Organizational Culture versus Organizational Climate

Creating and Maintaining Organizational Culture

How Are Cultures Created?

Where do cultures come from? Understanding this question is important so that you know how they can be changed. An organization's culture is shaped as the organization faces external and internal challenges and learns how to deal with them. When the organization's way of doing business provides a successful adaptation to environmental challenges and ensures success, those values are retained. These values and ways of doing business are taught to new members as the way to do business. The factors that are most important in the creation of an organization's culture include founders' values, preferences, and industry demands.

Figure 14.6 Culture Creation and Maintenance

Founder's Values

A company's culture, particularly during its early years, is inevitably tied to the personality, background, and values of its founder or founders, as well as their vision for the future of the organization. This explains one reason why culture is so hard to change: It is shaped in the early days of a company's history. When entrepreneurs establish their own businesses, the way they want to do business determines the organization's rules, the structure set-up in the company, and the people they hire to work with them.

As a case in point, some of the existing corporate values of the ice cream company Ben & Jerry's Homemade Holdings Inc. can easily be traced to the personalities of its founders Ben Cohen and Jerry Greenfield. In 1978, the two ex-hippie high school friends opened up their first ice-cream shop in a renovated gas station in Burlington, Vermont. Their strong social convictions led them to buy only from the local farmers and devote a certain percentage of their profits to charities. The core values they instilled in their business can still be observed in the current company's devotion to social activism and sustainability: continuous contributions to charities, use of environmentally friendly materials, and dedication to creating jobs in low-income areas.

In 2021 , Ben & Jerry made  decision to stop selling its ice cream in the Israeli occupied West Bank. The company said sales in the territories are "inconsistent with our values", adding that the move reflected the concerns of "fans and trusted partners".

In 2020, the ice cream brand unveiled a new flavour which takes aim at the Australian government's use of fossil fuels. The tub for the Unfudge Our Future flavour - a mix of "chocolate and peanut butter non-dairy ice cream, fudge brownies and peanut butter cookie dough" - features the message: "Dear Scott Morrison, make fossil fuels history!"

In 2020, the company sparked debate across social media after it launched a scathing attack on the U.K. Government's treatment of migrants. It wrote: "People wouldn't make dangerous journeys if they had any other choice. The UK hasn't resettled any refugees since March, but wars and violence continue. What we need is more safe and legal routes".

Industry Demands

While founders undoubtedly exert a powerful influence over corporate cultures, the industry characteristics also play a role. Industry characteristics and demands act as a force to create similarities among organizational cultures. For example, despite some differences, many companies in the insurance and banking industries are stable and rule oriented, many companies in the high-tech industry have innovative cultures, and companies in the non-profit industry tend to be people oriented. If the industry is one with a large number of regulatory requirements - for example, banking, health care, and nuclear power plant industries - then we might expect the presence of a large number of rules and regulations, a bureaucratic company structure, and a stable culture. Similarly, the high-tech industry requires agility, taking quick action, and low concern for rules and authority, which may create a relatively more innovative culture. The industry influence over culture is also important to know, because this shows that it may not be possible to imitate the culture of a company in a different industry, even though it may seem admirable to outsiders.

How Are Cultures Maintained?

As a company matures, its cultural values are refined and strengthened. The early values of a company's culture exert influence over its future values. It is possible to think of organizational culture as an organism that protects itself from external forces. Organizational culture determines what types of people are hired by an organization and what types are left out. Moreover, once new employees are hired, the company assimilates new employees and teaches them the way things are done in the organization. We call these processes attraction-selection-attrition and onboarding processes. We will also examine the role of leaders and reward systems in shaping and maintaining an organization's culture. It is important to remember two points: the process of culture creation is in fact more complex and less clean than the name implies. Additionally, the influence of each factor on culture creation is reciprocal. For example, just as leaders may influence what type of values the company has, the culture may also determine what types of behaviours leaders demonstrate.

Attraction-Selection-Attrition (ASA)

Organizational culture is maintained through a process known as attraction-selection-attrition.

First, employees are attracted to organizations where they will fit in. In other words, different job applicants will find different cultures to be attractive. Someone who has a competitive nature may feel comfortable and prefer to work in a company where interpersonal competition is the norm. Others may prefer to work in a team-oriented workplace. Research shows that employees with different personality traits find different cultures attractive. For example, out of the Big Five personality traits, employees who demonstrate neurotic personalities were less likely to be attracted to innovative cultures, whereas those who had openness to experience were more likely to be attracted to innovative cultures. As a result, individuals will self-select the companies they work for and may stay away from companies that have core values that are radically different from their own.

Of course, this process is imperfect and value similarity is only one reason a candidate might be attracted to a company. There may be other, more powerful attractions such as good benefits. For example, candidates who are potential misfits may still be attracted to Google because of the cool perks associated with being a Google employee.

