Reading Organization Culture
For the exclusive use of N. Guan, 2015
CASE: OB-69
DATE: 09/01/09
NOTE ON ORGANIZATIONAL CULTURE
Many people are skeptical of the idea that organizational cultures exert any real effects on individual and organizational behavior. One reason for this suspicion is that when people use the word culture to explain why a firm behaves the way it does, they often use it as a catch-all category for “the way things are done” in that firm. But “the way things are done” can often be discussed in much more concrete terms by focusing on specific aspects of the formal organization, such as the structure of the incentive plans in place, the formal grouping and linking principles encoded in the formal organizational structure, and the established routines and operating procedures in the firm. If the organizational culture concept merely summarizes these elements, it does seem fair to ask whether the concept adds any value.
An important first step in discussing organizational culture is therefore to define it. Following
Schein (1992), an organizational culture consists of a set of basic assumptions that have developed as a consequence of the organization’s attempts to adapt to internal and external problems. This definition suggests that organizational culture may be shaped by senior management to align with strategic goals, but it may also evolve in an emergent fashion, without direct influence from management. Organizational culture operates at the level of basic beliefs and values that have been internalized (to a greater or lesser extent) by the organization’s members. To better understand why organizational cultures might play an important role in shaping organizational behavior, consider two generic problems that firms face. The first is the problem of exercising control while at the same time delegating decision-making authority. Managers commonly need to make decisions under conditions of uncertainty, and therefore need to assess what kinds of actions are optimal, from
CASE: OB-69
DATE: 09/01/09
NOTE ON ORGANIZATIONAL CULTURE
Many people are skeptical of the idea that organizational cultures exert any real effects on individual and organizational behavior. One reason for this suspicion is that when people use the word culture to explain why a firm behaves the way it does, they often use it as a catch-all category for “the way things are done” in that firm. But “the way things are done” can often be discussed in much more concrete terms by focusing on specific aspects of the formal organization, such as the structure of the incentive plans in place, the formal grouping and linking principles encoded in the formal organizational structure, and the established routines and operating procedures in the firm. If the organizational culture concept merely summarizes these elements, it does seem fair to ask whether the concept adds any value.
An important first step in discussing organizational culture is therefore to define it. Following
Schein (1992), an organizational culture consists of a set of basic assumptions that have developed as a consequence of the organization’s attempts to adapt to internal and external problems. This definition suggests that organizational culture may be shaped by senior management to align with strategic goals, but it may also evolve in an emergent fashion, without direct influence from management. Organizational culture operates at the level of basic beliefs and values that have been internalized (to a greater or lesser extent) by the organization’s members. To better understand why organizational cultures might play an important role in shaping organizational behavior, consider two generic problems that firms face. The first is the problem of exercising control while at the same time delegating decision-making authority. Managers commonly need to make decisions under conditions of uncertainty, and therefore need to assess what kinds of actions are optimal, from
References: Burt, Ronald S., Shaul M. Gabbay, Gerhard Holt, and Peter Moran. 1994. “Contingent organization as a network theory: The culture performance contingency function.” Acta Kreps, David M. 1990. “Corporate culture and economic theory.” Pp. 90-143 in J.E. Alt and K.A O 'Reilly, Charles A. 1989 “Corporations, culture and commitment: Motivation and social control in organizations.” California Management Review 31: 9-25. O 'Reilly, Charles A. and Jennifer A. Chatman. 1996. "Culture as social control: corporations, culture and commitment." Research in Organizational Behavior 18: 157-200. Schein, Edgar H. 1991. “The role of the founder in the creation of organizational culture.” Pp. Sherif, M. 1935. “A study of some social factors in perception.” Archives of Psychology, No 187. Sørensen, Jesper B. 2002. “The strength of corporate culture and the reliability of firm performance.” Administrative Science Quarterly 47: 70-91. Zucker, Lynne G. 1977. “The role of institutionalization in cultural persistence.” American Sociological Review 42: 726-743. This document is authorized for use only by Nancy Guan in BUSE 39001 (Winter 15) Strategy and Structure: Markets and Organizatio... taught by Amanda Sharkey at University of Chicago, 2015