Lec-3: Organizational Culture and Environment

3.1

What is an Organization?

An organization is a collection of people working together to achieve a common purpose

Or its a deliberate arrangement of people to accomplish some specific purpose.
All are considered organizations and have three common characteristics.
(i)
(i)
(i)

Distinct purpose is typically expressed through goals that the organization

hopes to accomplish.
People It takes people to perform the work thats necessary for the
organization to achieve its goals.
Deliberate Structure all organizations develop some deliberate structure
within which members do their work.

Organizations as Systems
All organizations are open systems that interact with their environments. They do so in a
continual process of obtaining resource inputs like people, information, material,
technology and capital and transforming them into outputs in the form of finished goods
and services for customers.

Organizational Performance

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Organizations create value when they use resources well to produce good products and
take care of their customers. When operations add value to the original cost of resource
inputs, then:
(1) A business organization can earn a profit that is sell a product for more than the
costs of making it.
(2) A nonprofit organization can add wealth to society that is, provide a public
service.
One of the most common ways to assess performance by and within organizations is:
Productivity measures the quantity and quality of outputs relative to the cost of inputs.
Productivity involves:

Performance effectiveness is an output measure of task or goal

accomplishment.
Performance efficiency is an input measure of resource cost associated with
goal accomplishment.

Changing Nature of Organizations

The following list shows some of the organizational trends and transitions relevant to the
study of management.

3.2

Focus on valuing human capital

Emphasis on teamwork
Conveying command-and-control
Importance of networking
New workforce expectations
Priorities to be maintained
Using excellence technology

Organizational Culture

An organization has a personality which we call its culture. And that culture influences
the way employees act and interact with others.
The shared values, principles, traditions, and ways of doing things that influence the
way organizational members act.
OR
A system of shared meanings and common beliefs held by organizational members that
determines, in a large degree, how they act towards each other.
In most organizations, these shared values and practices determine:
What the members think of the organization and how they behave.
How things are done around here.
Implications of Culture
1. Culture is a perception Its not something that can be physically touched or seen,
but employees perceive it on the basis of what they experience within the
organization.
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2. Organizational culture is descriptive Its concerned with how members perceive

the culture and describe it, not with whether they like it.
3. Culture as a shared aspect individuals may have different backgrounds or work at
different organizational levels, they tend to describe the organizations culture.

3.3 7 DIMENSIONS THAT CAPTURE ESSENCE OF ORGANIZATIONAL

CULTURE
Each dimension ranges from High (Very Typical) to Low (Not Typical)

Innovatio
n and
Risk
Taking

Stabili
ty

Attentio
n to
Detail

Outcome
Orientati
on

Organization
al Culture

Agressiven
ess

People
Orientati
on

Team
Orientati
on

1. Attention to Detail Degree to which employees are expected to exhibit precision,

analysis and attention to detail.
2. Innovation and Risk Taking Degree to which employees are encouraged to be
innovative and to take risks.
3. Stability Degree to which organizational decisions and actions emphasize
maintaining the status quo.
4. Aggressiveness Degree to which the employees are aggressive and competitive
rather than cooperative.
5. Team Orientation Degree to which work is organized around teams rather than
individuals.
6. People Orientation Degree to which management decisions take into account the
effects on people in the organization
7. Outcome Orientation Degree to which managers focus on results or outcome rather
than how these outcomes are achieved.

3.4

Types of Organizational Cultures

1. Strong cultures
Strong Cultures are those in which the key values are deeply held and widely shared
and have a greater influence on employees.

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Strong organizational culture refers to a situation where the employees adjust well,
respect the organizations policies and adhere to the guidelines. In such a culture people
enjoy working and take every assignment as a new learning and try to gain as much as
they can. They accept their roles and responsibilities willingly.
Factors Influencing the Strength of Culture:

Size of the organization

Age of the organization
Rate of employee turnover
Strength of the original culture
Clarity of cultural values and beliefs

Benefits of a strong culture:

Creates a stronger employee commitment to the organization.

Aids in the recruitment and socialization of new employees.
Fosters higher organizational performance by establishing and promoting
employee initiative.

