What is Organizational Culture?

Dimensions of Culture

Which values characterize an organization’s culture? Although culture may not be immediately observable, identifying a set of values that can be used to describe an organization’s culture helps us identify, measure, and manage culture more effectively. For this purpose, several researchers have proposed various culture typologies. One typology that has received considerable research attention is the Organizational Culture Profile (OCP), which represents culture through seven distinct values (Chatman & Jehn, 1991; O’Reilly, Chatman, & Caldwell, 1991). We will describe the OCP and two additional dimensions of organizational culture that are not represented in that framework but are critical to consider: service culture and safety culture.

Innovative Cultures

According to the OCP framework, companies with innovative cultures are flexible and adaptable and experiment with new ideas. These companies are characterized by a flat hierarchy in which titles and other status distinctions tend to be downplayed. For example, W. L. Gore & Associates Inc. is a company with innovative products such as GORE-TEX® (the breathable fabric that is windproof and waterproof), Glide dental floss, and Elixir guitar strings, earning the company the distinction of being elected as the most innovative company in the United States by Fast Company magazine in 2004. W. L. Gore consistently innovates and captures a significant market share in various industries, primarily due to its unique culture. In this company, employees do not typically have bosses, and risk-taking is encouraged by celebrating both failures and successes (Deutschman, 2004). Companies such as W. L. Gore, Genentech Inc., and Google encourage their employees to take risks by allowing engineers to devote 20% of their time to projects (Deutschman, 2004; Morris, Burke, & Neering, 2006).

Aggressive Cultures

Companies with aggressive cultures value competitiveness and outperforming competitors: By emphasizing this, they may fall short in corporate social responsibility. For example, Microsoft Corporation is often identified as a company with an aggressive culture. Over the years, the company has faced several antitrust lawsuits and disputes with competitors. In aggressive companies, people may use language such as “We will kill our competition.” In the past, Microsoft executives often made statements such as “We are going to cut off Netscape’s air supply.… Everything they are selling, we are going to give away.” Its aggressive culture is cited as a reason for getting into new legal troubles before they are resolved (Greene, Reinhardt, & Lowry, 2004; Schlender, 1998). Microsoft founder Bill Gates went on to establish the Bill & Melinda Gates Foundation, devoting his time to reducing poverty worldwide (Schlender, 2007). Has he brought the same competitive approach to philanthropy?

Outcome-Oriented Cultures

The OCP framework describes outcome-oriented cultures as emphasizing achievement, results, and action as essential values. A good example of an outcome-oriented culture is Best Buy Co., Inc., which has a culture that emphasizes sales performance. Best Buy tallies revenues and other relevant figures daily by department. Employees are trained and mentored to effectively sell company products and learn how much money their department generates daily (Copeland, 2004). In 2005, the company introduced a results-oriented work environment (ROWE) program, which enables employees to work from anywhere and at any time. They are evaluated based on their results and the fulfillment of clearly outlined objectives (Thompson, 2005). Outcome-oriented cultures hold employees and managers accountable for success and utilize systems that reward employee and group output. In these companies, it is more common to see rewards tied to performance indicators than seniority or loyalty. Research indicates that organizations with a performance-oriented culture tend to outperform companies lacking such a culture (Nohria, Joyce, & Roberson, 2003). At the same time, some outcome-oriented companies may have such a high drive for outcomes and measurable performance objectives that they may suffer negative consequences as a result. Companies that overreward employee performance, such as Enron Corporation and WorldCom, have experienced well-publicized business and ethical failures. When performance pressures lead to a culture where unethical behaviors become the norm, individuals perceive their peers as rivals, and short-term results are prioritized; the resulting unhealthy work environment becomes a liability (Probst & Raisch, 2005).

