Organizational Culture

Organizational culture is is a company’s expectations, beliefs, values and attitudes, and how these influence the employees’ behavior. A company’s culture affects how people experience the organization such as employees, vendors, and customers. Some examples of organizational culture include philosophy, values, expectations, and experiences.

By Brad Nakase, Attorney

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Why Is Organizational Culture Important?

Organizational culture is important to the long-term success of an organization. A strong culture means that the business has a core set of beliefs evident in its policies and the actions of its management. When the organization’s culture is clear, the following benefits arise:

Employees will use the culture to decide how to act when new situations arise
Employees know that demonstrating the organization’s values will result in recognition
Employees know what is expected of them

HR is at the center of an organization’s culture, its policies, training, recognition, and recruitment will help to strengthen or weaken the culture.

Organizational culture is composed of expectations and beliefs shared by members of an organization. Organizational culture consists of common norms, values, and beliefs of individuals within that group. A well-defined company culture sets expectations for how everyone in the company is to behave. It is a series of beliefs and values that sets the framework of a company’s operations and how they want their employees to behave. Strong company culture leads to more efficient decision making, increased employee trust and sense of belonging, and fewer disagreements. It is also easier for employees and managers to make decisions that fit in with the company culture.

Most successful companies have a strong organizational culture which is demonstrated by management and even the business owners. The values and beliefs that management set should focus on the company’s goals and its brand. These values and beliefs must be widely shared and be a key factor in business decisions.

An ineffective company culture will lead to confusion, poor customer relations, disengaged employees, lower profits, and a high employee turnover. Employees and executives that feel like they do not fit in with the culture will often struggle or quit. Once an organizational culture is established, all subsequent business decisions and recruitment must be made with the culture in mind.

Mergers and acquisitions can threaten even the strongest organizational culture if not handled properly. In fact, it is the reason that two-thirds of mergers and acquisitions fail. It is important to blend the organizational cultures in a way that strengthens the culture rather than muddying the waters. Differences must be addressed, and common ground must be emphasized.

What Role Does HR Play in Organizational Culture?

HR plays an essential role in maintaining and strengthening a company’s culture. They must know the organization’s beliefs and values inside and out. By working with senior management to identify what high performance looks like within the organizational culture, they can make decisions that strengthen the culture. After all, company culture is influenced most by the people in an organization.

HR can strengthen an organization’s culture in these ways:

Defining the accountabilities and responsibilities of each role
Recruiting based on skill and fit with the company culture
Developing a reward and recognition system that mirrors the organizational culture
Demonstrating the beliefs of the company in the actions of their team
Ensuring that everyone understands the company values
Providing ongoing training for all members of staff
Ensuring that feedback channels are in place and that communication is two-way
Empowering teams to make decisions in line with organizational culture
Identifying and efficiently solving any issues that arise

What Is The Organization’s Culture?

The HR department needs to clearly understand the company’s culture if they are to strengthen it. On its most basic level, organizational culture is based on the company’s stance about:

The Company’s Environment – How the company defines and relates to the community around it. This can also refer to how the company sees its role on a global scale.
Appropriate Workplace Emotions – What emotions and values should employees express and suppress in the workplace? For example, a daycare might discourage competitiveness and encourage team work and nurturing. A sales-based business, on the other hand, might encourage competitiveness and a desire to succeed.
Human nature – By defining the company’s stance on human nature, it tells management and employees how to treat the customers, suppliers, and even fellow employees. For example, a “customer is always right” organization sees people as inherently good.
Effectiveness – Intrinsic to the company culture is a clear set of criteria for how well each employee and the overall business is performing. The metric used needs to fit in with the organizational culture otherwise, employees will be rewarded for going against the desired culture.

What Factors Shape a Company’s Culture?

Company cultures are often very similar, even across completely different industries. After all, there are a number of positive attributes that companies like to portray to the world. For example, many companies are team-oriented and driven. There are very few companies that have a unique organizational culture.

Shared Values

Commonly shared values are the lifeblood of company culture and will help employees to interpret the culture. Some common values are:

People-oriented
Team-oriented
Outcome-oriented
Stability
Aggressiveness/Competitive
Innovation
Attention to detail

Hierarchy

The hierarchal structure will also either strengthen or weaken the company culture. When talking about hierarchy, a high, medium, or low scale is applied. A high level of hierarchy is a formal workplace where employees work through official channels. A low level of hierarchy is a relaxed workplace where individual employee are empowered to challenge ideas and contribute to the decision-making process.

Urgency

The level of urgency of a company is how quickly they innovate and make decisions. This factor may be based on their ethos or the level of urgency the market requires. For example, a fast-moving market place will require companies to complete projects quickly and churn out new products. A company with low urgency will focus on the quality of their products or services.

People-Oriented vs Task-Oriented

An organization will either put the people first or the tasks first in their policies. Sometimes, this orientation will be affected by the nature of their operations or industry. This orientation will have a strong impact on the organizational culture.

Functional Orientation

A business’s functional orientation is which department it focuses on. In some companies, the focus may be customer service; in others, it may be marketing, or research and development. The marketplace may impact this orientation, but often it is a way to stand out from other companies in the industry.

