Organizational Culture

A Guide for Growth-Oriented Entrepreneurs

Sample Chapter: Introduction to Organizational Culture

GROWTH-ORIENTED ENTREPRENEURSHIP PROJECT

2015-1 Edition Dr. Alan S. Gutterman Growth-Oriented Entrepreneur’s Guide to Organizational Culture

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The Growth-Oriented Entrepreneurship Project (www.growthentrepreneurship.org) engages in and promotes research, education and training activities relating to entrepreneurial ventures launched with the intent to achieve significant growth in scale and value creation through the development of innovative products or services which form the basis for a successful international business. In furtherance of its mission the Project is involved in the preparation and distribution of Guides for Growth-Oriented Entrepreneurs covering Entrepreneurship, Leadership, Management, Organizational Design, Organizational Culture, Strategic Planning, Governance, Compliance, Finance, Human Resources, Product Development and Commercialization, Technology Management, Globalization, and Managing Growth and Change.

About the Author

Dr. Alan S. Gutterman is the founder and director of the Growth-Oriented Entrepreneurship Project and the founder and director of the Business Counselor Institute (www.businesscounselorinstitute.org), which distributes Dr. Gutterman’s widely-recognized portfolio of timely and practical legal and business information for attorneys, other professionals and executives in the form of books, online content, webinars, videos, podcasts, newsletters and training programs. Dr. Gutterman has over three decades of experience as a partner and senior counsel with internationally recognized law firms counseling small and large business enterprises in the areas of general corporate and securities matters, venture capital, mergers and acquisitions, international law and transactions, strategic business alliances, technology transfers and intellectual property, and has also held senior management positions with several technology-based businesses including service as the chief legal officer of a leading international distributor of IT products headquartered in Silicon Valley and as the chief operating officer of an emerging broadband media company. He received his A.B., M.B.A., and J.D. from the University of California at Berkeley, a D.B.A. from Golden Gate University, and a Ph. D. from the University of Cambridge. For more information about Dr. Gutterman, his publications, the Growth-Oriented Entrepreneurship Project or the Business Counselor Institute, please visit www.alangutterman.com and/or contact him directly at [email protected].

Growth-Oriented Entrepreneur’s Guide to Organizational Culture Contents

PART I ORGANIZATIONAL CULTURE

Preface

Chapter 1 Introduction to Organizational Culture

Chapter 2 Definitions and Models of Organizational Culture

Chapter 3 Significance of Organizational Culture

Chapter 4 Elements of Organizational Culture

Chapter 5 Determinants of Organizational Culture

Chapter 6 Dimensions of Organizational Culture

Chapter 7 Typologies of Organizational Culture

Chapter 8 Managing Organizational Culture

PART II CROSS-CULTURAL STUDIES OF ORGANIZATIONAL CULTURE

Chapter 1 Cross-Cultural Organizational Culture Research

Chapter 2 Country and Regional Profiles

This is a sample chapter from Part I of this Guide and you can get your full copy of the Guide and/or other sample chapters by contacting the Growth-Oriented Entrepreneurship Project (www.growthentrepreneurship.org) at [email protected]. The Project also prepares and distributes other Guides for Growth-Oriented Entrepreneurs covering Entrepreneurship, Leadership, Management, Organizational Design, Strategic Planning, Governance, Compliance, Finance, Human Resources, Product Development and Commercialization, Technology Management, Globalization, and Managing Growth and Change.

Attorneys acting as business counselors to growth-oriented entrepreneurs who are interested in forms, commentaries and other practice tools relating to the subject matter of this chapter should also contact Dr. Gutterman at the e-mail address provided above. Growth- Organizational Culture (2015-1) Part I Organizational Culture Oriented Entrepreneur’s Guide to – PART I 1 ORGANIZATIONAL CULTURE

Preface

A number of definitions of organizational culture have been offered; however, if managers and employees are consulted they may simply respond that culture is “how we do things around here”. There is obviously truth to such a statement but it would be a mistake to ignore the breadth and scope of the issues that are influenced by an organization’s cultural norms and values—how activities within the organization are carried out, how members communicate with one another, who is accepted into the organization and who is ostracized, and what is the organization’s overall morale. The culture of a particular organization is created and maintained by its members, particularly the founders and senior managers, based on a variety of influencing factors—both external and internal—and they are also the ones who can change and transform the culture when they are convinced that such actions are necessary in light of the then- current environment that the organization is facing.