At this point in the process, the second component of the ASA framework prevents them from getting in: Selection. Just as candidates are looking for places where they will fit in, companies are also looking for people who will fit into their current corporate culture. Many companies are hiring people for fit with their culture, as opposed to fit with a certain job. For example, Southwest Airlines prides itself for hiring employees based on personality and attitude rather than specific job-related skills, which are learned after being hired. This is important for job applicants to know, because in addition to highlighting your job-relevant skills, you will need to discuss why your personality and values match those of the company. Companies use different techniques to weed out candidates who do not fit with corporate values. For example, Google relies on multiple interviews with future peers. By introducing the candidate to several future coworkers and learning what these coworkers think of the candidate, it becomes easier to assess the level of fit. The Container Store Inc. ensures culture fit by hiring among their customers. This way, they can make sure that job candidates are already interested in organizing their lives and understand the company's commitment to helping customers organize theirs. Companies may also use employee referrals in their recruitment process. By using their current employees as a source of future employees, companies may make sure that the newly hired employees go through a screening process to avoid potential person-culture mismatch.

Even after a company selects people for person-organization fit, there may be new employees who do not fit in. Some candidates may be skillful in impressing recruiters and signal high levels of culture fit even though they do not necessarily share the company's values. Moreover, recruiters may suffer from perceptual biases and hire some candidates thinking that they fit with the culture even though the actual fit is low. In any event, the organization is going to eventually eliminate candidates who do not fit in through attrition. Attrition refers to the natural process in which the candidates who do not fit in will leave the company. Research indicates that person-organization misfit is one of the important reasons for employee turnover.

New Employee Onboarding

Another way in which an organization's values, norms, and behavioural patterns are transmitted to employees is through onboarding (also referred to as the organizational socialization process). Onboarding refers to the process through which new employees learn the attitudes, knowledge, skills, and behaviours required to function effectively within an organization. If an organization can successfully socialize new employees into becoming organizational insiders, new employees feel confident regarding their ability to perform, sense that they will feel accepted by their peers, and understand and share the assumptions, norms, and values that are part of the organization's culture. This understanding and confidence in turn translate into more effective new employees who perform better and have higher job satisfaction, stronger organizational commitment, and longer tenure within the company.

Netflix logo.

Netflix aims to set employees up for success from day one. The company adopts a "welcome home" approach, ensuring employees feel secure and grounded stepping into a new workplace.

"There is a general trust between managers and employees, with a big focus on feedback". Glassdoor comment.

Following this approach, Netflix prepares all new hire necessities - such as office space, equipment and documents - for a smooth transition. New employee initiations start with an orientation process that is primarily ongoing for the first quarter of the employee's first year.

Orientation covers company culture and vision, with insights spread out at different intervals throughout the employee's learning process. During the onboarding period, managers ensure to schedule periodic introductions with different teams. What really stands out about Netflix's onboarding program is the extraordinary amount of trust the company places in its new hires' expertise. From the very first day, they are assigned important projects which they are expected to start working on immediately. By making them a significant player in the decision-making process from the get-go, Netflix empowers its new hires with a sense of authority.

"The managers are always ready to help". Glassdoor comment

Managers also assign mentors to each new employee for additional guidance. In order to make their roles and the onboarding process feel engaging from day one, new employees are assigned key projects and tasks from the start. This ensures high engagement levels and a positive first impression which can have lasting effects, as the new employee feels immediately of added value.

"The job training course is excellent. " Glassdoor comment

Visual Elements of Organizational Culture

How do you find out about a company's culture? We emphasized earlier that culture influences the way members of the organization think, behave, and interact with one another. Thus, one way of finding out about a company's culture is by observing employees or interviewing them. At the same time, culture manifests itself in some visible aspects of the organization's environment. In this section, we discuss five ways in which culture shows itself to observers and employees.

Mission Statement

A mission statement is a statement of purpose, describing who the company is and what it does. Many companies have mission statements, but they do not always reflect the company's values and its purpose. An effective mission statement is well known by employees, is transmitted to all employees starting from their first day at work, and influences employee behaviour.

These are some examples:

Not all mission statements are effective, because some are written by public relations specialists and can be found in a company's website, but it does not affect how employees act or behave. In fact, some mission statements reflect who the company wants to be as opposed to who they actually are. If the mission statement does not affect employee behaviour on a day-to-day basis, it has little usefulness as a tool for understanding the company's culture. An oft-cited example of a mission statement that had little impact on how a company operates belongs to Enron. Their missions and values statement began, "As a partner in the communities in which we operate, Enron believes it has a responsibility to conduct itself according to certain basic principles". Their values statement included such ironic declarations as "We do not tolerate abusive or disrespectful treatment. Ruthlessness, callousness and arrogance don't belong here". The company filed for bankruptcy in 2001 after fraudulently stating its business results for years. Shareholders lost $74 billion.

