How is organisational culture formed and what impact does it have?

5 Minutes
Organisational culture embodies the collective values, beliefs, and principles that guide the behaviour of an organisation's members.

Understanding the Fabric of Organisational Culture

The concept of organisational culture stands as a cornerstone, influencing every facet of a company's operations. At its core, organisational culture embodies the collective values, beliefs, and principles that guide the behaviour of an organisation's members. It's an invisible yet powerful force that shapes decisions, molds strategies, and defines the character of a corporate entity.

The formation of this culture is not a random event but a complex process influenced by a multitude of factors, both internal and external. Understanding how organisational culture is formed is crucial for leaders, managers, and employees alike. It offers insights into the driving forces behind a company's ethos, aids in navigating the corporate landscape, and helps in aligning personal values with those of the organisation.

This article delves into the genesis of organisational culture, exploring its foundational elements such as leadership, company vision, and core values. It examines the role of early decisions and behaviours in setting the tone for cultural norms and presents case studies to illustrate these dynamics in real-world settings. Furthermore, it discusses the key factors influencing culture formation, including the impact of internal stakeholders and external conditions, and the interplay of policies, procedures, and people.

As we navigate through the manifestations of organisational culture, from symbols and rituals to stories and myths, we gain a deeper understanding of its pervasive influence. The article also sheds light on the profound impact organisational culture has on employee behaviour, decision-making processes, and overall business outcomes. Finally, it addresses the critical aspects of evaluating and evolving organisational culture, highlighting the challenges and strategies involved in fostering a desirable workplace environment.

In essence, this exploration is not just about understanding what organisational culture is, but also about grasping its significance in shaping the identity and success of an organisation. As we embark on this journey, we encourage readers to reflect on their own organisational environments and consider the continuous, dynamic nature of cultural evolution within their realms.

The Genesis of Organisational Culture

Foundational Elements: Leadership, Company Vision, and Values

The bedrock of organisational culture lies in its foundational elements: leadership, company vision, and values. Leadership, particularly, plays a pivotal role in shaping culture. As Schein (2010) articulates in his seminal work, leaders not only create and manage culture but also embody the values and norms of the organization. The vision set forth by leaders acts as a guiding star, providing direction and purpose. This vision, coupled with core values, forms the ethos of an organisation, influencing every aspect of its functioning.

A study by Groysberg, Lee, Price, and Cheng (2018) in the Harvard Business Review highlights how leadership styles and practices significantly impact organisational culture. The authors argue that leaders who communicate effectively and demonstrate a commitment to their vision and values foster a strong, positive culture. Furthermore, the values espoused by leaders, such as integrity, innovation, and teamwork, become ingrained in the organizational fabric, shaping employee attitudes and behaviours.

Role of Early Decisions and Behaviours

The initial decisions and behaviours of an organisation set a precedent for its cultural norms. These early choices, often made by the founding team, can have a lasting impact. For instance, a decision to prioritise customer satisfaction over short-term profits can instill a customer-centric culture. Similarly, early behaviours, such as how failures and successes are handled, signal to employees what is valued within the organization.

Research by Chatman and Cha (2003) in the Academy of Management Journal demonstrates that the early decisions regarding organizational structure, hiring practices, and reward systems significantly influence the development of organisational culture. The study suggests that these initial choices create a framework within which the culture evolves.

Case Studies: Examples of Formative Phases in Different Organizations

Google: Google’s culture, known for its openness and innovation, was largely shaped by its founders, Larry Page and Sergey Brin. From the outset, they fostered an environment of creativity and autonomy. As elucidated in a case study by Bock (2015) in his book Work Rules!, Google’s early decision to allow engineers to spend 20% of their time on personal projects led to significant innovations, embedding a culture of creativity and experimentation.

Zappos: Zappos, under the leadership of Tony Hsieh, developed a unique culture focused on exceptional customer service and employee happiness. A case study by Hsieh (2010) in his book Delivering Happiness outlines how Zappos’ early emphasis on company values and cultural fit in hiring practices laid the foundation for a strong, cohesive culture.

Southwest Airlines: The culture at Southwest Airlines, characterized by employee empowerment and customer-centricity, can be traced back to its founder, Herb Kelleher. As described in a study by Gittell (2003) in The Southwest Airlines Way, Kelleher’s early focus on employee satisfaction and teamwork established a culture that contributed significantly to the airline's success.

