This article is adapted from material that will appear in “Buying a Business,” by Robert Brown and Alan S. Gutterman, which will be published in early 2013 by Aspatore Publishers.
When the discussion turns to “organizational culture” or “corporate culture,” most people have some sense or recognition of what the concept means, at least to them. A fairly simply definition, or explanation, is “the way we do things around here.”
However, not surprisingly, there is no generally accepted definition of “culture,” organizational or otherwise, and scholars and researchers from various academic disciplines have added their own nuances when suggesting a definition.
For example, experts in management science and organizational behavior and communication see organizational culture as an explicit product of the choices that a group of people makes 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.
In the “business context,” the organizational culture is an important determinant of how members deal with customers; how members treat one another as fellow members; and how leaders and managers of the organization motivate, reward and develop members.
A lot has been written about “why organizational culture matters,” and dozens of consultants have developed sophisticated tools for measuring and profiling organizational cultures so executive and managers can launch “change initiatives,” even though there is some skepticism about just how easy it is to change an organizational culture.
Identifying issues of organizational culture
If you don’t have the time for a fancy assessment, perhaps you can benefit from going through a series of questions that we’ve developed after an extensive review of the models for empirically measuring organizational culture along various bipolar scales, which are referred to as “dimensions.”
Some of these models are prescriptive and come with data claiming to indicate that certain cultures are more “effective” than others in achieving desired indicators of performance, such as profitability, productivity and customer satisfaction. For example, it has been suggested that organizations should strive for “adaptability” and focus on “listening to the marketplace” to identify appropriate changes to behaviors and processes that will make them more responsive to customer needs.
The challenge for organizational leaders, whether executives or managers, is to develop questions and categories that can be used to identify key issues associated with “organizational culture,” explore them, and take action to strengthen and reinforce desired cultural characteristics or initiate changes aimed at greater member satisfaction and enhanced organizational performance. To get you started, here’s the list we put together:
- Organizational mission and purpose: Do all of the organizational members have a clear understanding of the mission and purpose of the organization and their roles and responsibilities in achieving organizational goals? Is there a clear vision of where the organization is headed that is shared and understood by all members
- Control systems: What “control” mechanisms are used within the organization and are they “tight” (e.g., formal rules with small tolerances) or “loose”? To what extent does the technology used by the organization influence its control systems?
- Organizational responsibilities to members: What is the accepted and expected scope of the organization’s responsibilities toward its members? Are those responsibilities limited to matters directly influencing job performance, or do they extend to include responsibilities for the overall well-being of organizational members (i.e., a more “humane orientation”)? What is the perceived (and actual) role of the organizational leader in the lives of subordinates?
- Organizational identification and commitment: Do organizational members have a strong level of identity with, and commitment to, the organization, or is their level of commitment divided between the organization and other strong group affiliations, such as allegiances to professional cultures (e.g., science and engineering)?
- Communication style: What styles are used by organizational members for internal and external communications (e.g., assertive/aggressive versus cordial/tender), and how easy is it for outsiders and newcomers to be admitted and integrated into the organization? This also includes the effectiveness of communication and the degree to which accurate information is shared throughout the organization.
- Internal governance systems: Has the organization developed an internal set of governance systems that contribute to a continuous sense of integration and coordination among organizational members? These systems include core values and established norms, rituals, rules and standardized procedures to avoid uncertainty, reduce ambiguity and help everyone in making consistent decision-making and behavior.
- Strategies for coping with the external environment: Is the organization pragmatic (i.e., flexible and adaptable) in dealing with its external environment, particularly its customers (i.e., a “customer orientation”), or is the approach more rigid? To what extent do organizational members expect that it is possible to change and manage the external relationship in order to advance and achieve organizational goals and objectives (i.e., is it believed that the organization can “master” its environment through detailed planning processes, or should it simply accept the environment as it comes and strive for “harmony” with it)?
- External adaptation: What is the level of results- and outcome-orientation (i.e., quality and efficiency) within the organization? Does the organizational culture emphasize customer satisfaction and continuous innovation to meet the changing demands of the marketplace?
- Power, status and participation: What are the expectations of organizational members regarding the distribution of power and status within the organization, as well as member opportunities to participate in decision-making regarding organizational goals and objective? Organizations with higher “power distance” are more hierarchical, accept more stratification among members with regard to power and wealth and more authoritarianism with respect to decision-making, while organizations with lower “power distance” are more egalitarian and deploy flatter organizational structures.
- Individualism/collectivism: What is the relative importance of individual accomplishment or autonomy versus group-dependent accomplishment within the organization? This can be measured by looking to see how important team and group activities are in the organizational structure and processes, how rewards are allocated to members for their actions and the extent to which people work well together and help each other with difficulties.
- Gender equality and diversity: To what extent do organizational leaders and organizational practices promote gender equality and minimization of gender-role differences? Do the various employment-related practices within the organization reflect acceptance of diversity and valuing of all people regardless of race, gender, sexual orientation, religion and age?
- Time orientation: What balance does the organization strike, particularly in its reward systems, between future-oriented behaviors, such as planning and long-term investment, and short-term planning and projects?
- Encouragement and support of individual development: To what extent does the organization encourage and reward members for improving their skills and performance and for setting and achieving challenging goals with respect to excellence and quality? Factors to consider include the level of training offered to organizational members, acceptance and encouragement of “entrepreneurship” and “reasonable risk taking” in areas such as product and process development, respect for individual dignity and provisions of a good and safe working environment.
Admittedly, a lengthy list of questions is somewhat daunting, and it is sometimes simpler and quicker to ask organizational members how they would place the organization within broad categories — such as a “personal” culture (i.e., does the workplace feel and act “like a family”); an “entrepreneurial and risk-taking” culture, such as the atmosphere commonly found in new firms targeting innovations in technology; a “competitive and achievement-oriented” culture; or a “controlled and structured” culture.
An alternative list of categories that would appear to be readily identifiable and understandable to respondents would include people orientation (supportiveness), innovation, competitiveness/aggressiveness, performance (outcome) orientation, stability, team orientation, detail orientation, emphasis on rewards and social responsibility.
One encouraging note in an increasingly global economy is that new research appears to support the proposition that many of the dimensions of organizational culture underlying the list above can be effectively used and measured in a variety of national settings.
For example, organizational culture in China has been reliably measured and described using a mix of internal integration and external adaptation values that would be familiar to analysts of organizational culture in the West; however, it is still necessary to “localize” the items associated with each of these values to obtain results that are meaningful for organizational managers interested in changing aspects of the organizational culture or for smoothing the integration of members from different countries brought together through merger.
Robert Brown has closely with companies as an investment banker and attorney, serving both in-house and as an outside advisor, for over 30 years, and is a partner of Bingham Greenebaum Doll LLP. He advises on investments, mergers, acquisitions and divestitures for U.S. companies and foreign companies’ operations in the U.S., including manufacturing, distribution, sales, retail and wholesale operations. Brown is the author of “Corporate Counsel’s Guide to Doing Business in South Korea,” co-author of “Corporate Counsel’s Guide to Doing Business in Vietnam” and co-author of “Going Global: A Guide to Building an International Business.”
Alan S. Gutterman is the founder and principal of Gutterman Law & Business, a leading provider of timely and practical legal and business information for attorneys, other professionals and executives in the form of books, online content, newsletters, programs, training and consulting services. Gutterman has over three decades of experience as a partner and senior counsel with internationally recognized law firms counseling small and large business enterprises and has also held senior management positions with several technology-based businesses. He has published numerous books and articles on a range of legal and business topics.