Disadvantage of a strong culture

Prevent employees from trying new approaches especially in periods of rapid

change.

2. Weak Organization Culture: In such a culture individuals accept their

responsibilities out of fear of superiors and harsh policies. The employees in such a
situation do things out of compulsion. They just treat their organization as a mere
source of earning money and never get attached to it.

3.5

Sources of Organizational Culture

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An organization culture is established and maintained with the help of the following:

3.6

The original source of the culture usually reflects the vision of the
founders. By articulating a vision of what they want the organization to be.
Certain organizational practices help maintain organization culture.
During the employee selection process, managers typically judge job candidates
not only on the job requirements, but also on how well they might fit into the
organization. At the same time, job candidates find out information about the
organization and determine whether they are comfortable with what they see.
The actions of top managers also have a major impact on the
organizations culture through what they say and how they behave, top managers
establish norms that filter down through the organization and can have a positive
effect on employees behaviors.
Socialization, a process that helps new employees learn the
organizations way of doing things. Past practices of the organization. One benefit
of socialization is that employees understand the culture and are enthusiastic and
knowledgeable. Another benefit is that it minimizes the chance that new
employees who are unfamiliar with the organizations culture might disrupt current
beliefs and customs.

How Employees Learn Culture

Employees learn an organizations culture in a number of ways. The most common are:

3.7

Stories Narratives of significant events or actions of people that convey the spirit
of the organization.
Rituals Repetitive sequences of activities that express and reinforce the values of
the organization.
Material Symbols Material symbols convey to employees who is important and
the kinds of behavior that are expected and appropriate.
Language Acronyms and jargon of terms, phrases, and word meanings specific to
an organization.

How Culture Affects Managers

Cultural Constraints on Managers

An organizations culture constrains what they can and cannot do and how they manage;
its particularly relevant to managers. Simple rule for getting ahead in an organization is
to find out what the organization rewards and do those things.
Managerial Decisions Affected by Culture
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An organizations culture, especially a strong one, influences and constrains the way
managers plan, organize, lead, and control.
Planning
The degree of risk that plans should contain
Whether plans should be developed by individuals or teams
The degree of environmental scanning in which management will engage
Organizing
How much autonomy should be designed into employees jobs
Whether tasks should be done by individuals or in teams
The degree to which department managers interact with each other
Leading
The degree to which managers are concerned with increasing employee job
satisfaction
What leadership styles are appropriate
Whether all disagreements even constructive ones should be eliminated
Controlling
Whether to impose external controls or to allow employees to control their own
actions
What criteria should be emphasized in employee performance evaluations
What repercussions will occur from exceeding ones budget

3.8

Current Issues in an organization culture

Four current organizational issues worthy of developing:

1. Creating an Ethical Culture

Managers has to be:

Be a visible role model.

Communicate ethical expectations.
Provide ethics training.
Visibly reward ethical acts and punish unethical ones.
Provide protective mechanisms so employees can discuss ethical dilemmas and
report unethical behavior without fear.

2. Creating an Innovative Culture

A successful organization needs a culture that supports innovation. Innovative culture
would be characterized by the following:

Challenge and involvement

How much employees are involved in, motivated by and committed to long-term
goals and success of the organization.
Freedom
Degree to which employees can independently define their work, exercise
discretion and take initiative to day to day activities
Trust and openness
Degree to which employees are supportive and being respected by each other
Idea time
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Amount of time to elaborate on new ideas before action

Playfulness/humor
How much spontaneity, fun and ease there is in the workplace
Conflict resolution
Degree to which individuals make decisions and resolve issues based on the good
of the organizations versus personal interest
Debates
How much employees are allowed to express their opinions and put forth their
ideas for consideration and review
Risk-taking
How much managers tolerate uncertainty and whether employees are rewarded
for taking risks
3. Creating a Customer-Responsive Culture

Hiring the right type of employees with the personality and attitudes specially the
ones with a strong interest in serving customers with friendliness, enthusiasm,
attentiveness, patience, concern, and listening skills.
Train customer service people continuously by focusing on improving product
knowledge, active listening, showing patience, and displaying emotions.
Having few rigid rules, procedures, and regulations and Socialize new servicecontact people to the organizations goals and values.
Empower service-contact employees with the discretion to make day-to-day
decisions on job-related activities.
As a leader, provide role clarity to employees to reduce ambiguity and conflict and
increase job satisfaction
Having conscientious, caring employees willing to take initiative to satisfy
customers.
4.