Organizational culture should not be underestimated and, in fact, in most cases it is a more influential force than any other set of internal laws—rules and procedures— applicable to the members of the organization. Research has indicated that the culture of an organization has a strong influence on how the organization tackles problems and questions, sets strategy and creates the structures that determine the work activities and relationships of organizational members and also on how members behave when carrying out their organizational activities. There is also evidence that organizational culture plays a big part in defining the competitive position of the organization in its environment and the way in which the organization is perceived by external stakeholders. Organizational culture is an important determinant of the level of risk-taking that a firm is willing to tolerate, and organizational culture can itself become a core competency for an organization and can be used to distinguish it from competitors in the minds of customers and prospective members.

While the importance of organizational culture has been widely recognized, it is a difficult and complex subject and careful review and analysis is required in order to identify the essential cultural values and norms and determine how they impact the behavior of managers and employees. There is no single culture that is universally appropriate for all organizations and there is clearly substantial diversity with respect to the dominant cultural attributes among successful and effective organizations. This Part provides an introduction to the complex topic of organizational culture, which is one of the key elements of organizational design and a valuable tool for controlling and coordinating the activities of organizational members (e.g., executives, managers and employees) and providing them with incentives to act in a manner that is consistent with achievement of the organizational goals and objectives. The Part includes a broad array of definitions of organizational culture and a discussion of the significant role that culture Growth- Organizational Culture (2015-1) Part I Organizational Culture Oriented Entrepreneur’s Guide to plays in the day-to-day operations of the organization. Several commonly– recognized elements of organizational culture are defined and described including values and norms 2 and cultural forms (i.e., stories, ceremonies, language, symbols and rituals). Various determinants of organizational culture are discussed including the personal and professional characteristics of organizational members, organizational ethics, property rights, organizational structure, control systems and power structures. Two of the chapters in the Part focus on identifying the dimensions of organizational culture and describes various proposed models or typologies of dimensions of organizational cultures, including several that have attempted to select and use the dimensions most often relied upon by other researchers and models that have been created to assist managers in identifying characteristics of organizational cultures that have been identified as being strongly related to effective organizational performance.

The Part also includes a discussion of how differences in organizational culture between parties to a merger should be identified and managed in ways that will enhance the chances the combination of human resources following the merger will be successful. Also covered are the attempts that have been made to create meaningful typologies of organizational culture by identifying pre-defined key characteristics that can be used to divide and cluster organizations into certain categories as a means for describing certain aggregates of cultural characteristics and facilitating comparisons among organizations. Finally, other topics covered in the Part include socialization processes; subcultures; managing and reinforcing cultural characteristics; and evaluating and transforming organizational culture.

Chapter 1 Introduction to Organizational Culture

§1:1 Introduction

In addition to their formal organizational structure and the rules and standard operating procedures used to support and operate the structure, organizations also rely heavily on their organizational culture as an important tool in controlling and coordinating the activities of their members (e.g., executive, managers and employees), formulating communications among those members, and providing incentives and reasons for them to act in ways that the leaders of the organization considers to be necessary in order to achieve and sustain organizational effectiveness and comply with the requirements and expectations of the organization’s external environment. A number of definitions of organizational culture have been offered; however, if managers and employees are consulted they may simply respond that culture is “how we do things around here”. There is obviously truth to such a statement but it would be a mistake to ignore the breadth and scope of the issues that are influenced by cultural norms and values—how activities within the organization are carried out, how members communicate with one another, who is accepted into the organization and who is ostracized, and what is the organization’s overall morale. The culture of a particular organization is created and maintained by its members, particularly the founders and senior managers, based on a Growth- Organizational Culture (2015-1) Part I Organizational Culture Oriented Entrepreneur’s Guide to variety of influencing factors and they are also the ones who can change– and transform the culture when they are convinced that such actions are necessary in light of the then- 3 current environment that the organization is facing. Organizational culture should not be underestimated and, in fact, in most cases it is a stronger force than any other set of internal laws—rules and procedures—applicable to the members of the organization.

§1:2 Definitions of organizational culture

Not surprisingly, there is no generally accepted definition of “organizational culture” and scholars from a diverse range of disciplines such as sociology and anthropology have treated culture as something that is implicit in social life and which emerges over extended periods of time as individuals interact with one another and begin to organize themselves as identifiable social groups (e.g., tribes, communities, companies, non-profit organizations, states and countries). Experts in management science and organizational behavior and communication see organization culture as an explicit product of the choices that a group of people make with respect to accepted behavior as they interact with one another and key stakeholders outside of the organization (e.g., customers, suppliers and regulators) and attempt to develop ways to confront their broader social environment.1 Hill and Jones offered a definition of organizational culture as "the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization".2 Schein defined organizational culture as: "[a] pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way you perceive, think, and feel in relation to those problems".3