Key Factors Influencing Culture Formation

Internal Stakeholders: Employees, Management, and Founders

The culture of an organisation is significantly shaped by its internal stakeholders: employees, management, and founders. Each group contributes uniquely to the cultural milieu. Founders often imprint their personal values and beliefs onto the organization, as seen in the case of Apple and Steve Jobs' emphasis on design and innovation. Management, through their leadership style and decision-making, reinforce these cultural norms. Employees, on the other hand, contribute to the culture through their daily interactions, behaviours, and adherence to company values.

A study by Schein and Schein (2016) in their book Organizational Culture and Leadership emphasises the symbiotic relationship between leaders and followers in culture formation. They argue that while leaders play a critical role in setting the tone, employees also actively shape and maintain the culture through their actions and decisions.

In conclusion, the genesis of organisational culture is deeply rooted in its leadership, vision, and values. The decisions and behaviours at the early stages of an organization's life cycle set the tone for its cultural development. Real-world examples from companies like Google, Zappos, and Southwest Airlines illustrate how these elements come together to form a unique and enduring culture.

External Influences: Industry Norms, National Culture, and Economic Conditions

External factors such as industry norms, national culture, and economic conditions also play a crucial role in shaping organisational culture. Industry norms set a benchmark that organisations often strive to meet or exceed, influencing their cultural priorities. National culture impacts organisational culture through the values and behaviours that are prevalent in the society where the company operates. Economic conditions, including market trends and financial stability, can force organisations to adapt their cultures in response to external pressures.

Hofstede’s cultural dimensions theory, as discussed in his book Cultures and Organizations: Software of the Mind (2010), provides insight into how national cultures influence organizational cultures. His research highlights the impact of societal values on organisational behaviour and practices.

Policies, Procedures, and People: The Interplay

The interaction between organisational policies, procedures, and the human element is critical in culture formation. Policies and procedures provide a framework within which the culture develops, setting boundaries and expectations for behaviour. However, it's the people within the organisation who bring these policies and procedures to life, interpreting and enacting them in ways that reflect the underlying culture.

A study by Chatman and O'Reilly (2016) in the Academy of Management Annals explores how organisational practices, including policies and procedures, interact with employee behaviours to create and sustain culture. They argue that these practices are not just top-down directives but are also shaped by the employees' understanding and engagement with them.

In conclusion, the formation of organisational culture is a complex interplay of internal and external factors. Internal stakeholders, through their values, behaviours, and decisions, play a critical role in shaping the culture. External influences like industry norms, national culture, and economic conditions provide a broader context within which the culture evolves. The interaction between organisational policies, procedures, and the human element is where the essence of the culture is truly formed and manifested.

Manifestation of Organisational Culture

Symbols: Logos, Office Design, and Dress Code

Symbols such as logos, office design, and dress code are tangible representations of an organisation's culture. They are not just aesthetic elements but carry deeper meanings that reflect the values, beliefs, and identity of the organisation. For instance, a minimalist and open office design can signify a culture of transparency and collaboration, while a formal dress code might indicate a culture of professionalism and traditional values.

George, Owoyemi, and Onakala (2012) in their study published in the International Journal of Business Administration discuss the impact of organisational artefacts, including symbols, on the development of corporate identity. They argue that these artefacts are not mere physical objects but are imbued with meanings that communicate and reinforce the cultural values of the organisation.

Rituals and Routines: Meetings, Celebrations, and Annual Events

Rituals and routines such as regular meetings, celebrations, and annual events play a crucial role in reinforcing and maintaining organisational culture. These activities provide opportunities for members to come together, share experiences, and reinforce the shared values and norms of the organisation. For example, regular team-building events can foster a culture of unity and collaboration.

A study by McDonald and Foster (2013) critically reviews Johnson's Cultural Web, which includes rituals and routines as key elements of organisational culture. They highlight how these practices are not just routine actions but are laden with cultural significance, shaping the way members perceive and engage with the organisation.

Stories and Myths: Shared Histories, Success Stories, and Cautionary Tales

Stories and myths, including shared histories, success stories, and cautionary tales, are powerful tools in shaping organisational culture. They provide a narrative that members can identify with, creating a sense of belonging and shared purpose. These stories often encapsulate the core values and lessons that are important to the organization.

Krupskyi and Stasiuk (2023) in their article on storytelling in medical institutions, published in the Clinical and Consulting Psychology Journal, emphasize the role of storytelling in forming and supporting organizational culture. They illustrate how stories can create meaningful narratives that promote cultural change and support the organisational identity.

