For the exclusive use of N. Guan, 2015
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 the firm’s perspective, and implement them. If different managers within the same firm react differently to similar situations, the organization may have difficulty executing its basic strategy; in short, a lack of consensus can be a source of strategic change, both good and bad. A second, somewhat related problem faced by firms is how to ensure consistent behavior over time, particularly in the face of turnover among its employees. If we have devised a complex yet efficient means of producing our widgets, it would be nice if we Professor Jesper B. Sørensen prepared this note as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 2009 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order copies or request permission to reproduce materials, e-mail the Case Writing Office at: email@example.com or write: Case Writing Office, Stanford Graduate School of Business, 518 Memorial Way, Stanford University, Stanford, CA 94305-5015. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means –– electronic, mechanical, photocopying, recording, or otherwise –– without the permission of the Stanford Graduate School of Business. 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
For the exclusive use of N. Guan, 2015
Note on Organizational Culture OB-69
could do this day in and day out, even if the particular people doing the job on Day 1 are not the same as the people doing the job on Day 100.
Both of these problems can be thought of as problems of persistence: how does a certain way of doing things get maintained, either across people or across time, or both? Organizational cultures play a central role in...
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