§1:3 Approaches to studying organizational culture

Dauber et al. noted that the concept of organizational culture has roots in cultural theory and the field of cultural studies and reported that organizational culture has been studied as a construct separate and distinguishable from societal culture for several decades and by a variety of different disciplines, each of which bring their own unique approach and emphasis to the subject.4 They classified the research approaches into three broad categories: the dimensions approach, which borrowed heavily from work done by a number of different researchers studying societal culture; the interrelated structure approach, a popular example of which is the model of organizational culture developed by Schein that includes three levels: basic underlying assumptions, espoused values and artifacts; and the typology approach, which attempts to divide and cluster organizations into certain categories based on pre-defined key characteristics and then assign

1 R. Wuthnow and M. Witten, New directions in the study of culture. Annual Review of Sociology 14: 50- 51 (1988); E. Schein, Organizational Culture and Leadership (San Francisco, CA: Jossey-Bass, 1988). 2 C. Hill and G. Jones, Strategic Management (Boston, MA: Houghton Mifflin, 2001). 3 E. Schein, Organizational Culture and Leadership (3rd Ed.) (San Francisco, CA: Jossey-Bass, 1985-2005). 4 D. Dauber, G. Fink and M. Yolles, “A Configuration Model of Organizational Culture”, SAGE Open 2012, Originally Published on 22 March 2012, http://sgo.sagepub.com/content/2/1/2158244012441482. Growth- Organizational Culture (2015-1) Part I Organizational Culture Oriented Entrepreneur’s Guide to organizational culture profiles to each category (e.g., “strong”, “weak”, –“bureaucratic”, ‘innovative”, “people-oriented” or “team-oriented”). Dauber et al. recognized the 4 influence of research on societal culture on the study of organizational culture; however, they emphasized that organizational values were quite distinguishable from societal values and that while organizational values were influenced by the values of the society in which they were operated identifying organizational culture required attentiveness to the personalities and value preferences of the organizational members and their specific tasks and goals within the organization.

§1:4 --Dimensions of organizational culture

The dimensions approach was described by Dauber et al. as including efforts focused “on measuring organizational culture empirically along (in some cases bipolar) scales that can be related to other, most dependent, variables of interest”.5 The dimensions approach has become extremely popular for research, analysis and diagnosis in the area of societal culture and its influence on the management of organizations and the behaviors of organizational members. Researchers have observed that this phenomenon can partly be “attributed to a simplification of the approach to culture”. It is, therefore, not surprising that attempts have been made to identify dimensions of organizational culture and, as part of that process, gauge the extent to which dimensions of societal culture can also be applied to analysis at the organizational level. The consensus seems to be that while organizational values are affected by societal values, and the personal values of organizational members that inevitably come into play as they go about their day-to-day activities are also influenced by societal values, organizational values differ significantly from national or societal values and any dimensional model of organizational culture would best be focused on the tasks required, and the actual practices relating to those tasks, of organizational members.6

A wide range of models of dimensions of organizational cultures have been proposed, often accompanied by suggestions on how organizational leaders can use the various dimensional models in connection with their efforts to assess and evaluate their organizational cultures and implement changes to those cultures that might lead to improvements in productivity, efficiency and other tangible measures of “organizational performance”. Many of these models were developed by Western researchers looking at organizational activities and behaviors within firms launched and operating in the developed world. Among those researchers that have proposed models intended to have applicability across all types of societies—developed and developing—the ideas of Hofstede and the research team overseeing the Global Leadership and Organizational Behavior Effectiveness project, commonly referred to as “GLOBE”, have received most of the attention.

5 Id. at 2. 6 Id. at 3. See L. Sagiv and S. Schwartz, “Cultural values in organisations: Insights for Europe”, European Journal of International Management, 1 (2007), 176-190 (arguing that organizational culture is influenced by the “surrounding society” (societal culture), “personal value priorities of organizational members” and “the nature of the organization’s primary tasks”). For a detailed discussion of attempts to identify dimensions of organizational culture, see the chapter on “Dimensions of Organizational Culture” in this Guide. Growth- Organizational Culture (2015-1) Part I Organizational Culture Oriented Entrepreneur’s Guide to – Hofstede, who is best known for his work in studying how national and regional cultural 5 characteristics (i.e., “societal culture”) impact organizational behavior, also conducted smaller studies that focused on organizational culture and identified the following dimensions of organizational culture that could be used a descriptive framework for organizational cultures: process-oriented versus results-oriented; job-oriented versus employee-oriented; professional versus parochial; open systems versus closed systems; tight versus loose control; and pragmatic (flexible) versus normative (rigid).7 Hofstede acknowledged that his specific research base (20 organizations or parts of organizations, ranging from a toy manufacturing company to municipal police corps, in the Netherlands and Denmark) was too narrow to credibly argue for the universal validity and sufficiency of the six dimensions that he identified and noted that additional dimensions may be necessary or some of the six may be less useful in other countries and/or when analyzing other types of organizations. In fact, while the organizations that he studied did evidence widely divergent perceptions of daily practices he was only able to uncover “modest” differences in values after taking into account the effect of non-organizational factors such as nationality, education, age and gender.