Stable Cultures

Stable cultures are predictable, rule-oriented, and bureaucratic. These organizations aim to coordinate and align individual efforts for the most significant levels of efficiency. When the environment is stable and confident, these cultures may help the organization be effective by providing stable and constant output levels (Westrum, 2004). These cultures prevent quick action, which may be a misfit to a changing and dynamic environment. Public sector institutions may be viewed as stable cultures. In the private sector, Kraft Foods Inc. is an example of a company with centralized decision-making and a rule-oriented culture that suffered due to a culture-environment mismatch (Thompson, 2006). Its bureaucratic culture is blamed for killing good ideas in the early stages and preventing the company from innovating. When the company initiated a change program to enhance the agility of its culture, one of its first actions was to combat bureaucracy with more bureaucracy: it created the new position of VP of Business Process Simplification, which was later eliminated (Boyle, 2004; Thompson, 2005, 2006).

People-Oriented Cultures

People-oriented cultures value fairness, supportiveness, and respect for individual rights. These organizations truly live by the mantra “people are their greatest asset.” In addition to having fair procedures and management styles, these companies create an atmosphere where work is enjoyable and employees do not feel compelled to choose between their work and other aspects of their lives. In these organizations, there is a greater emphasis on and expectation of treating people with respect and dignity (Erdogan, Liden, & Kraimer, 2006). One study of new accounting company employees found that, on average, employees stayed 14 months longer in companies with people-oriented cultures (Sheridan, 1992). Starbucks Corporation is an example of a people-oriented culture. The company pays employees above minimum wage, offers health care and tuition reimbursement benefits to its part-time and full-time employees, and has creative perks such as weekly free coffee for all associates. As a result of these policies, the company benefits from a turnover rate lower than the industry average (Weber, 2005; Motivation Secrets, 2003). Fortune magazine routinely ranks the company as one of the best workplaces.

Team-Oriented Cultures

Companies with team-oriented cultures are collaborative and emphasize cooperation among employees. For example, Southwest Airlines Company fosters a team-oriented culture by cross-training its employees, enabling them to assist one another when needed. The company also emphasizes training intact work teams (Bolino & Turnley, 2003). Employees participate in twice-daily meetings called “morning overview meetings” (MOM) and daily afternoon discussions (DAD), where they collaborate to understand the sources of problems and determine future courses of action. In Southwest’s selection system, applicants not viewed as team players are not hired as employees (Miles & Mangold, 2005).In team-oriented organizations, members have more positive relationships with their coworkers, particularly with their managers (Erdogan, Liden, & Kraimer, 2006).

Detail-Oriented Cultures

Organizations with detail-oriented cultures are characterized in the OCP framework as emphasizing precision and attention to detail. Such a culture provides a competitive advantage to companies in the hospitality industry by enabling them to differentiate themselves from others. For example, Four Seasons Hotels Ltd. and The Ritz-Carlton Company LLC are among hotels that keep records of all customer requests, such as which newspaper the guest prefers or the type of pillow they use. This information is put into a computer system to provide better service to returning customers. Any requests that hotel employees receive and overhear may be entered into the database to serve customers better. Recent guests to Four Seasons Paris who were celebrating their 21st anniversary were greeted with a bouquet of 21 roses on their bed. Such evident attention to detail is an effective way to impress customers and ensure repeat visits. McDonald’s Corporation is another company that specifies in detail how employees should perform their jobs by including photos of exactly how French fries and hamburgers should look when appropriately prepared (Fitch, 2004; Ford & Heaton, 2001; Kolesnikov-Jessop, 2005; Markels, 2007).

