aspect of a culture.
 Symbols are objects, not necessarily physical, that hold meaning for
the members of the organization.
 The meaning of the symbol expresses in some ways the values the
organization holds important.
 4.3.1 ELEMENTS OF
ORGANIZATIONAL CULTURE
STORIES (MAY BE INSPIRATIONAL)
 Religious stories are designed to encourage shared values and a
sense of right and wrong.
 They give people a cultural identity, binding them together in a
common purpose and a feeling of belonging.
 Stories and legends can make or break the culture of a business.
 Get them right and they are really powerful.
 They can strengthen bonds, motivate and engage staff like nothing
else.
 Get them wrong and they can be catastrophic (involving or causing
sudden great damage or suffering) breeding negativity,
dissatisfaction and toxicity through-out business.
 4.3.1 ELEMENTS OF
ORGANIZATIONAL CULTURE
HEROS
 People who are associated with the organization, either at the present
time or in the past, who act as role models for current employees.
 They may be leaders, strong personalities or respected individuals who
portray admired values and behaviors.
RITUALS AND CEREMONIES
 RITUALS: These happen at the team-level and can be practiced weekly
or monthly.
 Teams can have rituals to bond with each other, to stay in the loop and
to building a sense community.
 CEREMONIES: These happen at an organizational level and can
happen every quarter.
 Companies can use ceremonies to celebrate successes and to connect
& communicate with all employees.
 4.3.2 FUNCTIONS OF
ORGANIZATIONAL CULTURE

 COOPERATION
 DECISION MAKING
 CONTROL
 COMMUNICATION
 COMMITMENT
 EMPLOYEE
PERCEPTION
 JUSTIFICATION OF
BEHAVIOR
 4.3.2 FUNCTIONS OF
ORGANIZATIONAL CULTURE

COOPERATION
 Since a collectivistic organizational culture rewards members for
cooperating with others in meeting organizational objectives, people
with a disposition to cooperate are likely to demonstrate well-
practiced cooperative behaviors in this context, such as working with
others rather than alone, and expressing preferences .
DECISION MAKING
 The effect that organizational culture has on managerial decisions
depends on whether the organization has a strong or a weak culture.
 Organizational culture determines the decision making process as
well as decision making speed. Some cultures permit all employees
to participate in the decision making process .
 4.3.2 FUNCTIONS OF
ORGANIZATIONAL CULTURE

CONTROL
 The controls culture of an organization will define what behaviors
are appropriate for an organisation.
 The controls culture will also determine which behaviors are good
and add value to the organization's control ambitions and
objectives, and which are bad and negate the organization's
objectives.
COMMUNICATION
 Clear and effective communication can result in improved
cooperation, higher employee engagement, increased productivity,
and a more positive workplace environment.
 On the other hand, poor communication can result in a lack of
clarity regarding objectives, misunderstandings, low morale, and
toxic work culture.
 4.3.2 FUNCTIONS OF
ORGANIZATIONAL CULTURE

COMMITMENT
 A view of an organization’s member’s psychology towards
his/her attachment to the organization that he/she is working for.
 Organizational commitment plays a pivotal role in determining
whether an employee will stay with the organization for a longer
period of time and work passionately towards achieving the
organization’s goal.
 4.3.2 FUNCTIONS OF
ORGANIZATIONAL CULTURE

EMPLOYEE PERCEPTION
 Essential for companies who want to create a strong work culture
and improve employee engagement and productivity.
 It is a critical aspect of the organization as a whole because it
affects employee behavior, attitudes, and performance.
JUSTIFICATION OF BEHAVIOR
 Employees whose organizations have strongly defined cultures can
also justify their behaviors at work because those behaviors fit the
culture.
 Company leaders play an instrumental role (serving as a means
of pursuing an aim or policy) in shaping and sustaining
organizational culture.
 4.4 ORGANIZATIONAL CULTURE
AND LEADERSHIP

LEADERSHIP
 Important for building organizational culture.
 Leadership culture is how leaders interact with one another and
their team members.
 The way leaders operate, communicate, and make decisions.
 About the everyday working environment: their behaviors,
interactions, beliefs, and values.
 MAIN CHARACTERISTICS OF BUSINESS
LEADERS

 Communication
 Integrity
 Decision Making
 Innovation
 Creativity
 Confidence
 Self-Awareness
 Delegation
 Emotional Intelligence
 MAIN CHARACTERISTICS OF BUSINESS
LEADERS

 Accountability
 Strategy
 Empower
 Patience
 Discipline
 Transparency
 Positivity
 Creativity
 Jack Ma
Jack Ma
Jack Ma

MAIN BUSINESS LEADERS

 Warren Buffett
 Bill Gates
 Elon Musk
 Jack Ma
 Mary Barra
 Jeff Bezos
 Tim Cook
 Steven Paul Jobs
 STEVEN PAUL JOBS

Steven Paul Jobs (February 24, 1955 – October 5,

2011) was an American businessman.
 He was the co-founder, chairman, and CEO of Apple;
the chairman and majority shareholder of Pixar; a
member of The Walt Disney Company's board of
directors following its acquisition of Pixar; and the
founder, chairman, and CEO of NeXT.
 He was a pioneer of the personal computer revolution
of the 1970s and 1980s, along with his early business
partner and fellow Apple co-founder Steve Wozniak.

Steve Jobs: How a dreamer Changed the World

 4.4 ORGANIZATIONAL CULTURE
AND LEADERSHIP

 How leaders shape culture.

– TRANSACTIONAL LEADERSHIP
• Capacity to motivate followers by exchanging rewards for
performance.
• Works within the organizational culture as it exists.
– TRANSFORMATIONAL LEADERSHIP
• Capacity to motivate followers by inspiring involvement in
a mission.
• Changes the organizational culture.
 4.4 ORGANIZATIONAL CULTURE
AND LEADERSHIP (CONTD.)

 How leaders shape culture.

– CHARISMATIC LEADER
• Exercising a compelling charm which inspires devotion in
others.
• One who has the ability to influence the behavior of others
through his/her personal qualities, enthusiasm, beliefs
and charm.
 4.4.2 ORGANIZATIONAL CULTURE
AND ENVIRONMENT

 ADAPTIVE CULTURES
– Innovative cultures that encourage and reward initiatives taken by
middle and lower level managers.
– Enables the organization to adapt quickly and effectively to internal and
external pressures for change.
– A corporate culture that consistently supports a positive psychological
environment that will ensure, the workforce will be more resilient (able
to withstand or recover quickly from difficult conditions) against stress.
 UNADAPTIVE CULTURES
– Managers who care mainly about themselves, their immediate work
group or their product.
– They value orderly risk-reducing management processes more highly
than leadership initiative. Common Behavior.
 ORGANIZATIONAL CULTURE AND
ENVIRONMENT (CONTD.)

ENVIRONNEMENTAL ADAPTIVE VS UNADAPTIVE ORGANIZATIONAL CULTURES

ADAPTIVE UNADAPTIVE

 Managers pay close attention to

all constituencies, especially  Managers typically behave somewhat
customers. politically and bureaucratically.
VISIBLE  Changes are initiated when  Thus, they do not change strategies
BEHAVIOR needed for legitimate interests, quickly or take advantage of changes
even if it entails taking some in their business environments.
risks.

 Managers care deeply about  Managers care about themselves,their

customers, stakeholders and immediate work group or products, and
EXPRESSED employees. technology associated with the work
VALUES  They strongly value people group.
and processes that create useful  They strongly value a systematic,
changes. risk-reducing management process
taken up by leadership initiatives.