The Role of Corporate Culture in Organizational Performance - Case Study Example

The Role of Organisational Culture in Enhancing Organisational Effectiveness and Performance Introduction Organisational performance refers to how an organisation utilises its technological, physical and human resources to achieve its objectives. It takes into account several parameters including productivity levels, sustainability of profitability and general satisfaction of employees. Every organisation has its own organisational culture. These are unwritten values and practices which employees, over a considerable length of time in the organisation, have adopted and learnt to adhere to. Since organisational culture underlies the utilisation of human resource within an organisation to achieve operational effectiveness, it follows that organisational culture plays a key role in enabling organisations to achieve performance in their operations. This paper examines the role of corporate culture in organisational performance. To do this, a general examination of theories and concepts of organisational culture is given. Definitions and description of key concepts of organisational culture, including roles and functions, is given. This is followed by a general examination of the concept of operational effectiveness and performance. Parameters used to determine the level of performance of organisations are explored. Lastly, the paper examines various ways in which organisational culture contributes to organisational effectiveness and performance. Definition, characteristics and functions of organisational culture Organisational culture can be defined as a set of attributes perceived by individuals and deemed to have an impact upon the willingness of individuals to perform at their best. This system of shared meaning differentiates one organisation from the others. Two salient features of organisational culture are evident in this definition. One is that culture refers to what individuals react to both physically and psychologically. The second feature of organisational culture is that it is composed of enduring characteristics which not only define the organisation but also affect the behaviour of human resources in the organisation (Daft, Murphy & Willmot 2010, p. 400). Dessler (1976, cited by Dwivedi 1995, p. 10) stated that culture can be analysed in three different approaches: subjective, structural and synthetic. The subjective approach of culture emphasises individual and collective attitudes of human resources towards the organisation. Culture, in this case, defines how individuals feel about the organisation. On the other hand, culture, basing on the structural approach, is viewed as a set of characteristics which are eternally distinct in differentiating an organisation from others. Culture creates the uniqueness of an organisation, therefore setting an organisation apart from the rest. A synthetic cultural analysis emphasises the role of both subjective and structural approaches in creating a holistic definition of organisational culture. The corporate culture of an organisation is what defines its salient features, strengths and general performance. The complete picture of an organisation’s culture can be summed up in four key characteristics. These characteristics provide a complete picture of how the organisation is perceived by its human resource in its operations and general performance. The first characteristic of organisational culture is that it defines the extent of risk tolerance within the organisation. This is expressed by the degree to which employees are expected to exhibit characteristics of innovativeness, aggressiveness and risk tolerance in their day-to-day operations. Secondly, organisational culture defines the identity of members of an organisation. Organisational culture influences employees to identify with the organisation rather than their professions or job responsibilities. Third, organisational culture expresses the degree to which an organisation is people-centred. This explains to what extent the management takes into consideration the impact or decision making processes on the lives of employees. Fourth, organisational culture defines the reward policy within an organisation. Organisations reward employees by basing on objective criteria such as performance and merit as opposed to favouritism and seniority (Miner 2007, p. 74). Rewards, according to the reinforcement theory, act to influence the behaviour of employees towards adopting a particular pattern of cultural behaviour within the organisation (Murray, Poole & Jones 2006, p. 78). According to Handy (1995, pp. 15-20), there are four different types of organisational culture. This characterisation is based on the notion that culture follows the structural design of the organisation. Therefore, it follows that power culture is mostly adopted by family-based or small businesses because one individual forms the centre of power and influence throughout the whole organisation. Employees are tasked with the responsibility of adapting to the expectations of the source of power. On the other hand, task culture is common with corporations that adopt a project-based approach in operations. Teams of professionals are assembled at every particular time for the sole purpose for completing a particular project. This type of culture focuses on team work as opposed to hierarchical order of power. This is quite different from role culture which emphasises professional roles at the expense of the individuals who hold them (Handy 1995, p. 18; Hollank & Walter 2009, p. 13). Culture plays three important roles in an organisation (Chang & Luo 2007, p. 9). First, by defining the uniqueness of an organisation, it acts as tool of setting boundaries between one organisation and others. Employees are guided on how far they can go in making decisions as members of the organisation. New employees learn and adapt to its corporate culture. This process takes time; according to Jablin (1987, 2001 cited by Dainton & Zelley 2012, pp. 106 – 108), new employees in an organisation undergo a four-stage process in adapting to the new culture. In the first stage, employees have prior knowledge about a particular type of career. The knowledge and opinion is slightly modified during the second stage when the employee develops anticipated expectations before joining the organisation. The third stage involves the employee coming into contact with the reality of the culture of the organisation. Earlier beliefs may be discarded as modification takes place in the last stage of metamorphosis. The second role of culture in an organisation is that it creates a sense of belongingness to members of organisations (Dwivedi 1995, p. 35). This results from the fact that employees of an organisation identify themselves with the culture of the organisation and the organisation itself in full. Third, culture provides social stability within the organisation. The appropriate standards recommended by organisational culture