Organizational CultureChapter 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 advantage.

• An organization has two types of values: terminal and instrumental.

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 behavior.

• 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 effectiveness.

• 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 practices.

• 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 timetable.

• 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 immediately.

• 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.

Cont’d..

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 values.

• Stories, ceremonies, and organizational language convey cultural values.

Cont’d..

• 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 From:-

• 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 Organization

• 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 From:-

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 employees.

• 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.

Cont’d..

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.

Cont’d..

Can Organizational Culture Be Managed?

• 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.

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