The researchers involved in the GLOBE project on cross-cultural aspects of leadership assessed nine cultural dimensions derived from a number of sources including Hofstede and others identified in an extensive literature review.8 In contrast to Hofstede, the GLOBE researchers worked from the perspective that “societal and organizational cultures can be described using the same dimensions, recognizing that these dimensions can have somewhat different psychological meanings at the different levels of analysis”.9 However, they conceded that when organizational, as opposed to societal, culture was the primary subject of interest “there is no need to constrain the dimensions of organizational culture to map onto the dimensions of societal culture” and then reported that exploratory factor analyses of the responses to the questions on the GLOBE questionnaire to organizational level items led them to identify the following, smaller, set of factors that might be more appropriate when attempting to construct a list of organizational culture dimensions: organizational collectivism/commitment; humane orientation; assertiveness; a combination of uncertainty avoidance and future orientation; gender egalitarianism; and individualism collectivism.10

7 G. Hofstede, B. Neuijen, D. Ohayv and G. Sanders, Measuring Organizational Cultures: A Qualitative and Quantitative Study across Twenty Cases, Administrative Science Quarterly, 35 (1990), 286. 8 For an interesting and detailed overview of the development of the GLOBE project and the organizational processes used to collect and analyze the information, see R. House, P. Hanges, S. Ruiz-Quintanilla, P. Dorfman, M. Javidan and M. Dickson, Cultural Influences on Leadership and Organizations, in Advances in Global Leadership, Volume I 171 (1999). For a fuller discussion of the GLOBE project, see “Growth- Oriented Entrepreneur’s Guide to Globalization” prepared and distributed by the Growth-Oriented Entrepreneurship Project (www.growthentrepreneurship.org). 9 M. Dickson, R. Aditya and J. Chhokar, Definition and Interpretation in Cross-Cultural Organizational Research: Some Pointers from the GLOBE Research Program, in N. Ashkanasy, C. Wilderom and M. Peterson (Eds.), Handbook of Organizational Culture & Climate 447, 453 (2000). 10 Id. at 453-454. Growth- Organizational Culture (2015-1) Part I Organizational Culture Oriented Entrepreneur’s Guide to In addition to the models developed by Hofstede and the GLOBE researchers,– Sagiv and Schwartz argued for a framework that included each of the following cultural dimensions 6 as influencers of organizational behaviors: harmony, embeddedness, hierarchy, mastery, affective autonomy, intellectual autonomy and egalitarianism.11 These dimensions were expressed in bipolar fashion by linking embeddedness and autonomy; mastery and harmony; and hierarchy and egalitarianism. Chatterjee et al., who were specifically interested in developing measurements of corporate culture to be used to determine the extent to which perceptions of cultural differences of the top management teams of parties to an acquisition transaction (e.g., a merger) related to stock market gains of the securities of the acquirer, suggested a group of dimensions of organizational culture that included innovation and action orientation; risk-taking; lateral integration; top management contact; autonomy and decision making; performance orientation; and reward orientation.12 Based on his studies of hundreds of companies around the world, Denison concluded that four cultural traits or dimensions—adaptability, mission, involvement and consistency—each had a significant influence on an array of organizational performance measures including sales growth, return on assets, quality, profits, employee satisfaction and overall performance.13 Researchers working on the Organizational Culture Profile project felt that it was possible and valuable to create profiles of organizational culture that incorporated measures on multiple dimensions that included supportiveness, innovation, competitiveness, performance orientation, stability, emphasis on rewards, and social responsibility.14

§1:5 --Interrelated structure approach

As for the interrelated structure approach, Dauber et al. described it as “concentrate[ing] on linking the concept of organizational culture to other constructs or characteristics of organizations and less to single variables”.15 A popular example of this approach is the model of organizational culture developed by Schein, who began with a definition of “culture” as “a pattern of basic assumptions – invented, discovered or developed by a given group as it learns to cope with problems of external adaptation and internal integration – that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think and feel in relation to those problems”.16 He then fleshed out this definition by suggesting that culture could be

