Context 1. What is the relationship between an institutional system and an organizational culture? The process when an “organization takes on a life of its own, apart from its founders or members, and acquires immortality” is called institutionalization by Robbins and Judge. That means that the organization in itself does not change even if the founder dies or important managers leave the company, it will remain basically the same in the future as it has been in the past.
Furthermore, these institutions influence the behavior and make some actions more understood than they perhaps should be.
For example a very authoritarian management behavior that obstructs innovations and harms the external view on the company, but is tolerated by the entrepreneur as he acts in the same way. Even though a company may have achieved its original goals, it will continue its business with new goals if it is institutionalized.
Organizational culture can be defined as “a system of shared meaning held by members that distinguishes the organization from other organizations”.
This shows that every organization is different because of its values that origin from the organization’s founders and from the employees who are specifically selected in consideration of these values. Robbins and Judge identify seven primary characteristics to describe a culture: innovation and risk taking, attention to detail, outcome orientation, people orientation, team orientation, aggressiveness and stability.
It is vital for a company to have a matching culture to the means of an organization: for instance should a high-technology firm not be afraid of risk-taking and ought to give high attention to detail and team orientation; a retailer in a very competitive market should rather be outcome oriented and does not necessarily have to be very innovative.
All of these seven attitudes could also be used for human beings which points up that an organization with its own culture develops its own personality. Organizational culture can also be seen as a descriptive term how employees perceive a firm’s culture.
Robbins and Judge call institutionalization the forerunner of organizational culture as it already exists for a significant longer time. In the past a firm was considered more as “rational -1- means” that was strictly organized, controlled and influenced people. It was not supposed to have an own personality, values and culture. When the concept of institutionalization was introduced, it was the first time to acknowledge that corporations are more than just a rational system, that people are a very important part of every organization and that these employees shape an organization as well as they are influenced by it.
In the concept of organizational culture, the focus on the members of each organization is even stronger as business would not work without the employees. Therefore an institutional system and an organization’s culture can be seen as related to each other, but they are still two very different ways to direct employees. Both concepts show the importance of people in an organization and consider an organization as a person in itself. An organization has its own values and acts according to them.
They continue to “live” even if the members of the organization change continuously. However, institutionalization regards rules and structures as necessary and even as substitutes for managerial discretion. It is more about controlling people to act in the desired manner and influence their behavior with direct orders or regulations. Organizational culture can be considered as a broader view: it contains all aspects that concern an organization’s members. Their minds and values also influence the rules and regulations and thus the institutional system of these companies.
Thus, a strong culture can be considered superior to an institutional system within a company as the culture influences the employees who shape the rules of a firm and is extremely difficult to change. 2. How does organizational culture help management? Organizational culture has a lot of functions and effects on a firm and its members: it helps to distinguish between different organizations; it creates a common identity for employees; culture can generate a high commitment of an organization’s members; it secures the social system within a firm; and it can be a control and directing system for employees.
For the management this means that organizational culture is a very important part of the hiring process and facilitates the selection of people if they have equal skills. An applicant should not only have the soft and hard skills (i. e. communication skills, networking competency, computer skills, business or technical knowledge etc. ), but ought to fit also into a company’s culture, thus he or she should have similar beliefs and values to those of the organization.
Moreover, a strong culture helps the management to motivate the employees for common goals and to build a strong esprit de corps which is a fundamental part of success in several departments (e. g. in the sales department as some studies show1). It also ensures that employees act in a consistent manner with the core values. The latter is particularly a very important point when employees represent their firm while talking to customers or at business conferences. As already mentioned above, organizational culture can show how employees perceive an organization’s culture.
But you have to distinguish how strong and dominant a culture is: normally there is one dominant culture within a company – this term describes core values shared by the organization’s members – but several subcultures that share the same core values but have differing departmental values. This implies that even the change from one department to another within a firm can include a change in some important values for the employee and should be wisely considered therefore. The strength of a culture describes how intensely an organization’s core values are shared and how they are shared within the firm.
Hence, in a strong culture the management doesn’t have to pay so much attention to formal rules and regulations to influence employees because the culture already creates an internal climate of behavioral control and employees acknowledge these rules already as part of the organizational culture. Therefore it is easier for the management to focus on its main tasks and not only on controlling people if there is a strong and commonly shared and accepted culture. Furthermore, an elaborate and widely shared organizational culture influences the organizational climate positively.
This in turn is motivating for employees to act in a company’s best interest: if performance is promoted, employees try to perform as well as possible; if innovation is the main target, the staff will try to enhance current products, develop new products and are willing to take more risk for that than in a climate that supports stability. It is therefore vital for the management to pursue a climate that is consistent with the company’s goals in order to achieve a maximum performance by the employees.