In conclusion, the manifestation of organisational culture is evident in its symbols, rituals, and stories. These elements are not just superficial aspects but are deeply ingrained in the fabric of the organisation, playing a vital role in defining and communicating its culture. On Employee Behaviour and Morale

Impact of Organisational Culture

Organisational culture profoundly influences employee behaviour and morale. A positive and supportive culture fosters a sense of belonging, motivation, and commitment among employees. Studies, such as those by Grace Hemalatha on employee engagement activities at H & R Johnson (India), demonstrate the correlation between organisational culture and employee satisfaction [1]. When employees resonate with their organisation's culture, they exhibit higher levels of enthusiasm, dedication, and loyalty. This alignment not only enhances individual performance but also contributes to a harmonious and productive workplace environment. Conversely, a negative or misaligned culture can lead to disengagement, low morale, and high turnover rates, adversely affecting the overall health and effectiveness of the organisation.

On Decision Making and Problem Solving

The decision-making and problem-solving processes within an organisation are significantly shaped by its culture. A culture that values collaboration, open communication, and diverse perspectives encourages a more inclusive and comprehensive approach to decision-making. The Rational Decision-Making Model and Bounded Rationality theory highlight the importance of logical and informed decision-making processes [2]. In cultures where employees feel valued and heard, there is a greater likelihood of innovative problem-solving and effective decision-making. On the other hand, a culture that stifles creativity and discourages open dialogue can lead to poor decision-making, with a lack of diverse viewpoints and potential groupthink scenarios.

On Innovation, Productivity, and Financial Performance

Organisational culture is a key driver of innovation, productivity, and financial performance. A culture that encourages risk-taking, experimentation, and continuous learning is conducive to innovation. Elena Gurgu and Valentin Kuleto's research on employer branding and organisational performance underscores the link between a positive organisational culture and enhanced productivity [3]. Innovative cultures are often agile and adaptable, enabling organisations to respond quickly to market changes and seize new opportunities

Furthermore, there is a strong correlation between organisational culture and financial performance. Silva Opuala-Charles and Ikuroaa Daerego Jack's study on adhocracy culture in Nigeria illustrates how cultural elements like autonomy and employee empowerment contribute to improved business performance indicators, including financial outcomes [4]. Organisations with strong, positive cultures often report better financial results, as a motivated and engaged workforce drives higher productivity and efficiency.

In summary, organisational culture has a far-reaching impact on various aspects of business operations. It shapes employee behaviour and morale, influences decision-making and problem-solving processes, and drives innovation, productivity, and financial performance. Cultivating a strong, positive, and adaptive organisational culture is essential for businesses aiming to achieve long-term success and sustainability.

Assessing and Evolving Organisational Culture

Assessing the Current Culture

Understanding a company's current culture necessitates a thorough diagnosis. Monica Dudian and her team's study of schools transitioning to online teaching revealed that organisational culture profoundly impacts the effectiveness of online education. In a similar vein, companies can utilise these insights when adopting new technologies or methodologies. For instance, the introduction of a new project management system must take into account how the prevailing organisational culture might affect its acceptance and efficacy.

Training and workshops that align the new technology with the organisation's established values and practices can ensure a more seamless transition.

Example: A tech company rolling out a remote working system could conduct training sessions that focus not just on the technological aspects but also on integrating it into the company's culture of collaboration and innovation.

Creating the Culture You Want

Napoleon Arrey Mbayong's investigation into how a university's organisational culture influences employee creativity found that environments fostering teamwork and innovation bolster creativity. Companies can mirror this approach to stimulate creativity, such as by reconfiguring workspaces to encourage teamwork or instituting regular brainstorming sessions.

Example: A design agency might restructure its office to foster open collaboration areas and organise weekly brainstorming sessions, inviting all employees to contribute ideas to current projects.

Dealing with the Challenges of Change

Altering a company's culture presents significant challenges. M. Sendall and his team's research on implementing a no-smoking policy at a university highlighted the difficulties in changing deep-seated habits.

Companies aiming to introduce substantial changes, like sustainability or diversity initiatives, need to develop effective communication and engagement strategies to surmount resistance.

Example: A manufacturing firm aspiring to adopt sustainable practices could initiate with educational workshops and discussion forums, engaging employees in the process and addressing their reservations.

Conclusion

Organisational culture, a multifaceted and dynamic concept, is pivotal in defining and driving the success of any company. This article has delved into the complexities of organisational culture formation and the profound impact it has on all facets of an organisation.