11 See, e.g., L. Sagiv and S. Schwartz, “Cultural values in organisations: Insights for Europe”, European Journal of International Management, 1 (2007), 176-190. 12 See S. Chatterjee, M. Lubatkin, D. Schweiger and Y. Weber, “Cultural differences and shareholder value in related mergers: Linking equity and human capital”, Strategic Management Journal, 13 (1992), 319-334, 324. 13 For descriptions of the four dimensions of Denison’s model of organizational culture, see Denison, Denison Organizational Culture Model, See also W. Mobley, L. Wang and K. Fang, Organizational Culture: Measuring and Developing It in Your Organization, The Link (China Europe International Business School), 11 (Summer 2005), 13. http://www.denisonconsulting.com/model-surveys/denison-model/organizational-culture. 14 See J. Sarros, J. Gray and I. Densten, The Next Generation of the Organizational Culture Profile, Monash University Faculty of Business and Economics Working Paper Series, 15/03 (April 2003). 15 D. Dauber, G. Fink and M. Yolles, “A Configuration Model of Organizational Culture”, SAGE Open 2012, Originally Published on 22 March 2012, http://sgo.sagepub.com/content/2/1/2158244012441482, 2. 16 E. Schein, Organizational Culture and Leadership (San Francisco, CA: Jossey-Bass, 1992), 16-17. Growth- Organizational Culture (2015-1) Part I Organizational Culture Oriented Entrepreneur’s Guide to understood by dividing it into three levels or elements. At the broadest and– perhaps most abstract level are “basic assumptions”, which are the most difficult to identify and include 7 the organization’s tacit core beliefs, values and assumptions that drive the decisions of organizational members with respect to their behaviors and actions. The next level is “espoused values”, such as organizational slogans and other visible expressions of organizational mission and the established rules of behavior or standards of conduct, often referred to as “norms”, which exist within an organization to control the behavior of its members. Norms, both formal and informal, contribute to the orderliness and predictability of the day-to-day activities of the organization and are learned through various socialization processes. Norms create strong bonds within the organization and members are likely to feel intense guilt or shame if they should breach their obligations. The third level consists of the various visible artifacts and creations, sometimes referred to as “cultural forms,” including rites and rituals, myths and stories, symbols, language, gestures, dress codes, artifacts physical layout of work spaces and other elements of the physical surroundings, used by organizations as linking mechanisms to develop networks of understanding among members and communicate the prevailing cultural values and norms of the organization. Taken together, these components provide guidelines that ease the burden on members as they go about their activities within the organization.

§1:6 --Typologies of organizational culture

Typology approaches identify pre-defined key characteristics that can be used to divide and cluster organizations into certain categories, and a number of attempts have been made to identify categories of organizational culture as a means for describing certain aggregates of cultural characteristics and facilitating comparisons among organizations.17 Perhaps the simplest typology of organizational culture relies on classification on a continuum from “strong” to “weak” and a key determinant of where an organization falls on this continuum is the degree of homogeneity. A strong culture is one where the mutually agreed and understood values and norms have an overriding influence on the ways in which members conduct their activities on a day-to-day basis and interact with external stakeholders. On the other hand, if the culture is weak it provides little or no guidance to members and control of behavior is exercised primarily through formal written guidelines and procedures. Deal and Kennedy developed four categories of organizational culture based on how the speed of feedback given to members for their actions and the level of risk and uncertainty associated with the activities of the organization. For example, at one extreme is the “tough-guy macho” culture, typical of stock brokers during the trading day, in which feedback on actions comes quickly, members can anticipate high rewards for the right decision and stress levels are quite

17 D. Dauber, G. Fink and M. Yolles, “A Configuration Model of Organizational Culture”, SAGE Open 2012, Originally Published on 22 March 2012, http://sgo.sagepub.com/content/2/1/2158244012441482, 2. Attempts to identify categories of organizational culture and create typologies have been criticized. One researcher complained that “the allocation of organizations to types often is not clear-cut. Because of their a priori nature and frequent lack of specified empirical referents and cutoff points, typologies are difficult to use empirically.” See A. Meyer, A. Tsui and C. Hinings, “Configurational approaches to organizational analysis”, Academy of Management Journal, 36 (1993), 1175-1195, 1182. For further discussion of typologies of organizational culture, see the chapter on “Typologies of Organizational Culture” in this Guide. Growth- Organizational Culture (2015-1) Part I Organizational Culture Oriented Entrepreneur’s Guide to high. At the other extreme would be organizational cultures that stress– learning and following a “process” and in which members get little or no feedback and tend to focus 8 on how things are done (i.e., process) as opposed to the value of the end product of all of the activities. Process-based organizations are often referred to as “bureaucracies.”18