Workplace Spirituality
A culture where organizational values promote a sense of purpose through
meaningful work that takes place in the context of community.
OR
The recognition that people have an inner life that nourishes and is nourished by
meaningful work that takes place in the context of community.
Characteristics of a Spiritual Organization

Strong sense of purpose

Building an organization for a meaningful purpose instead of just making
money.
Focus on individual development
Not just providing jobs. Realize importance of people and need to grow and
learn.
Trust and openness points mutual trust and honesty. Leaders must admit
mistakes.
Employee empowerment
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Managers trust employees to make conscientious and thoughtful decision

Toleration of employees expression
Do not stifle employees expression of feelings.

BENEFITS OF A SPIRITUAL ORGANIZATION

3.9

Improved employee productivity

Reduction of employee turnover
Stronger organizational performance
Increased creativity
Increased employee satisfaction
Increased team performance
Increased organizational performance

Environment

External Environment
Those factors and forces outside the organization that affect the organizations
performance.
Components of the External Environment

Specific environment: external forces that have a direct and immediate impact on
the organization.
Suppliers A party that supplies goods or services. A supplier may be
distinguished from a contractor or subcontractor, who commonly adds
specialized input to deliverables. Also called vendor.
Competitors A company in the same industry or a similar industry which offers
a similar product or service.
Pressure Groups Social and political groups outside that influence
organization.
General environment: broad economic, socio-cultural, political/legal, demographic,
technological, and global conditions that may affect the organization.

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 ECONOMIC CONDITIONS
Interest rates, Inflation, Changes in disposable income affect how managers
manage their employees
POLITICAL/ LEGAL CONDITIONS
Laws and regulation can limit managers options like Ex. Dismissing an employee /
Labor Laws. Political conditions influence decisions and actions in country and
outside.
SOCIOCULTURAL CONDITIONS
Managers adjust to changing expectations, Junk food to healthy snacks, Smoking,
Other countries values and cultures.
DEMOGRAPHIC CONDITIONS
Gender, age, level of education, geographic location, income, family composition
changes may constrain how managers plan, organize, lead and control.
TECHNOLOGICAL
Organization should keep itself updated from the latest technology.
GLOBAL CONDITIONS
World is getting smaller Managers are challenged by big and small competitors in
the environment

3.9

How environment affects Manager

In an organization not all environments are the same it differs in the degree of change
and complexity.
1. Environmental Uncertainty
The extent to which managers have knowledge of and are able to predict change. The
organization external environment is affected by:

Complexity of the environment: the number of components in an organizations

external environment and the extent of knowledge the organization has about these
components. The less components, the more stable the environment

Degree of change in environmental components: how dynamic or stable the

external environment is.

Stable The rate of change is minimum. Changes that can be predicted and
anticipated.
Dynamic The rate of change is rapid. Unpredictable changes are difficult to
anticipate.
Environmental Uncertainty Matrix

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2.
Stakeholders
A person, group or organization that has interest or concern in an
organization.
OR
Any constituencies in the organizations environment that are affected by the
organizations decisions and actions.
Why Manage Stakeholder Relationships?

It can lead to improved organizational performance knowing who they are can help
you serve them better
Its the right thing to give the interdependence of the organization and its
external stakeholders. Organizations depend on stakeholders

How do we manage our Stakeholders?

1.
2.
3.
4.

Identify the organizations external stakeholders.

Determine the particular interests and concerns of the external stakeholders.
Decide how critical each external stakeholder is to the organization.
Determine how to manage each individual external stakeholder relationship. The
more critical the stakeholder, the more uncertain the environment

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