Organizational culture will act as a self-defending organism where intrusive elements are kept out.

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Chapter 15 Organizational Culture

LEARNING OBJECTIVES

After reading this chapter, you should be able to do the following:

1. Describe organizational culture and why it is important for an organization.

2. Understand the dimensions that make up a company’s culture.

3. Distinguish between weak and strong cultures.

4. Understand factors that create culture.

5. Understand how to change culture.

6. Understand how organizational culture and ethics relate.

7. Understand cross-cultural differences in organizational culture.

Customer Service Culture: The Case of Nordstrom Nordstrom Inc. is a Seattle-based department store rivaling the likes of Saks

Fifth Avenue, Neiman Marcus, and Bloomingdale’s. Nordstrom is a Hall of

Fame member of Fortune Magazine’s “100 Best Companies to Work for” list,

including being ranked 34th in 2008. Nordstrom is known for its quality

apparel, upscale environment, and generous employee rewards. However,

what Nordstrom is most famous for is its delivery of customer service above

and beyond the norms of the retail industry. Stories about Nordstrom service

abound. For example, according to one story the company confirms, in 1975

Nordstrom moved into a new location that had formerly been a tire store. A

customer brought a set of tires into the store to return them. Without a word

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about the mix-up, the tires were accepted and the customer was fully refunded

the purchase price. In a different story, a customer tried on several pairs of

shoes but failed to find the right combination of size and color. As she was

about to leave, the clerk called other Nordstrom stores, but could only locate

the right pair at Macy’s, a nearby competitor. The clerk had Macy’s ship the

shoes to the customer’s home at Nordstrom’s expense. In a third story, a

customer describes wandering into a Portland, Oregon Nordstrom looking for

an Armani tuxedo for his daughter’s wedding. The sales associate took his

measurements just in case one was found. The next day, the customer got a

phone call, informing him that the tux was available. When pressed, she

revealed that using her connections she found one in New York, had it put on

a truck destined to Chicago, and dispatched someone to meet the truck in

Chicago at a rest stop. The next day she shipped the tux to the customer’s

address, and the customer found that the tux had already been altered for his

measurements and was ready to wear. What is even more impressive about

this story is that Nordstrom does not sell Armani tuxedos.

How does Nordstrom persist in creating these stories? If you guessed that they

have a large number of rules and regulations designed to emphasize quality in

customer service, you’d be wrong. In fact, the company gives employees a 5½-

inch by 7½-inch card as the employee handbook. On one side of the card, the

company welcomes employees to Nordstrom, states that their number one

goal is to provide outstanding customer service, and for this they have only

one rule. On the other side of the card, the single rule is stated: “Use good

judgment in all situations.” By leaving it in the hands of Nordstrom associates,

the company seems to have managed to empower employees who deliver

customer service heroics every day.

Sources: Adapted from information in Chatman, J. A., & Eunyoung Cha, S.

(2003). Leading by leveraging culture. California Management Review, 45,

19–34; McCarthy, P. D., & Spector, R. (2005). The Nordstrom way to customer

service excellence: A handbook for implementing great service in your

organization. Hoboken, NJ: John Wiley; Pfeffer, J. (2005). Producing

sustainable competitive advantage through the effective management of

people. Academy of Management Executive, 19, 95–106.

Just like individuals, you can think of organizations as having their own

personalities, more typically known as organizational cultures. The opening

case illustrates that Nordstrom is a retailer with the foremost value of

making customers happy. At Nordstrom, when a customer is unhappy,

employees are expected to identify what would make the person satisfied,

and then act on it, without necessarily checking with a superior or

consulting a lengthy policy book. If they do not, they receive peer pressure

and may be made to feel that they let the company down. In other words,

this organization seems to have successfully created a service culture.

Understanding how culture is created, communicated, and changed will

help you be more effective in your organizational life. But first, let’s define

organizational culture.

15.1 Understanding Organizational Culture

LEARNING OBJECTIVES

1. Define organizational culture.

2. Understand why organizational culture is important.

3. Understand the different levels of organizational culture.

What Is Organizational Culture?

Organizational culture refers to a system of shared assumptions, values, and

beliefs that show employees what is appropriate and inappropriate

behavior. [1] These values have a strong influence on employee behavior as well

as organizational performance. In fact, the term organizational culture was made

popular in the 1980s when Peters and Waterman’s best-selling book In Search of

Excellence made the argument that company success could be attributed to an

organizational culture that was decisive, customer oriented, empowering, and

people oriented. Since then, organizational culture has become the subject of

numerous research studies, books, and articles. However, organizational

culture is still a relatively new concept. In contrast to a topic such as

leadership, which has a history spanning several centuries, organizational

culture is a young but fast-growing area within organizational behavior.