Employees in different departments may have different answers if asked which department is the company’s focus. It is important to be aware of how the employees perceive the company’s functional orientation too.

Subcultures

Within an organization will exist a number of subcultures, these may exist in different company locations or departments. While subcultures are very natural, it is important that the subcultures strengthen the overall organizational culture rather than contradicting it. If issues with subcultures are identified, they must be dealt with directly.

How to Create and Manage Organizational Culture

It takes time to develop an organizational culture; it is not as simple as sending a company-wide memo. Most of all, employees need to see the company culture reflected in policies, procedures, and the actions of leaders.

Often, a company’s values are most visible in the traditions, reward and recognition system, rituals, and way of operating. Anyone who walks into your business should be able to see what kind of values your company has.

How to Develop Company Culture

The founders of a business will create the company culture through the way they act and their goals for the business. However, as the company grows, these values will develop over time. Often, all leaders will gather to have an honest conversation about the company values. They will discuss what the company currently values and the company’s ideal values. Some companies will put together a committee to develop and maintain the company values; others will just ask HR to oversee the values. Most importantly, the people in charge of maintaining the company’s values must have a direct link to leadership and be able to speak out against decisions which go against the values.

How to Sustain Company Culture

To properly manage company culture, you need to first identify the “artifacts” of the company. These are the core philosophies, processes, and business activities of the organization. These should be evaluated in light of the following three types of culture

Ideological culture – The ideals, values, and beliefs of the people in the organization.
Material culture – The things people achieve, the products they make, and the way people support each other when exchanging goods and services.
Social culture – The social hierarchy between people, the distribution of power, and the roles and responsibilities.

HR and the leaders of an organization should have a good understanding of how those three types of culture currently exist in their workplace. They should identify the key business artifacts within each culture and check with representatives from different departments and levels as to how important each artifact is. From there, they can begin to develop a culture management plan based on how individuals and departments within the organization work.

Often shared beliefs and assumptions come from management or leaders. These are the people who need to emulate the desired company culture for it to work.

How Can HR Develop Organizational Culture?

Because HR develops policies and programs, training, recruitment, and onboarding programs, it is a key part of developing and maintaining organizational culture. If HR activity is aligned with the company culture then the culture will be strong. If the HR activity is not aligned with the organizational culture, then the culture will be weakened.

HR should use all the tools in their arsenal to develop and maintain company culture. The company culture will determine how HR resources will be allocated. Here are some of the tools HR departments have at their disposal.

Recruitment Practices

A company’s recruitment practices are at the center of developing organizational culture. When hiring new employees, it is important to determine whether the potential employee’s personality will fit in with the company culture. This will ensure employees thrive in the workplace and stay longer.

An ill-fitting hire will cause issues in the workplace or with other employees. It will also cost the company at least 50% of the role’s annual salary in recruitment fees.

Hiring practices which support company culture include

Interview questions that determine if an applicant demonstrates behaviors in line with company culture.
Ask questions in a way that shows their views on some of the For example, ask about the best and worst places they’ve worked.
Do not reveal anything about company culture so that you may get honest answers.
Ensure three people are conducting the interview so you can get different perspectives on the potential applicant.
When hiring new employees, a company must be honest about their company culture. Misrepresenting it to new hires can result in high staff turnover just as much as hiring a poor fit.

Onboarding

The onboarding process socializes new employees into the workplace and teaches them about the company culture. A new employee’s early job experiences must reinforce the organizational culture.

Reward and Recognition

The programs which are designed to motivate employees will encourage certain behaviors. To enforce company culture, these should be behaviors which are in line with the company’s culture. Those who personify the values of the organization should be held up as ideal employees.

Performance Management

Employees perform well in environments where they know what is expected of them. A performance management program can remind employees about desired behaviors and analyze where they are going right and anywhere they are underperforming.

Communication

Messages should be cohesive as conflicting messages will create uncertainty and even cynicism. This also means that management and leaders’ actions should reflect the company’s communication. If a company claims to be people-orientated but implements policies which show they care more about company profit than the wellbeing of their people, then employees will doubt the company culture.

How to Measure Company Culture

Assessing organizational culture can be difficult as there is little that can be reduced down to numbers for analysis.

Create a survey for assessing the culture
Use the survey
Analyze the survey results and discuss it with HR and leaders
Conduct focus groups amongst employees to find out more about the issues the survey uncovered
Discuss the results of the focus group and create plans for improving company culture or changing direction to fit how the business actually operates

What Are the Legal Issues With Organizational Culture?

If a company is not careful, recruiting based on company culture can open them up to discrimination claims. It is important to ensure the organizational culture does not exclude any types of people. Recruiters must also be aware that hiring cultural fits does not mean hiring people who look like everyone else in the workplace in terms of race, gender, sexuality, ability, etc. Similarly, organizational culture might cause discrimination issues in compensation or promotion if not managed correctly. The values a company promotes must be values that many demographics would hold or feel comfortable displaying. For example, certain religions or genders might feel uncomfortable expressing “aggressiveness” at work. However, if the value is reframed as “competitive,” then the playing field is evened out while the value remains.

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