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Organisational Culture and

Part I Introduction to Corporate Culture

What does the term corporate culture refer to?
Corporate culture essentially refers to the way we do
things around here.

Example Nestls longstanding

corporate culture respects
diversity, has a focus on the
development of human capital,
and recognises social and
environmental responsibilities.

It encompasses the company's goals and dominant

ideologies and is influenced both by the environment and
by internal currents. For example, the organisation has to
survive and thrive in an external environment which could
be turbulent, steady etc. Against this background,
corporate culture is created by organisational members values, philosophy, beliefs,
assumptions and norms. Top management plays a dominant role in.
Other factors which influence how culture develops are work groups, organisational
characteristics, supervision, and administration.
Corporate culture contains assumptions about the nature of the business and its markets and
customers, the way in which business should be carried out, how work should be organised,
the sort of people the organisation needs and how they should be treated.
Culture is an intangible concept which is difficult to pin down. It can encompass any number
of the following features of an organization its values, ethics, beliefs, ethos, climate, and so
on. We will look at these in more detail.
Ethics refers to normative aspects of what is socially desirable these are not unique to the
organization and have been adopted from the prevailing social environment. On the other
hand, values, beliefs, attitudes and norms are interrelated and refer to a shared sense of
desirability that has been adopted by the organisation. Ethos can be defined as the underlying
spirit of character of an entity or group. For example, Nestle (see box) consists of both ethics
and values.

What is its function?

Culture plays a vital strategic role in an organisation. A companys distinct culture will:

Specify the goals and objectives of the organisation

Specify the relations that exist within the organisation
Specify what qualities are valued within organisations such as loyalty,
competitiveness, hard work etc

The culture plays a vital role in communicating to employees how they should work and the
attitude they should adopt towards this work. It is an underlying indicator of desirable
behaviour and lays out the boundaries of acceptability. What is encouraged in one

Example Amazon has a famous and enduring

culture of high-performance and competitiveness.
Employees collectively share the goal of Amazon
being and remaining market leader and, not only do
they strive to maintain Amazons competitive
advantage by seeking to ideate and implement the
next big thing, they are also actively encouraged to
compete with one another, within the company.

organisation may be looked down

upon in another, and culture is
what communicates this difference
and what an employee should do.
This relationship works both ways.
That is, culture also helps people
decide where they want to work in
the first place; a distinct personality
can help a company attract people
who share that culture. Jeff Bezos,
founder of Amazon, has explained
this concept as follows:

A word about corporate cultures: for better or for worse, they are
enduring, stable, hard to change. They can be a source of advantage or
disadvantage. If its a distinctive culture, it will fit certain people like a
custom-made glove. The reason cultures are so stable in time is because
people self-select. Someone energized by competitive zeal may select and
be happy in one culture, while someone who loves to pioneer and invent
may choose another.

How is a culture created?

Organisation cultures are developed and reinforced in a
variety of ways. There are five primary and five secondary
cultural development mechanisms.
The five primary mechanisms are:
1. What leaders pay attention to, measure, to, and
2. Leaders' reactions to critical incidents and
organisational crises
3. Deliberate role modelling, teaching and coaching
4. Criteria for allocation of rewards and status
5. Criteria for recruitment, selection, promotion and
retirement employees
These factors determine the kind of people who are
inducted into the company, the kind of attitudes they bring
with them, and the kind of attitudes they develop and
disseminate amongst their colleagues whilst within the
Such factors have a more direct and impactful influence,
and highlight the importance of top management and the
decisions they make on the kind of culture that develops
over time.

