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Organizational Culture

Chapter 5

Sreenath B.
Organizational Culture
• Organizational culture is the set of values that controls
behavior, determines how organizational members interpret
the environment, and helps achieve a competitive
• An organization has two types of values: terminal and
1. A terminal value is a desired outcome or end state, whereas
an instrumental value is a desired behavior; instrumental
values accomplish terminal values.
2. Employee risk-taking (an instrumental value) helps achieve
innovation (a terminal value).
3. Terminal values are written in the mission statement &
official goals, but instrumental values are conveyed through
rules, norms, & standard operating procedures (SOPs).
Organizational Culture
• The most influential values are unwritten and reflected in
shared beliefs and norms, acceptable standards of
• Over time, rules, SOPs, and norms are internalized.
How Is an Organization’s Culture Transmitted to
Its Members?
• The method of conveying values influences the culture to
motivate employees and increase organizational
• Newcomers learn values from formal socialization and
informal stories, ceremonies, and language.
• Socialization and Socialization Tactics
• Newcomers become insiders when they internalize
organizational values.
Newcomer learn values by:-
• Watching existing members and determining
appropriate behavior lets newcomers learn
indirectly, but they also learn unacceptable
• Socialization, the process of learning and
internalizing norms, assures that members learn
appropriate values.
• A socialization model by Van Mannen & Schein,
suggests that structuring socialization teaches
newcomers key values.
• Role orientation is the characteristic way
newcomers respond to a situation.
Newcomer learn values by:-
• Two types of role orientations:-
1.Institutionalized role orientation. Newcomers respond the same
way as existing members do.
2.Individualized role orientation. Newcomers respond creatively
and experiment with changing norms and values.
Differences between the two are:
• 1. Collective vs. Individual. Collective tactics consist of common
experiences to generate standard responses. Individual tactics
allow newcomers to learn new responses.
• 2. Formal vs. Informal. Formal tactics separate newcomers
during learning; informal tactics encourage learning on the job.
• 3. Sequential vs. Random. Sequential tactics establish a
sequence for activities; random tactics are based on newcomer
interests and needs.
Newcomer learn values by:-
• 4. Fixed vs. Variable. Fixed tactics provide a specific
timetable for each stage; variable tactics set no
• 5. Serial vs. Disjunctive. Serial tactics use existing
members as role models and mentors; disjunctive
processes develop individual behavior.
• 6. Divestiture vs. Investiture. Divestiture gives
members negative social support (neglect) until they
conform to norms. Investiture gives positive support
• These tactics influence role orientation; military-style
socialization leads to an institutional orientation.

Dangers of institutionalized socialization.

• It produces sameness among members, making it
hard to adapt to changes.
• An organization chooses institutionalized or
individualized tactics based on goals.
• For predictability & standardization,
institutionalized tactics fit; for innovation,
individualized tactics fit.
Stories, Ceremonies, and
Organizational Language
• There are four organizational rites:
• 1. Rites of passage signify entry to, promotion in,
and departure from the organization.
• 2. Rites of integration build bonds between
members (an office party or cookout).
• 3. Rites of enhancement are public recognition of
employees (news releases and awards dinners).
• 4. Rites of degradation denote involuntary
departure, allowing a change or reaffirmation of

• Stories, ceremonies, and organizational language

convey cultural values.
• Stories and language reveal the type of behaviors the
company values and those that are frowned upon.
• Language includes not only speech, but also what
people wear, their offices, their company cars, and a
formal manner of addressing each other.
• Technical language facilitates mutual adjustment
(sports team).
• Symbols also reveal an organization’s values; office
size, location, and luxury communicate images about an
organization’s values.
• Isolating the corporate office conveys the image of a
hierarchical and status-conscious organization.
• A building design can be a symbol; Team Disney
Building has offices, a restaurant, & a patio connected
to a garden to show the value Disney places on
imagination and creativity.
Organizational Culture Come
• Organizations have different cultures due to the
interaction of four factors: people, ethics, property
rights given to employees, and structure.

1.Characteristics of People within the

• Companies attract, hire, and retain people with
different values, personalities, and ethics.
• People are drawn to companies with values similar to
their own.
• As people and values become more similar,
organizational culture becomes more unique.
• The founder impacts the culture by setting the initial
values and hiring the first employees.
Organizational Culture Come
2. Organizational Ethics
• The cultural values of the founder and the top managers are beyond an
organization’s control.
• Yet an organization can cultivate ethical values to control employees through
guidelines for appropriate behavior.
• Ethical values are an inseparable part of organizational culture.
3. Personal ethics influence organizational ethics.
• Personal ethics stem from societal ethics and an individual’s upbringing.
4. Property Rights
• Cultural values arise from property rights, the rights given to stakeholders to
receive and use organizational resources.
• Shareholders have the greatest property rights, because they own the resources
and share in profits.

Property rights given to managers and

• Managers receive golden parachutes, stock options,
large salaries, control over resources, and decision-
making authority.
• Employees receive notification of layoffs, severance
payments, lifetime or long-term employment, pension
and benefits, stock ownership plans, and decision-
making opportunities.
• Employees’ rights may be limited to wages, health
insurance, and pensions.
• Property rights shape employee behavior and
determine organizational effectiveness.
• Strong property rights at Southwest Airlines’ result in
employee loyalty.
Top Management and Property Rights
• Top managers determine their own property rights:
terms of their employment, salaries, benefits,
pension, and termination agreements.
• Because top managers decide how property rights
are distributed to others, they influence culture.
• Organizations must assign property rights based on
performance and continually evaluate the property
rights system.
Can Organizational Culture Be
• Managers must examine the interaction of the sources
of culture: the characteristics of organizational
members, organizational ethics, the property rights
system, and organizational structure.
• These factors interact, and only major modifications
change values, making cultural change difficult.
• An organization might need to change its structure, its
people, or its property rights system.
• A larger and more complex organization with a
successful culture can decrease effectiveness.
• To avoid negative cultural change, managers must
design a structure to handle control problems.