Service Culture

Service culture is not one of the dimensions of OCP, but given the importance of the retail industry in the overall economy, having a service culture can make or break an organization. Some organizations we have illustrated in this section, such as Nordstrom, Southwest Airlines, Ritz-Carlton, and Four Seasons, are also famous for their service culture. In these organizations, employees are trained to serve the customer well; cross-training is the norm. Employees are empowered to resolve customer issues in a manner they deem appropriate. Because employees with direct customer contact are in the best position to resolve any problems, employee empowerment is truly valued in these companies. For example, Umpqua Bank, operating in the northwestern United States, is known for its service culture. All employees are trained in all tasks, enabling them to assist customers when needed. Branch employees may develop unique ways to serve customers better, such as opening their lobby for community events or keeping bowls full of water for customers’ pets. The branches feature coffee for customers, Internet kiosks, and a service where withdrawn funds are given on a tray along with a piece of chocolate. They also reward employee service performance through bonuses and incentives (Conley, 2005; Kuehner-Herbert, 2003).

What differentiates companies with a service culture from those without such a culture may be their proactive approach to solving customer-related problems. In other words, in these cultures, employees are engaged in their jobs and personally invested in improving customer experience. They identify issues and devise solutions without being explicitly instructed on what to do. For example, a British Airways baggage handler noticed that first-class passengers were waiting longer for their baggage, whereas standby passengers often received their luggage first. Noticing this tendency, a baggage handler notified his superiors about the problem, along with a suggestion to load first-class passenger luggage last (Ford & Heaton, 2001). This solution was successful in cutting down the wait time by half. Such proactive behavior by employees who share company values will likely emerge frequently in companies with a service culture.

Safety Culture

Some jobs are safety-sensitive. For example, logger, aircraft pilot, fishing worker, steel worker, and roofer are among the top 10 most dangerous jobs in the United States (Christie, 2005). Creating and maintaining a safety culture provides a competitive advantage in organizations performing safety-sensitive jobs. The organization can reduce accidents, maintain high morale and employee retention, and increase profitability by cutting workers’ compensation insurance costs. Some companies suffer severe consequences when they cannot develop such a culture. For example, British Petroleum experienced an explosion in their Texas City, Texas, refinery in 2005, which led to the death of 15 workers while injuring 170. In December 2007, the company announced that it had already depleted the $ 1.6 billion fund allocated for claims related to this explosion (Tennissen, 2007). A safety review panel concluded that developing a safety culture was essential to avoid such occurrences in the future (Hofmann, 2007). In companies with a strong safety culture, there is a clear commitment to safety that begins at the management level and extends to lower levels. M. B. Herzog Electric Inc. of California, selected as one of America’s safest companies by Occupational Hazards magazine in 2007, has maintained a zero accident rate for the past three years. The company utilizes safety training programs tailored to specific job roles, and all employees are encouraged to identify and report any safety hazards they encounter while performing their duties. They are also asked to be an OSHA (Occupational Safety and Health Administration) inspector for a day to become more aware of the hidden dangers in the workplace. Managers play a crucial role in promoting safe behaviors in the workplace, as they can motivate employees daily to exhibit safe behaviors and serve as safety role models. A recent study has shown that in organizations with a safety culture, leaders encourage employees to exhibit behaviors such as volunteering for safety committees, making recommendations to increase safety, protecting coworkers from hazards, whistleblowing, and in general trying to make their jobs safer (Hofman, Morgeson, & Gerras, 2003; Smith, 2007).

Strength of Culture

A strong culture is shared by organizational members (Arogyaswamy & Byles, 1987; Chatman & Eunyoung, 2003). In other words, if most employees in the organization share a consensus regarding the company’s values, it is possible to discuss the existence of a strong culture. A culture’s content is more likely to affect how employees think and behave when the culture is strong. For example, cultural values that emphasize customer service will lead to higher-quality customer service if there is widespread agreement among employees on the importance of customer service-related values (Schneider, Salvaggio, & Subirats, 2002).

