Organizational Culture: Definition, Importance, and Development

What is organizational culture?

Organizational culture is the collection of values, expectations, and practices that guide and inform the actions of all team members. Think of it as the collection of traits that make your company what it is. A great culture exemplifies positive traits that lead to improved performance, while a dysfunctional company culture brings out qualities that can hinder even the most successful organizations.

Don’t confuse culture with organizational goals or a mission statement, although both can help define it. Culture is created through consistent and authentic behaviors, not press releases or policy documents. You can watch company culture in action when you see how a CEO responds to a crisis, how a team adapts to new customer demands, or how a manager corrects an employee who makes a mistake.

The importance of culture to your company

Organizational culture affects all aspects of your business, from punctuality and tone to contract terms and employee benefits. When workplace culture aligns with your employees, they’re more likely to feel more comfortable, supported, and valued. Companies that prioritize culture can also weather difficult times and changes in the business environment and come out stronger.

Culture is a key advantage when it comes to attracting talent and outperforming the competition. 77 percent of workers consider a company’s culture before applying, and almost half of employees would leave their current job for a lower-paying opportunity at an organization with a better culture. The culture of an organization is also one of the top indicators of employee satisfaction and one of the main reasons that almost two-thirds (65%) of employees stay in their job.

Consider Microsoft and Salesforce. Both technology-based companies are world-class performers and admired brands, and both owe this in part to prioritizing culture. Microsoft, known for its cut-throat competitiveness under Steve Balmer, has been positively transformed by Satya Nadella, who took over as CEO of the company in 2014. He embarked on a program to refine the company culture, a process that upended competitiveness in favor of continuous learning. Instead of proving themselves, employees were encouraged to improve themselves. Today Microsoft’s market cap flirts with $1 trillion and it is again competing with Apple and Amazon as one of the most valuable companies in the world.

Salesforce puts corporate culture front and center and has experienced incredible growth throughout its history. Marc Benioff, Salesforce’s founder and CEO, established philanthropic cultural norms that have guided the company over the past two decades. All new Salesforce employees spend part of their first day volunteering and receive 56 hours of paid time to volunteer a year. This focus on meaning and mission has made Salesforce one of the best places to work in America according to Fortune, and it hasn’t compromised profits either: Salesforce’s stock price has surged year after year at an average of over 26% annually to date.

Organizational Culture: An Empirically Based Abstraction

Culture as a concept has had a long and checkered history. Laymen have used it as a word to indicate sophistication, as when we say

The concept of organizational culture

THE CONCEPT OF ORGANIZATIONAL CULTURE: WHY BOTHER? Culture is an abstraction, yet the forces that are created in social and orga­nizational situations deriving from culture

Organizational Culture: Definition, Importance, and Development

What is organizational culture? Organizational culture is the collection of values, expectations, and practices that guide and inform the actions of all team members. Think

Espoused Beliefs and Values – the second levels of organizational culture

All group learning ultimately reflects someone’s original beliefs and values, his or her sense of what ought to be, as distinct from what is. When

Artifacts – the first levels of organizational culture

At the surface is the level of artifacts, which includes all the phenomena that you would see, hear, and feel when you encounter a new

Organizational culture definition, content and process of socialization or acculturation

1. Culture Formally Defined The culture of a group can now be defined as a pattern of shared basic assumptions learned by a group as

Example of three levels of organizational culture: case of Ciba-Geigy

The Ciba-Geigy Company in the late 1970s and early 1980s was a Swiss multidivisional, geographically decentralized chemical company with sev­eral divisions dealing with pharmaceuticals, agricultural

Example of Organizational culture: case of Digital Equipment Corp.

Digital Equipment Corp. (DEC) is a major case running throughout this book because it not only illustrates aspects of how to describe and analyze organizational

Basic Underlying Assumptions – the third levels of organizational culture

When a solution to a problem works repeatedly, it comes to be taken for granted. What was once a hypothesis, supported only by a hunch

Shared Assumptions About Mission, Strategy, and Goals

Every new group or organization must develop a shared concept of its ulti­mate survival problem, from which usually is derived its most basic sense of

Microcultures

Microcultures evolve in small groups that share common tasks and histories. Shared assumptions will arise especially in groups whose task requires mutual cooperation because of

The Executive Subculture

A third generic subculture that exists in all organizations is the executive subculture based on the fact that top managers in all organizations share a

The Engineering/Design Subculture

In all organizations, there is a group that represents the basic design ele­ments of the technology underlying the work of the organization, and this group

The Operator Subculture

All organizations have some version of what has been called “the line” as opposed to the “the staff,” referring to those employees who produce and

Macrocultures, subcultures, and microcultures

Organizational culture has been the focus of the analysis so far, but as pointed out earlier, both DEC and Ciba – Geigy existed in national

Defining Group Boundaries and Identity

For a group to function and develop, one of the most important areas for clear consensus is the perception of who is in the new

Creating a Common Language and Conceptual Categories

To function as a group, the individuals who come together must establish a system of communication and a language that permits setting goals and interpreting

Shared Assumptions About Remedial and Repair Strategies

The final area of consensus crucial for external adaptation concerns what to do if a change in course is required and how to make that

Shared Assumptions About Measuring Results and Correction Mechanisms

All groups and organizations need to know how they are doing against their goals and periodically need to check to determine whether they are performing

Shared Assumptions About Means to Achieve Goals: Structure, Systems, and Processes

Some of the most important and most invisible elements of an organiza­tional culture are the shared basic assumptions about “how things should be done, how

Shared Assumptions About Goals Derived from the Mission

Consensus on the core mission and identity does not automatically guar­antee that the key members of the organization will have common goals or that the

High Context and Low Context

A useful distinction can be found in Hall’s (1977) differentiation between what he calls high-context and low-context cultures and Maruyama’s (1974) contrast between unidirectional and

Shared Assumptions About the Nature of Reality and Truth

A fundamental part of every culture is a set of assumptions about what is real and how to determine or discover what is real. Such

Managing the Unmanageable and Explaining the Unexplainable

Every group inevitably faces some issues not under its control, events that are intrinsically mysterious and unpredictable and hence frightening. At the physical level, events

Allocating Rewards and Punishment

Every group must develop a system of sanctions for obeying or disobeying its norms and rules. There must evolve some consensus on what symboli­cally and

Developing Rules for Relationships

Every new group must decide simultaneously how to deal with author­ity problems and how to establish workable peer relationships. Whereas authority issues derive ultimately from

Distributing Power, Authority, and Status

A critical issue in any new group is how influence, power, and authority will be allocated and what the rules will be for “deference and

Deeper cultural assumptions about human nature

Every culture has shared assumptions about what it means to be human, what our basic instincts are, and what kinds of behavior are considered inhuman

Deeper cultural assumptions: Distance and Relative Placement

Space has both a physical and a social meaning (Van Maanen, 1979b). For coordinated social action to occur, an individual must share assumptions about the

Deeper cultural assumptions: the nature of space

Our assumptions about the meaning and use of space are among the most subtle aspects of organizational culture because assumptions about space, like those about

Deeper cultural assumptions: the nature of time

The perception and experience of time are among the most central aspects of how any group functions. When people differ in their experience of time,

What Is “Information”?

How a group tests for reality and makes decisions also involves consen­sus on what constitutes data, what is information, and what is knowledge. As information

Moralism-Pragmatism

A useful dimension for comparing groups on their approach to reality testing is an adaptation of England’s (1975) moralism-pragmatism dimension. In his study of managerial