Wallach argued for a typology that included the following three separate, and measurable, organizational cultures: bureaucratic, innovative and supportive.19 Handy described four different categories of organizational culture identified by Roger Harrison: power cultures (high concentration of authority among a relatively few individuals), role cultures (highly organized structure with authority based on position), task cultures (emphasis on specialization and expertise), and person cultures (individuals believe they are more valuable than the organization).20 Bauer and Erdogan used the dimensions associated with the well-known Organizational Culture Profile to suggest a typology of seven distinctive organizational cultures: innovative, aggressive, outcome-oriented, stable, people-oriented, team-oriented and detailed-oriented.21

Researchers have also embraced the “competing values” scale generally associated with the work of Quinn and Rohrbaugh22 to propose a model that includes the following four types of organizational culture: an “adhocracy” culture (flexible and externally focused) which stresses creativity, adaptability and change; a “hierarchy” culture (stable and internally focused) which focuses on stability, order, rules and regulations and features hierarchical organizational structures with hierarchical leaders, well-defined policies and procedures and close oversight by organizational leaders over all aspects of operational activities; a “market” culture (stable and externally focused) which is concerned with planning, efficiency and attainment of well-defined goals related to the organization's position in its competitive environment; and a “clan” culture (flexible and internally focused) which is focused on flexibility and developing human potential through consensus building and relies on rules that are typically communicated socially and clan leaders who act as supportive facilitators and assume a “parental role”.23

18 T. Deal and A. Kennedy, Corporate Cultures: The Rites and Rituals of Corporate Life, (Harmondsworth: Penguin Books, 1982). 19 E. Wallach, Individuals and Organizations: The Cultural Match, Training and Development Journal, 37 (1983), 29. 20 C. Handy, Understanding Organizations (3d Ed.) (1985) (citing R. Harrison, Understanding Your Organization’s Character, 50 Harvard Business Review 119 (1972). 21 T. Bauer and B. Erdogan, Organizational Behavior, v. 1.0, Chapter 15, Flat World Knowledge, http://catalog.flatworldknowledge.com/bookhub/3?e=bauer-ch15_s02. For further discussion of the Organizational Culture Profile, see the chapter on “Typologies of Organizational Culture” in this Guide. 22 See R. Quinn and J. Rohrbaugh, A Competing Values Approach to Organizational Effectiveness, 5 Public Productivity Review 122 (1981); and R. Quinn and J. Rohrbaugh, A Spatial Model of Effectiveness Criteria: Towards a Competing Values Approach to Organizational Analysis, 29 Management Science 363 (1983). 23 Descriptions adapted from K. Cameron, Measuring Organizational Effectiveness in Institutions of Higher Education. 23 Administrative Science Quarterly 604 (1978) (as described in K. Chadwick, T. Barnett and S. Dwyer, Entrepreneurial Orientation, Organizational Culture, and Firm Performance: An Empirical Study in the Banking Industry, 6(3) Journal of Management and Applied Entrepreneurship 3 (2001) and “Competing Values Framework.” ChangingMinds.org. Web. No Date. Growth- Organizational Culture (2015-1) Part I Organizational Culture Oriented Entrepreneur’s Guide to Trompenaars supplemented his well-known research on societal cultures24– by examining organizational culture and suggested that it was possible to identify four “types” of 9 organizational or corporate culture based on the premise that the following aspects of organizational structure were especially important in determining the culture: the general relationship between employees and their organization; the vertical or hierarchical system of authority defining superiors and subordinates; and the general views of employees regarding the destiny, purpose and goals of the organization and their specific roles and places within those views. 25 Trompenaars argued that two dimensions, incorporating the aforementioned aspects of organizational structure, were needed in order to distinguish different organizational cultures: equality-hierarchy and orientation to person-orientation to task. This allowed him to generate four quadrants, each of which representing a specific type of organizational culture: the “family”, the “Eiffel Tower”, the “guided missile” and, finally, the “incubator”.26 According to Trompenaars each of the types of organizational culture that they had identified could be distinguished from one another with respect to several important elements and he argued that there were real and identifiable differences among them with respect to how employees related to one another (e.g., degree of formality); how employees viewed authority (e.g., egalitarianism versus hierarchy); ways of thinking and learning; attitudes toward people; ways of changing; the methods that would be most effective for motivating and rewarding; and the processes used for delivering criticism and resolving conflicts and disputes.27

§1:7 Determinants of organizational culture

Behind any model of organizational culture is an attempt to identify the most important influences on, and determinants of, organizational culture. A great deal of focus has been placed on understanding the external environment in which the organization operates, technology, industry factors and societal culture (both for its direct impact on the organization and its indirect impact through the personal values that organizational members bring with them as a result of growing up within the societal culture). In fact, Schein’s definition of organizational culture suggests that the basic assumptions underlying an organization’s culture can be identified and understood by looking closely

