Organizational Culture: Will yours help you grow or will it keep you from growing?

Guy Sapirstein, PhD
Resilience Consulting, LLC

Why is organizational culture important?

Research on organizational culture has demonstrated that it has significant impact on economic performance. Kotter and Haskett found that over an eleven year period, organizations with “healthy” cultures outperformed those with “unhealthy cultures”:

1.     Revenue increase over 11 years: 682% versus 166%
2.
     Workforce expansion over 11 years: 282% versus 36%
3.
     Net income improvement over 11 years: 756% versus 1%

What is “organizational culture”?

The most basic yet straightforward definition of organizational culture is “this is how things are around here” (Cameron and Quinn). The organizational culture refers to the values, guidelines (written and at times unspoken), the sense of identity, behavior patterns, and expectations people have. It is often ignored or taken for granted until it is challenged, changed, or made explicit through a program, model, or initiative.

Another important aspect of organizational culture is that it tends to persist over time, regardless of the individuals in the group. That means that even if someone leaves, the expectations and other behavior patterns will likely endure. Finally, organizational culture is part of the formal and informal on-boarding process for new employees.

What is a “healthy culture”?

Defining a “healthy” organizational culture is difficult. There are four principles to keep in mind:

1.     There needs to be a match between the cultural characteristics and the mission, vision, and operational goals of the organization (company, department, division, etc.).
2.
     The culture needs to emphasize all three groups of stakeholders: customers, owners, and employees.
3.
     Managers or leaders at all levels of the organization must be able to initiate change processes when necessary, not just when one of the groups (customers, owners, or employees) demands it. In other words, managers must take all three groups into account.
4.
     Organizational Culture begins at the top: CEOs of companies that were interviewed for the Kotter and Haskett study spoke about defining their role as related to the values and culture of the organization (e.g. being “custodian of the corporate culture”; “preserving the firm’s values”; “teaching others… a key part of the curriculum is cultural”).

Another important aspect of organizational culture relates to hiring practices. In organizations with a “healthy” culture, people are hired and promoted on the basis of having values consistent with the “core” of the organizational culture.  This does not mean conformity of personal philosophy or outlook – to the contrary! Organizations with healthy cultures value diversity. It does mean that the  “core cultural values” (e.g. promoting leadership, initiative, or collaboration) are often more important than skills or experience.

In contrast to “healthy” cultures, the unhealthy ones were characterized by:

1.  Arrogant managers.
2.  Not valuing all stakeholders (customers, owners, and employees).
3. Hostility to values of change and leadership.

Finaly, in less adaptive cultures, managers tended to behave cautiously and politically, focusing on their own protection or self interest (i.e. to advance themselves, their specific product or immediate work group).

Conclusions:

Having a “healthy” organizational culture is critical for long-term performance and success. Organizations should assess their organizational culture styles and determine whether they “fit” or “match” the mission, vision, and operational needs. If there is a mismatch, an organizational culture change process should be initiated. “Healthy” or adaptive organizational culture begins at the top and continues with managers and leaders throughout the organization. Finally, the HR departments and those responsible for hiring play an important role in helping secure the organization’s cultural “health”.



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