Example Nestl provides an

example of a culture which has
both grown organically throughout
many decades of operation and
also been deliberately cultivated
through explicit statements.
Nestl has laid out ten Corporate
Business Principles which form
the foundation of its corporate
culture. In these Principles, the
organisation makes a commitment
that its people will treat each
other with respect and dignity,
and each has a sense of personal
responsibility. The resulting
culture respects diversity, has a
focus on the development of
human capital, and recognises
social and environmental

There are five secondary mechanisms by which organizational culture develops:

1. The organizations design and structure
2. Organizational systems and procedures
3. Design of physical space, facades and Example Deloitte has created
buildings (see box)
Greenhouses in some of its office
4. Stories, legends, myths, and parables about
spaces to encourage freedom of thought
important events and people
and collaborative work processes.
5. Formal
philosophy, creeds and charters
Rituals, traditions, legends and prominent figures
also contribute to the build-up of a companys
culture. A defining moment for cleaning company SC
Johnson (which makes market-leading products
such as Glade, Pledge and Windex) came during a
1927 Christmas Eve speech by H.F. Johnson Sr. He
took this opportunity to introduce a profit-sharing
plan, a 40-hour work week and a pension plan
unusual benefits in those days. The goodwill of the
people is the only enduring thing in any business,
Johnson said. 80 years later, SC Johnson still calls
itself a family company (a tagline that is added to
the very name of the company itself), and this speech
is still spoken famously of and holds important
meaning for the organisations employees.

Bain and Company on how to create a winning culture

According to Bain and Company, a winning
culture is created by focusing on two aspects:
The unique personality and soul of a company
The high-performance values and behaviour of
the highest performing employees
These two aspects go hand in hand. A companys
personality needs to be complemented by
behaviours that motivate employees to excel over
and over again, displayed by role models who are
exemplary within the organisation. Such
behaviours tend to be similar across high
performing companies, although the personality
and soul are unique (see box). Bain has attempted
to identify such high-performing behaviours:

They aim high, so that employees remain

fundamentally dissatisfied with the status
quo. Energy gets focused externally on
customers and competitors, rather than
internally on issues of politics or turf.
They also exhibit a clear bias to
action, with little patience for bureaucratic debate. People in winning

cultures are team players who display high levels of passion and
commitment, which usually includes hard work.
The way in which these behaviours are manifested within a company will vary, depending on
the nature of the work. For example, customer focus will be realised differently in a consumer
products company and a professional services firm. The former may focus on the customer
by blanketing the offices with lifestyle posters featuring its particular target customers. The
latter might send out a weekly communication with updates about important clients. Whether
these techniques have been effective or not will be determined by whether the expectations
of high performance and are widely understood and shared.
Bain and Company, Building a winning culture, 2006

Cultural change
There are a number of internal and external factors which are responsible for cultural change
in an organisation.
Composition of the workforce: Over time, the people entering an organisation may differ in
important ways from those already in it, and these differences may impinge on the existing
culture of the organisation.
Mergers and acquisitions: Another source of cultural change is mergers and acquisitions,
events in which one organisation purchases or otherwise absorbs another. In such cases, rare
consideration is given to the acquired organisation's culture. This is unfortunate because there
have been several cases in which the merger of two organisations with incompatible cultures
leads to serious problems, commonly known as culture clashes. In such cases, the larger and
more powerful company attempts to dominate the smaller acquired company.
Additionally, an organisation can also undertake deliberate activities and initiatives to result
in cultural change. Such transformational programs usually involve some or all of the
following steps:
1. Identify the basic assumptions and beliefs and challenge them if necessary
2. Define or re-define the core values - stated or unstated
3. Analyse the organisational climate
4. Analyse the management style
5. Plan and implement what aspects of the culture needs to be changed and what aspects
should be maintained or reinforced

Part II Assessing and Measuring Culture

The importance of culture is readily apparent when things go wrong. When two large
companies merged last year, for example, it became clear that one company had a culture of
"low cost" while the other had a culture of "quality service". Employees received mixed signals
for months until the new management team took the time to carefully diagnose and redefine
many business processes throughout the company.
However, when managed well, culture can drive execution and ensure business consistency
around the world. It is possible to carry out cultural assessment programs through various
means, in order to describe and understand a companys culture. This understanding can be
used to diagnose problems of performance and
cohesion, to check alignment with strategic
objectives, and to inform cultural transformation
Example After spinning off
PayPal in 2015, eBay embarked on projects.

a complete cultural
transformation initiative. It
collected a team of organizational
development experts and data
scientists to survey its employees
on over 50 cultural attributes,
that were mapped to five recently
formulated values designed in the
cultural refresh. This data was
then combined with operational
metrics to assess the extent to
which compliance with cultural
values impacts the business.