However, a strong organizational culture is not always beneficial and can be a serious managerial challenge. In the last couple of years the need for change management was widely recognized in academic and in practical fields2. A strong culture can be one main reason for 1 E. g. Jones, Eli, Dixon, Andrea L. , Chonko, Lawrence B. and Joseph P. Cannon, Key Accounts and Team Selling: A Review, Framework, and Research Agenda, 2005, Journal of Personal Selling & Sales Management, vol. XXV, no. 2, pp. 181-198. 2 E. g. Kotter, John P. Leading Change: Why Transformation Efforts Fail, Harvard Business Review, January 2007. this need as it often hinders innovation as the company – often influenced especially by the founder – wants to continue its business as it did before even though the environment has changed and there is an urgent need for change. Moreover, managers need to pay attention that organizational culture doesn’t lead to uniform employees – especially in big globalized corporations, diversity in age, gender, ethnical and demographical background is required to be successful all around the world.
In the case of mergers and acquisitions, management needs to be aware that the fit of organizational culture is nowadays the main challenge for success as the merger of two different cultures often fails. 3. How do you build up an organizational culture? The foundation of an organization’s culture is always laid by the entrepreneur right in the beginning of an organization. It’s the founder’s visions and beliefs that determine the goals, the values and the behavior.
And these visions can also be seen as the basic for the recruiting process in the first stages of an enterprise as only people are hired that match the founder’s ideas. These new employees are in turn influenced by the founder to “internalize their beliefs, values and assumptions”. This is how a culture is established in the first place. But the entrepreneurs and their first employees can only be seen as a first generation and it needs much more to maintain an organizational culture. The next step is the selection of new employees (they could be called second generation and so on).
They must meet the company’s requirement for skills and have consistent values with the company, too. Often the latter is a main point for hiring someone or not because it is essential for a firm living on and to have employees that can perform very well. As companies get bigger – but also in smaller firms – it becomes more important that the statements and actions of every top executive is consistent with the organizational values as this group of people is considered as role models for all employees.
Especially the coherent mix of recruiting new employees and the management acting in the sense of the organization’s culture is vital for the culture to be sustainable. Still, there is more than the founder and the recruitment process that is necessary to build up an organizational culture. The process of socialization, that describes how new members adapt to the existing organizational culture, is influenced by the selection process and the top management’s behavior. It can be divided into three main stages according to Robbins and Judge.
Before a new employee starts to work in the company, he or she already imagines what it will be like to work there and how the organizational culture will look like. This stage can be called “prearrival”. Most of the expectations come from the organization’s actions in the past, from news about the company and from own or friends’ experience. This stage shows again the importance of the recruitment process as it can be looked at as a last opportunity to inform applicants about the culture and to see if they really fit in it. The next stage “encounter” describes the start of work for new employees.
There will be a very important comparison of what the new employee expected in the prearrival stage and what reality in the organization really looks like. If these two perspectives differ too far from each other, the selection process didn’t succeed and it is vital that colleagues and team-members help the new member to acclimatize with the culture if this person is ought to stay in the company. The third and final stage of socialization – “metamorphosis” – describes the process how new employees change their behavior due to an organizational culture.
If these changes are rather small or pretty radical depends on the culture’s design: all new employees will develop in the same direction and act in a predictable way if a newcomer is strongly differentiated from the other employees, the socialization process takes place in groups, the training phase and the career steps are fixed, the new employees get a mentor assigned and the organization tries to form a newcomer’s characteristics. This is mostly in organizations that have strict rules, processes and hierarchies the case.
Even though it does not promote innovative practices, it raises employees’ commitment for the company. Therefore, every firm has to decide which shape its culture should assume dependent on the desired outcome. If the socialization process was successful, the newcomers have adapted to the formal and especially to the informal rules of the organization, they know their evaluation criteria and feel integrated within their team and the company. Consequently, the newcomer’s productivity and commitment increases and the turnover rate decreases.
Once the culture is implemented into employees, it doesn’t mean that the management doesn’t need to keep culture alive. There are several ways to motivate and influence the workers to behave in the company’s manner. First, stories build up connections between normal employees and the company’s founders, its success or its operations in the past. Stories make it easier for people to associate themselves with the firm and help the management to justify their actions. Second, rituals emphasize a corporation’s key values, goals and employees.
A ritual can be for example a song or a dance in order to motivate the employees for work. Third, an organization represents itself also by material symbols. That means that if a company attaches high importance to hierarchy and authority, the management will have big cars, big offices and a lot of privileges. If team work is in the focus, there will be more open spaces and rooms for group work. Finally, a company-own language is also a possibility to let employees identify themselves with the company.
There are many terms used only in a firm-specific context and employees feel as a real part of the company when they know them all. All mentioned points emphasize how important it is for the management to build up an organizational culture that is consistent with the company’s goals and to recruit employees who really fit into that culture. There are several ways to design the culture and thereby direct the employees, but this should always happen in terms of the desired outcome and not arbitrarily.