Culture is by and large invisible to individuals. Even though it affects all

employee behaviors, thinking, and behavioral patterns, individuals tend to

become more aware of their organization’s culture when they have the

opportunity to compare it to other organizations. If you have worked in

multiple organizations, you can attest to this. Maybe the first organization you

worked was a place where employees dressed formally. It was completely

inappropriate to question your boss in a meeting; such behaviors would only

be acceptable in private. It was important to check your e-mail at night as well

as during weekends or else you would face questions on Monday about where

you were and whether you were sick. Contrast this company to a second

organization where employees dress more casually. You are encouraged to

raise issues and question your boss or peers, even in front of clients. What is

more important is not to maintain impressions but to arrive at the best

solution to any problem. It is widely known that family life is very important,

so it is acceptable to leave work a bit early to go to a family event. Additionally,

you are not expected to do work at night or over the weekends unless there is a

deadline. These two hypothetical organizations illustrate that organizations

have different cultures, and culture dictates what is right and what is

acceptable behavior as well as what is wrong and unacceptable.

Why Does Organizational Culture Matter?

An organization’s culture may be one of its strongest assets, as well as its

biggest liability. In fact, it has been argued that organizations that have a rare

and hard-to-imitate organizational culture benefit from it as a competitive

advantage. [2] In a survey conducted by the management consulting firm Bain

& Company in 2007, worldwide business leaders identified corporate culture

as important as corporate strategy for business success. [3]This comes as no

surprise to many leaders of successful businesses, who are quick to attribute

their company’s success to their organization’s culture.

Culture, or shared values within the organization, may be related to increased

performance. Researchers found a relationship between organizational

cultures and company performance, with respect to success indicators such as

revenues, sales volume, market share, and stock prices. [4] At the same time, it

is important to have a culture that fits with the demands of the company’s

environment. To the extent shared values are proper for the company in

question, company performance may benefit from culture. [5]For example, if a

company is in the high-tech industry, having a culture that encourages

innovativeness and adaptability will support its performance. However, if a

company in the same industry has a culture characterized by stability, a high

respect for tradition, and a strong preference for upholding rules and

procedures, the company may suffer as a result of its culture. In other words,

just as having the “right” culture may be a competitive advantage for an

organization, having the “wrong” culture may lead to performance difficulties,

may be responsible for organizational failure, and may act as a barrier

preventing the company from changing and taking risks.

In addition to having implications for organizational performance, organizational

culture is an effective control mechanism for dictating employee behavior. Culture is in fact a

more powerful way of controlling and managing employee behaviors than

organizational rules and regulations. When problems are unique, rules tend to

be less helpful. Instead, creating a culture of customer service achieves the

same result by encouraging employees to think like customers, knowing that

the company priorities in this case are clear: Keeping the customer happy is

preferable to other concerns such as saving the cost of a refund.

Levels of Organizational Culture

Organizational culture consists of some aspects that are relatively more

visible, as well as aspects that may lie below one’s conscious awareness.

Organizational culture can be thought of as consisting of three interrelated

levels. [6]

At the deepest level, below our awareness lie basic assumptions. Assumptions

are taken for granted, and they reflect beliefs about human nature and reality.

At the second level, values exist. Values are shared principles, standards, and

goals. Finally, at the surface we have artifacts, or visible, tangible aspects of

organizational culture. For example, in an organization one of the basic

assumptions employees and managers share might be that happy employees

benefit their organizations. This assumption could translate into values such

as social equality, high quality relationships, and having fun. The artifacts

reflecting such values might be an executive “open door” policy, an office

layout that includes open spaces and gathering areas equipped with pool

tables, and frequent company picnics in the workplace. For example, Alcoa

Inc. designed their headquarters to reflect the values of making people more

visible and accessible, and to promote collaboration. [7] In other words,

understanding the organization’s culture may start from observing its

artifacts: the physical environment, employee interactions, company policies,

reward systems, and other observable characteristics. When you are

interviewing for a position, observing the physical environment, how people

dress, where they relax, and how they talk to others is definitely a good start to

understanding the company’s culture. However, simply looking at these

tangible aspects is unlikely to give a full picture of the organization. An

important chunk of what makes up culture exists below one’s degree of

awareness. The values and, at a deeper level, the assumptions that shape the

organization’s culture can be uncovered by observing how employees interact

and the choices they make, as well as by inquiring about their beliefs and

perceptions regarding what is right and appropriate behavior.