Such studies often take part during crucial moments,

such as a merger or a split.
Means of analysing culture include:

Structured and unstructured interactions with


Analysis of social media entries, as carried out

by Starbucks, in order to gain an objective view of its

Always-on feedback mechanisms for staff to

record their journeys

Use of quantitative tools to assess behaviour of

employees, as undertaken by HP Inc, after the
Hewlett-Packard Co split, to understand the behaviour
of its sales staff

Hofstedes Cultural Dimensions Model

A prevalent means of describing and assessing a companys culture is according to Hofstedes
Cultural Dimensions model. According to Hofstede, there are majorly five factors which
influence the culture of the workplace.
1. Power Distance
Power distance index refers to the differences in the work culture as per the power delegated
to the employees. There are some organisations which believe in appointing team leaders or
team managers who are responsible for their respected teams. However, in some
organisations, there exists no team leader and every employee is accountable for his/her own
Example: Steel Authority of India Ltd. rates high in power distance since there is a large and
prominent hierarchy. Snapdeal rates low in power distance.
2. Masculinity Vs Feminity
This refers to the effect of differences in male and female values on the culture of the
organization. Organisations where the male employees dominate their female counterpart will
have a very different culture from organisations where females are treated as equals too

Example: Snapdeal rates high in masculinity whereas Nestl rates low in masculinity.
3. Individualism
There are some organisations which strongly rely on teamwork. These organisations believe
that the output is always better when people work in a team. However, certain organisations
follow a culture where individuals do not believe in working in teams and prefer working
Example: Amazon rates high on individualism whereas a company like Deloitte rates low on
4. Uncertainty Avoidance Index
This refers to a culture where employees know how to respond to unusual and unforeseen
circumstances. Organisations try hard to avoid such a situation and also prepare the
employees to adjust well in all conditions.
Example: PSUs tend to rate high on uncertainty avoidance.
5. Long Term Orientation
There are some organisations which focus on a long term relationship with the employees. In
such organisations, people have a steady approach and strive hard to live up to the
expectations of the management. On the other hand, some organisations have employees
who are more concerned with their position and image. The employees are concerned only
with their profits and targets and leave as and when they get a better opportunity.
Example: Tata Group companies usually rate high on long term orientation.

Part III Case Studies

Google fosters a culture of innovation and
risk taking. Larry Page says would rather
run a company where they are moving
quickly and doing too much, as opposed
to being too cautious and doing too little.
In addition to this, Google encourages its
employees to spend 20% of their time
working on projects of their own.
Decision making at Google is not top
down, and small teams take decisions
after extensive discussions backed with
data and facts. The company maintains a
flat structure, and team-work is
Rigorous recruitment process is in place which ensures that the best minds are working with
the company. The process also considers potential employees fit with the company in terms
values, working style, etc.

IKEA's human resource philosophy stands on the belief that employees are more productive
and committed when the company takes care of them and their needs.
IKEA's positive HR policies are supported by a strong and nurturing culture that promoted
diversity and creativity and empowerment. In 1990s, Spiers-Lopez, HR head at IKEA North
America said IKEA's culture was characterized by a family-like quality that made relationships
between employees strong and open.
The organisations manifesto declares that "the true IKEA spirit is still founded on our
enthusiasm, on our constant will to renew, on our cost consciousness, on our willingness to
assume responsibility and to help, on our humbleness before the task and on the simplicity in
our behavior. We must take care of each other, inspire each other."