The culture of an organisation is shaped by a mix of internal and external factors. Internally, elements such as leadership, company vision, and core values are crucial. Leaders not only establish but also personify the culture, profoundly influencing how it develops and is perceived by employees. Early decisions and behaviours, often set by founders, create a precedent for cultural norms that follow. This transition from the role of leadership to everyday practices reveals how culture is experienced within the daily life of the organisation.

This culture manifests through symbols, rituals, routines, and stories. These tangible and intangible elements communicate the organisation's values and norms, reinforcing collective identity and purpose. This visual and ritualistic aspect of organisational culture serves as a constant reminder of the values and principles underpinning it, directly influencing employee behaviour and morale.

The impact of organisational culture is vast and profound. It directly influences employee behaviour and morale, decision-making, problem-solving, innovation, productivity, and financial performance. A positive and aligned culture can lead to higher employee engagement, better decision-making, and greater innovation, while a negative or misaligned culture can have the opposite effect. This impact of culture on the internal environment of the organisation is a crucial link in understanding how it affects organisational effectiveness as a whole.

Assessing and evolving organisational culture are continuous and essential processes. Understanding the current culture is the first step towards any change. From there, strategies can be implemented to cultivate desired cultural traits and address the challenges of change. This process requires effective communication, employee engagement, and a strategic approach to ensure that the culture evolves in a way that supports the organisation's goals and values. This need for continuous evolution highlights the dynamic nature of organisational culture and its importance in adapting and sustaining long-term organisational growth.

In conclusion, organisational culture is more than just a set of values and norms; it is the beating heart of an organisation, influencing every aspect of its operations. Understanding its formation and impact is crucial for leaders and managers who aim to create a positive and productive work environment. Through careful assessment and conscious evolution strategies, organisations can shape a culture that not only reflects their values but also drives their success and long-term sustainability.

Further Recommended Reading

If you want to understand more on this topic, then we recommend browsing these articles:

What are the characteristics of a strong organisational culture? - Striking a balance between the benefits of a strong culture and the need for adaptability, diversity, and ethical considerations.

How do you recognise the signs of a toxic culture? - Explore the telltale signs of a toxic organisational culture.

What are the characteristics of organisations with strong and effective cultures? - A robust and effective organisational culture is frequently the cornerstone of high-performing entities, exerting a significant influence on a myriad of organisational dimensions, from employee morale to overarching business results.

References

Schein, E. H. (2010). Organizational Culture and Leadership. Jossey-Bass.

Groysberg, B., Lee, J., Price, J., & Cheng, J. Y. (2018). The Leader’s Guide to Corporate Culture. Harvard Business Review.

Chatman, J. A., & Cha, S. E. (2003). Leading by Leveraging Culture. California Management Review, 45(4), 20-34.

Bock, L. (2015). Work Rules! Insights from Inside Google That Will Transform How You Live and Lead. Grand Central Publishing.

Hsieh, T. (2010). Delivering Happiness: A Path to Profits, Passion, and Purpose. Business Plus.

Gittell, J. H. (2003). The Southwest Airlines Way: Using the Power of Relationships to Achieve High Performance. McGraw-Hill.

Schein, E. H., & Schein, P. (2016). Organizational Culture and Leadership. Jossey-Bass.

Hofstede, G. (2010). Cultures and Organizations: Software of the Mind. McGraw-Hill.

Chatman, J. A., & O'Reilly, C. A. (2016). Paradigm Lost: Reinvigorating the Study of Organizational Culture. Academy of Management Annals, 10(1), 129-156.

1Grace Hemalatha, "A Study on Employee Engagement Activities at H & R Johnson (India) A Division of Prism Cements.

2Theories of Decision-Making: Rational Decision-Making Model, Bounded Rationality.

3Elena Gurgu and Valentin Kuleto, "The Impact of Employer Branding on Organizational Performance: A Comprehensive Analysis.

4Silva Opuala-Charles and Ikuroaa Daerego Jack, "Study on Adhocracy Culture in Nigeria.

Dudian, M., Abramiuc Todoran, T., & Popa, R. A. (2022). Organisational Culture Shifting Into Online Learning. Virtual Learning Practices. PDF

Mbayong, N. A., & Noumssi Placide, D. N. (2022). Assessing the Role of Organisational Culture on Workforce Creativity. PDF

Sendall, M., Fox, L., & Wraith, D. (2021). University Staff and Students’ Attitudes towards a Completely Smoke-Free Campus. PDF

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