A mission statement that is taken seriously and widely communicated may provide insights into the corporate culture. For example, the Mayo Clinic's mission statement is "The needs of the patient come first". This mission statement evolved from the founders who are quoted as saying, "The best interest of the patient is the only interest to be considered". Mayo Clinics have a corporate culture that puts patients first. For example, no incentives are given to physicians based on the number of patients they see. Because doctors are salaried, they have no interest in retaining a patient for themselves and they refer the patient to other doctors when needed. Wal-Mart Stores Inc. may be another example of a company who lives its mission statement, and therefore its mission statement may give hints about its culture: "Saving people money so they can live better". In fact, their culture emphasizes thrift and cost control in everything they do. For example, even though most CEOs of large companies in the United States have lavish salaries and showy offices, Wal-Mart's CEO Michael Duke and other high-level corporate officers work out of modest offices in the company's headquarters.

Figure 14.7 Visual Elements of Culture

Rituals

Rituals refer to repetitive activities within an organization that have symbolic meaning. Usually rituals have their roots in the history of a company's culture. They create camaraderie and a sense of belonging among employees. They also serve to teach employees corporate values and create identification with the organization.

For example, at the cosmetics firm Mary Kay Inc., (the sixth largest network marketing company in the world in 2018, with a wholesale volume of US$3.25 billion) employees attend award ceremonies recognizing their top salespeople with an award of a new car - traditionally a pink Cadillac. These ceremonies are conducted in large auditoriums where participants wear elaborate evening gowns and sing company songs that create emotional excitement. During this ritual, employees feel a connection to the company culture and its values, such as self-determination, will power, and enthusiasm.

Another example of rituals is the Saturday morning meetings of Wal-Mart. This ritual was first created by the company founder Sam Walton, who used these meetings to discuss which products and practices were doing well and which required adjustment. He was able to use this information to make changes in Wal-Mart's stores before the start of the week, which gave him a competitive advantage over rival stores who would make their adjustments based on weekly sales figures during the middle of the following week. Today, hundreds of Wal-Mart associates attend the Saturday morning meetings in the Bentonville, Arkansas, headquarters. The meetings, which run from 7:00 to 9:30 a.m., start and end with the Wal-Mart cheer; the agenda includes a discussion of weekly sales figures and merchandising tactics. As a ritual, the meetings help maintain a small-company atmosphere, ensure employee involvement and accountability, communicate a performance orientation, and demonstrate taking quick action.

Rules and Policies

Another way in which an observer may find out about a company's culture is to examine its rules and policies. Companies create rules to determine acceptable and unacceptable behaviour, and thus the rules that exist in a company will signal the type of values it has. Policies about issues such as decision making, human resources, and employee privacy reveal what the company values and emphasizes. For example, a company that has a policy such as "all pricing decisions of merchandise will be made at corporate headquarters" is likely to have a centralized culture that is hierarchical, as opposed to decentralized and empowering. Similarly, a company that extends benefits to both part-time and full-time employees, as well as to spouses and domestic partners, signals to employees and observers that it cares about its employees and shows concern for their well-being. By offering employees flexible work hours, sabbaticals, and telecommuting opportunities, a company may communicate its emphasis on work-life balance. The presence or absence of policies on sensitive issues such as English-only rules, bullying or unfair treatment of others, workplace surveillance, open-door policies, sexual harassment, workplace romances, and corporate social responsibility all provide pieces of the puzzle that make up a company's culture.

Physical Layout

A company's building, including the layout of employee offices and other work spaces, communicates important messages about a company's culture. The building architecture may indicate the core values of an organization's culture. For example, visitors walking into the Nike Inc. campus in Beaverton, Oregon, can witness firsthand some of the distinguishing characteristics of the company's culture. The campus is set on 74 acres and boasts an artificial lake, walking trails, soccer fields, and cutting-edge fitness centers. The campus functions as a symbol of Nike's values such as energy, physical fitness, an emphasis on quality, and a competitive orientation. In addition, at fitness centers on the Nike headquarters, only those wearing Nike shoes and apparel are allowed in. This sends a strong signal that loyalty is expected. The company's devotion to athletes and their winning spirits is manifested in campus buildings named after famous athletes, photos of athletes hanging on the walls, and honorary statues dotting the campus. A very different tone awaits visitors to Wal-Mart headquarters, where managers have gray and windowless offices. By putting its managers in small offices and avoiding outward signs of flashiness, Wal- Mart does a good job of highlighting its values of economy.

Stories

Perhaps the most colorful and effective way in which organizations communicate their culture to new employees and organizational members is through the skillful use of stories. A story can highlight a critical event an organization faced and the collective response to it, or can emphasize a heroic effort of a single employee illustrating the company's values. The stories usually engage employee emotions and generate employee identification with the company or the heroes of the tale. A compelling story may be a key mechanism through which managers motivate employees by giving their behaviour direction and energizing them toward a certain goal.

In this video Airbnb tells a real story of how two men who lived on the either side of the Berlin Wall (when Germany was separated as West Germany – a democracy and East Germany – a communist country)  met each other in surprisingly unexpected and yet happy circumstances. The story highlights Airbnb's culture of building a sense of belonging with its guests.