24 For discussion of the work of Trompenaars and his colleague, Hampdon-Turner, on societal cultures, including their “Seven Dimensions of Culture” model, see F. Trompenaars and C. Hampden-Turner, Riding the Waves of Culture: Understanding Cultural Diversity in Global Business (2nd Ed.) (1998) and “Growth- Oriented Entrepreneur’s Guide to Globalization” prepared and distributed by the Growth-Oriented Entrepreneurship Project (www.growthentrepreneurship.org). 25 F. Trompenaars and C. Hampden-Turner, Riding the Waves of Culture: Understanding Cultural Diversity in Global Business (2nd Ed.) 161 (1998). 26 Id. at 162. For further discussion of these “ideal types” of organizational cultures, see the chapter on “Typologies of Organizational Culture” in this Guide. 27 Trompenaars believed that countries could actually be classified into one of the four types of organizational cultures in his suggested model and set out to do so by compiling a “database of corporate culture” based on responses received from 42 countries to questionnaires that “deal[t] with general concepts of egalitarianism versus hierarchy, degrees of formality, different forms of conflict resolution, learning and so on” and asked respondents to “choose between four possible descriptions of their company” that corresponded to the four types of organizational cultures in the Trompenaars model. F. Trompenaars and C. Hampden-Turner, Riding the Waves of Culture: Understanding Cultural Diversity in Global Business (2nd Ed.) 182 (1998), 182. Growth- Organizational Culture (2015-1) Part I Organizational Culture Oriented Entrepreneur’s Guide to at the “problems of external adaptation and internal integration” that the organization– has confronted and overcome, which means that learning about the organizational history, 10 particularly the way it is communicated to new members during their orientation process, is extremely important in assessing its culture.28

Identifying the determinants of organizational culture is obviously a fundamental endeavor when attempting to make comparisons of organizational cultures; however, the complexity of culture makes it impossible to identify with certainty all of the factors that determine the culture of a particular organization. Jones argued that specific determinants of organizational culture include such things as the personal and professional characteristics of the organizational members, particularly the founders; organizational ethics; the manner in which property rights are created and allocated within the organization; the structure used by the organization for communication and coordination of activities; the systems used by the organization to control its internal activities; and the power structures within the organization.29 In many cases the organizational culture is also heavily influenced by the characteristics of the industry in which the organization operates and organizations within a particular industry share the cultural characteristics that are most appropriate for survival and growth in the face of the competition and other environmental factors that they are facing.30 Other factors that are likely contributors to the development of organizational culture include the history and background of the organization; the size and evolution of growth of the organization; societal culture; the function and purpose of the organization (i.e., organizational tasks and the nature of the organization’s business, clients and operating processes); the technology used in the conduct of the organization’s activities (i.e., job design, complexity and interdependence); the goals and objectives of the organization; training, appraisal and rewards systems; and the leadership and communications skills of those at the top of the organizational hierarchy.31

While it may be true that organizational culture develops as a response to, and way of coping with, the environment in which the organization must operate and the

28 E. Beaudan and G. Smith, “Corporate culture: asset or liability”, Ivey Business Journal, 64(4) (2000), 29- 33. 29 See G. Jones, Organizational Theory, Design and Change (5th Ed) (Old Tappan N.J.: Prentice Hall, 2007), 187-194. 30 G. Gordon, “Industry Determinants of Organizational Culture”, Academy of Management Review: 16-2 (1991), 396-415. See also K. Haddad, C. Chow, G. Gordon, R. Hwang and A. Wu, Cross-National Differences in Corporate Cultures and the Culture-Performance Relationship: a Two-Country Comparison, International Journal of Business, 4(2) (1999), 81-112, 82-83 (“. . . Because industries place different demands and constraints on their members, companies in the same industry tend to develop common responses (an "industry recipe") to the managerial uncertainties that they face. That corporate culture differs systematically across industries has been empirically demonstrated in a number of studies (Citations omitted).). 31 See, for example, the discussion of antecedents of organizational culture in R. Cooke and J. Szumal, “Using the Organizational Culture Inventory to Understand the Operating Cultures of Organizations” in N. Ashkanasy, C. Wilderom and M. Peterson (Eds.), Handbook of Organizational Culture & Climate (Thousand Oaks, CA: Sage Publications, Inc., 2000), 147-162, 151. For a fuller discussion of the determinants of organizational culture, see the chapter on “Determinants of Organizational Culture” in this Guide. Growth- Organizational Culture (2015-1) Part I Organizational Culture Oriented Entrepreneur’s Guide to expectations of the various external stakeholders that support and depend– on the organization, in many ways the culture of a particular organization is created and 11 maintained by its members, particularly the founders and senior managers, and they are also the ones who are best positioned to change and transform the culture when they are convinced that such actions are necessary in light of the then-current environment that the organization is facing. The influence of the organizational founders on organizational culture is substantial and persists long after those persons have ceased to be actively involved with the organization.