It is essential to recognize that a strong culture can act as either an asset or a liability for the organization, depending on the shared values. For example, imagine a company with a strongly outcome-oriented culture. If this value system matches the organizational environment, the company outperforms its competitors. On the other hand, a strong outcome-oriented culture coupled with unethical behaviors and an obsession with quantitative performance indicators may be detrimental to an organization’s effectiveness. An extreme example of this dysfunctional type of strong culture is Enron. A strong culture may sometimes outperform a weak culture due to the consistency of its expectations. In a strong culture, members are aware of what is expected of them, and the culture effectively guides their behaviors. Research shows that strong cultures lead to more stable corporate performance in stable environments. However, in volatile environments, the advantages of cultural strength disappear (Sorensen 2002). One limitation of a strong culture is the difficulty of changing it.

Suppose an organization with widely shared beliefs adopts a different set of values. In that case, unlearning the old and new values will be challenging because employees will need to adopt new ways of thinking, behaving, and responding to critical events. For example, the Home Depot Inc. had a decentralized, autonomous culture where many business decisions were made using “gut feeling” while ignoring the available data. When Robert Nardelli became CEO of the company in 2000, he decided to change its culture, starting with centralizing many of the decisions that were previously left to individual stores. This initiative encountered substantial resistance, and many high-level employees departed during his first year. Despite getting financial results such as doubling the company’s sales, many of his changes were criticized. He left the company in January 2007 (Charan, 2006; Herman & Wernle, 2007).

A strong culture may also be a liability during a merger. During mergers and acquisitions, companies inevitably experience a clash of civilizations, as well as a clash of structures and operating systems. Cultural clashes become more problematic when both parties have distinct and robust cultures. For example, during the merger of Daimler AG with Chrysler Motors LLC to create DaimlerChrysler AG, the differing strong cultures of each company acted as a barrier to effective integration. Daimler had a strong engineering culture that was more hierarchical and emphasized the routine working of long hours. Daimler employees were accustomed to being part of an elite organization, as evidenced by their first-class travel on all business trips.

On the other hand, Chrysler had a sales culture where employees and managers were used to autonomy, working shorter hours, and adhering to budget limits, which meant only the elite flew first class. The different ways of thinking and behaving of these two companies introduced several unanticipated problems during the integration process (Badrtalei & Bates, 2007; Bower, 2001). Differences in culture may be part of the reason that, in the end, the merger didn’t work out.

Do Organizations Have a Single Culture?

So far, we have assumed that a company shares a single culture. However, you may have realized that this is an oversimplification. In reality, there might be multiple cultures within any given organization. For example, individuals working on the sales floor may experience a different culture from those working in the warehouse. A culture that emerges within various departments, branches, or geographic locations is called a subculture. Subcultures may arise from the personal characteristics of employees and managers, as well as the other conditions under which work is performed. Within the same organization, marketing and manufacturing departments often have different cultures so that the marketing department may emphasize innovativeness.

In contrast, the manufacturing department may have a shared emphasis on detail orientation. In an interesting study, researchers uncovered five subcultures within a police organization. These subcultures differed depending on the level of danger involved and the type of background experience the individuals held, including “crime-fighting street professionals” who did what their job required without rigidly following protocol and “anti-military social workers” who felt that most problems could be resolved by talking to the parties involved (Jermier et al., 1991). Research has shown that employee perceptions regarding subcultures were related to employee commitment to the organization (Lok, Westwood, & Crawford, 2005). Therefore, in addition to understanding the broader organization’s values, managers must also try to understand the subculture’s values to see their impact on workforce behavior and attitudes. Moreover, as an employee, you need to understand the type of subculture in the department where you will work and the company’s overall culture.

Sometimes, a subculture may take the form of a counterculture. Defined as shared values and beliefs that directly oppose the values of the broader organizational culture (Kerr & Slocum, 2005), countercultures are often shaped around a charismatic leader. For example, within a vastly bureaucratic organization, an enclave of innovativeness and risk-taking may emerge within a single department. The organization may tolerate a counterculture if it yields results and contributes positively to its overall effectiveness. However, its existence may be perceived as a threat to the broader organizational culture. In some cases, this may lead to actions that would undermine the managers’ autonomy and erode the counterculture.