guide employees on what to do and act, thus holding them together as members of one organisation (Madu 2012, p. 6). These functions of culture work to remove deviations from established norms within the organisation and establish culture as a set of unwritten laws of the organisation (Armbruster 2007, p. 97). Role of corporate culture in organisational performance Organisational effectiveness and performance can be measured by a number of specific criteria. Such measurements form a quantitative basis for determining the general performance of an organisation. Factors such as absenteeism of employees, the rate of employee turnover, level of unrest among employees and their grievances can be easily obtained from the records of any organisation in an industrial setting (Daft, Murphy & Willmot 2010, p. 123). Employee absenteeism reflects the level of job satisfaction (or dissatisfaction) among the workforce of the organisation. Workers who are less satisfied with the job conditions find it much easier to positively respond to conditions which necessitate absenteeism. A high rate of employees leaving an organisation is a manifestation of general unrest and dissatisfaction within the work force. This lowers the rate of production and, by extension, bears a negative impact on the general performance of the organisation (D’Annunzio, Gillain & Sandra 2002, pp. 54-56). It is argued that these criteria of measuring organisational effectiveness and performance take into account levels of adaptability within the organisational setting, sense of identity and the capacity of employees to adapt to existing realities and future strategy (Greenberg 2007, p. 2042). Organisational culture plays an important role in the performance of an organisation. High level of organisational performance entails effective utilisation of all the human, technological and physical resources at the disposal of an organisation. This translates to general corporate success. There are several ways in which corporate culture interacts with management practice to yield effective utilisation of resources in an organisation. The first one is the role of organisational culture in leadership and management of the organisation. Organisational culture is completely dependent on the managerial behaviour of leaders of the organisation (Cole 2003, pp. 102-104). Leadership bears a strong influence on the beliefs and general behaviour of subordinates which, in turn, constitute the culture of the organisation. Further, effective leadership styles foster an efficient and productive group work approach (Armbruster 2007, p. 87). Effective groups build an atmosphere of cooperation and group loyalty and this translates to a strong organisational culture. Further, it has been observed that the success of leadership is dependent on a combination between the style of leadership employed and the personality type of the leader. Both of these build loyalty and trust within the workforce and are precursors to organisational effectiveness and general performance. The second way in which organisational culture influences corporate performance is through adoption of strategically appropriate cultures for an organisation (Kotter & Heskett 1992, pp. 26-29). A culture whose content (values and behaviours) fits into the strategy of an organisation within a particular timeframe in the industry is termed as being “fit” for adoption. Such a culture enhances organisational performance by aligning and motivating employees. Further, since firms operate in different business conditions, it follows that a culture appropriate for a particular organisation at a time may differ significantly from the needs of other organisations. Organisational performance is enhanced by adoption of a culture that is appropriate to the organisation in a particular context. A business environment characterised by extreme competition may require a culture of rapid decision making (as opposed to bureaucracy) in order to match the business standards and enhance performance (Steers, Sanchez-Runde & Nardon 2010, p. 194). The third way in which organisational performance is enhanced by corporate culture is in work group behaviour (Mayo 1933, cited by Gillespie, 1991, pp. 133). Small and informal work groups can become strong driving forces to the accomplishment of important tasks and objectives of the organisation. This is so because small work groups offer an environment which develops collaboration between the members and allows productive interaction of complex human factors which can be harnessed to enhance organisational productivity (Gillespie 1991, p. 134). Moreover, a culture that supports effective use of group work in accomplishing tasks enhances organisational performance because such a culture supports interaction of the three basic elements in a social system: tasks, interaction and sentiments. This observation is consistent with theories of organisational culture as proposed by Handy (1985 cited by Hegedus 2010, p. 42), which state that effective organisational performance can be attained when an organisation utilises teamwork and the management adopts a culture that puts emphasis on meeting the expectations of employees. Conclusion Culture plays a key role in enhancing organisational effectiveness and performance. Adoption of a strategically appropriate corporate culture for an organisation aligns and motivates employees. This boosts productivity and, in the process, enhances organisational effectiveness and performance. Also, corporate cultures which are task or role-orientated encourage the use of small and informal groups in accomplishing projects. This enables individuals to interact and accomplish given tasks, particularly when they are consistent with the objectives of the group. An organisational culture that supports group work therefore enhances organisational performance. Lastly, culture interacts with the management style of the organisation to determine the performance of an organisation. Since the leadership of an organisation strongly influences attitudes and values of subordinates, it follows that the culture of an organisation is a product of different management styles and personality types exhibited in leadership. These interact to influence organisational productivity and, by extension, organisational performance. References Armbruster, T 2005, Management and organization in Germany, Ashgate Publishing Limited, Surrey. Chang, K & Luo, L 2007, “Characteristics of organizational culture, stressors and wellbeing: the case of Taiwanese organizations”, Journal of Managerial Psychology, Vol. 22, No. 6, pp. 7–10. Cole, G A 2002, Strategic management: Theory and practice, Thomson, London. 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Murray, P; Poole, D & Jones G 2006, Contemporary issues in management and organizational behaviour, Cengage Learning, Melbourne. Steers, R M, Sanchez-Runde C J & Nardon, L 2010, Management across cultures: challenges and strategies, Cambridge University Press, Cambridge. Read More