It should not be forgotten, however, that while founders and senior managers can attempt to influence organizational culture through their ideas, visions and personality traits, the culture itself will not develop unless and until the organization and its members have gone through a variety of crises of growth and survival and identified the best solutions to deal with adapting to the organization's external environment and established appropriate rules for all of the internal relationships within the organization. Schein observed that organizational culture is based on “a pattern of assumptions that has worked well enough to be considered valid ….”32 In other words, organizational culture ultimately emerges from a complex, and often unpredictable, “interaction between (1) the assumptions and theories that founders bring to the group initially and (2) what the group learns subsequently from its own experiences.”33

§1:8 Significance of organizational culture

In order for culture to have the desired impact it is important for the founders and senior managers of an organization to understand as early as possible that culture is one of the fundamental tools available to them to create a working environment in which organizational members are encouraged and motivated to cooperatively engage in collaborative behavior. Moreover, a failure of organizational leaders to understand the cultural values and norms that exist within the organization can doom their attempts to change the goals and strategy of the organization if the proposed changes are not consistent with the culture.

Research has indicated that the culture of an organization has a strong influence on how the organization tackles problems and questions, sets strategy and creates the structures that determine the work activities and relationships of organizational members and also on how members behave when carrying out their organizational activities.34 There is also evidence that organizational culture plays a big part in defining the competitive position of the organization in its environment and the way in which the organization is perceived by external stakeholders. For example, it has been argued that organizational culture is a key factor in whether or not an organization can achieve and maintain an entrepreneurial orientation35, which has been defined as a strategic focus on risk-taking, proactive pursuit

32 E. Schein, The Role of the Founder in Creating Organizational Culture, in Organizational Dynamics 348 (1983). 33 Id. at 349. 34 O. Recklies, Mergers and Corporate Culture, http://www.themanager.org/pdf/Merger_Culture.PDF 35 J. Cornwall and B. Perlman, Organizational Entrepreneurship (Homewood, IL: Richard D. Irwin, 1990). Growth- Organizational Culture (2015-1) Part I Organizational Culture Oriented Entrepreneur’s Guide to of new opportunities and new product or process innovation.36 Organizational– culture is an important determinant of the level of risk-taking that a firm is willing to tolerate.37 12 Organizational culture can itself become a core competency for an organization and can be used to distinguish it from competitors in the minds of customers. Good examples are firms such as Disney and Southwest Airlines, each of which are widely known as companies with an innovative organizational culture that continuously works to improve the experience that customers have with their activities and their members. Culture should not be underestimated and, in fact, in most cases the organizational culture is a stronger force than any other set of internal laws--rules and procedures--applicable to the members of the organization.

While the importance of organizational culture has been widely recognized, it is a difficult and complex subject and careful review and analysis is required in order to identify the essential cultural values and norms and determine how they impact the behavior of managers and employees. There is no single culture that is universally appropriate for all organizations and there is clearly substantial diversity with respect to the dominant cultural attributes among successful and effective organizations. For example, the core cultural values at a relatively conservative company, such as General Motors in the early 1980s, might include loyalty, hierarchy, and conformity and expected behaviors from managers and employees in that environment might include deferential respect for authority; open expressions of loyalty to the company and strong discouragement of opposition; and conservative choices with respect to dress and office furnishings. In contrast, an upstart company created by founders disenchanted with the culture and practices of traditional companies might emphasize a very different set of core values such as rewarding productivity and performance over acts of deference and conformity, encouraging employees to act independently and challenge decisions and beliefs rather than simply continue to act based on blind loyalty, adopting contemporary styles of dress and office decoration, and designing and maintaining flat organizational structures to facilitate rapid decision making.38 In addition, a strong culture is not necessary better or more effective than a weak one. The real point of measurement is whether or not the culture fits well with the overall strategic goals and objectives of the organization and the key challenge for senior management is identifying the particular cultural elements that are most important and focusing on how appropriate changes can be made to drive the organization in the direction necessary to execute new strategies.

36 D. Miller, The Correlates of Entrepreneurship in Three Types of Firms, Management Science, 29, 770- 791. 37 R. Burgelman and L. Sayles, Inside Corporate Innovation: Strategy, Structure and Managerial Skills (1986). 38 J. Martin and C. Siehl, “Organizational culture and counterculture: an uneasy symbiosis”, Organizational Dynamics, 12(2) (1983), 52–64.