KEY TAKEAWAY

Organizational culture is a system of shared assumptions, values, and beliefs that

help individuals within an organization understand which behaviors are and are not

appropriate within an organization. Cultures can be a source of competitive

advantage for organizations. Strong organizational cultures can be an organizing as

well as a controlling mechanism for organizations. And finally, organizational culture

consists of three levels: assumptions, which are below the surface, values, and

artifacts.

EXERCISES

1. Why do companies need culture?

2. Give an example of an aspect of company culture that is a strength and one that is a

weakness.

3. In what ways does culture serve as a controlling mechanism?

4. If assumptions are below the surface, why do they matter?

5. Share examples of artifacts you have noticed at different organizations.

15.2 Characteristics of Organizational Culture

LEARNING OBJECTIVES

1. Understand different dimensions of organizational culture.

2. Understand the role of culture strength.

3. Explore subcultures within organizations.

Dimensions of Culture

Which values characterize an organization’s culture? Even though culture may

not be immediately observable, identifying a set of values that might be used

to describe an organization’s culture helps us identify, measure, and manage

culture more effectively. For this purpose, several researchers have proposed

various culture typologies. One typology that has received a lot of research

attention is the organizational culture profile (OCP), in which culture is represented

by seven distinct values. [1] We will describe the OCP as well as two additional

dimensions of organizational culture that are not represented in that

framework but are important dimensions to consider: service culture and

safety culture.

Figure 15.4 Dimensions of Organizational Culture Profile (OCP)

Source: Adapted from information in O’Reilly, C. A., III, Chatman, J. A., &

Caldwell, D. F. (1991). People and organizational culture: A profile

comparison approach to assessing person-organization fit. Academy of

Management Journal, 34, 487–516.

Innovative Cultures

According to the OCP framework, companies that have innovative cultures are

flexible and adaptable, and experiment with new ideas. These companies are

characterized by a flat hierarchy in which titles and other status distinctions

tend to be downplayed. For example, W. L. Gore & Associates Inc. is a

company with innovative products such as GORE-TEX® (the breathable

fabric that is windproof and waterproof), Glide dental floss, and Elixir guitar

strings, earning the company the distinction of being elected as the most

innovative company in the United States by Fast Company magazine in 2004. W.

L. Gore consistently manages to innovate and capture the majority of market

share in a wide variety of industries, in large part due to its unique culture. In

this company, employees do not have bosses in the traditional sense, and risk

taking is encouraged by celebrating failures as well as successes. [2] Companies

such as W. L. Gore, Genentech Inc., and Google also encourage their

employees to take risks by allowing engineers to devote 20% of their time to

projects of their own choosing. [3]

Aggressive Cultures

Companies with aggressive cultures value competitiveness and outperforming

competitors: By emphasizing this, they may fall short in the area of corporate

social responsibility. For example, Microsoft Corporation is often identified as

a company with an aggressive culture. The company has faced a number of

antitrust lawsuits and disputes with competitors over the years. In aggressive

companies, people may use language such as “We will kill our competition.” In

the past, Microsoft executives often made statements such as “We are going to

cut off Netscape’s air supply.…Everything they are selling, we are going to give

away.” Its aggressive culture is cited as a reason for getting into new legal

troubles before old ones are resolved. [4] Recently, Microsoft founder Bill Gates

established the Bill & Melinda Gates foundation and is planning to devote his

time to reducing poverty around the world. [5] It will be interesting to see

whether he will bring the same competitive approach to the world of

philanthropy.

Outcome-Oriented Cultures

The OCP framework describes outcome-oriented cultures as those that

emphasize achievement, results, and action as important values. A good

example of an outcome-oriented culture may be Best Buy Co. Inc. Having a

culture emphasizing sales performance, Best Buy tallies revenues and other

relevant figures daily by department. Employees are trained and mentored to

sell company products effectively, and they learn how much money their

department made every day. [6] In 2005, the company implemented a results

oriented work environment (ROWE) program that allows employees to work

anywhere and anytime; they are evaluated based on results and fulfillment of

clearly outlined objectives. [7] Outcome-oriented cultures hold employees as

well as managers accountable for success and utilize systems that reward

employee and group output. In these companies, it is more common to see

rewards tied to performance indicators as opposed to seniority or loyalty.

Research indicates that organizations that have a performance-oriented

culture tend to outperform companies that are lacking such a culture. [8] At the

same time, some outcome-oriented companies may have such a high drive for

outcomes and measurable performance objectives that they may suffer

negative consequences. Companies over rewarding employee performance

such as Enron Corporation and WorldCom experienced well-publicized

business and ethical failures. When performance pressures lead to a culture

where unethical behaviors become the norm, individuals see their peers as

rivals and short-term results are rewarded; the resulting unhealthy work

environment serves as a liability. [9]