Culture beats paycheck: what is company culture

Organizational culture is the social construct that affects formal processes and policies within an organization. It is defined by the evolving dynamics between managers and employees. Thus, psychological and social forces manifested in an organization’s culture have an impact on group morale and productivity.

Others refer to organizational culture as the very essence of an organization. It is the core beliefs and premises that shape the company, the behavior of its members and how it interacts with the external environment. Hidden assumptions or psychological predispositions that the organization’s members have in common further shape the corporate culture.

The culture of a group can be defined as a pattern of shared basic assumptions learned by a group as it solved its problems of external adaptation and internal integration."
Blog Edgar Schein culture over paycheck what is company culture
Edgar Henry Schein
Author and former professor at MIT Sloan School of Management

As a source of the company’s identity, the initial organizational culture is highly dependent on the founders’ beliefs, values and assumptions of how the company should be organized and operate. These initial ground values and beliefs become modified by the organization’s subsequent leaders through different behavioral patterns. Correspondingly, organizational culture is formed by what the management emphasizes, measures and controls. The way the leaders deal with critical circumstances and their individual managerial styles and behavioral patterns further influence the culture within the organization. Besides, human resource management plays an important role. Depending on the stressed criteria concerning selection, recruitment, reward, and promotion policies employees are selected and evaluated according to the cultural base. Thus, the culture itself is usually expressed by the management through the organizational procedures, practices, policies and systems.

Organizational culture can be seen as a construct that makes an organization unique. A manifestation of organizational culture can be found in the concept of organizational climate. Organizational culture is often described in the context of evolutions of social systems whereas climate can be seen as the impact of these systems on individuals and groups. Organizational climate is usually described as the perception of organizational practices experienced in a more conscious way whereas culture has a deeper impact on employees’ psychology.

Company climate is perhaps best described by R. Taguiri and G. H. Litwin.

"The relatively enduring organizational environment that (a) is experienced by the occupants, (b) influences their behavior, and (c) can be described in terms of the values of a particular set of characteristics or attributes of the environment."

There are four main themes of organizational culture.

  1. Organizational culture is described as a learned entity in which employees think and act in a specific way. These behavioral patterns are then transferred to or learned by new employees that enter the organization. By aligning behavior organizational culture can foster growth and survival of the whole entity.
  2. Organizational culture is a system of beliefs. These beliefs are either of a fundamental nature that serve as general guidance or adapt daily. Whereas the first ones are rather unlikely to change over time as they inherit an organization’s truth the latter is more dynamic and subject to situational, everyday change.
  3. One can see culture as a strategy. This is because any kind of strategic formulation can be regarded as a cultural activity. Whenever a strategy is subject to change, a change in culture is necessary to accomplish the shift in organizational strategy.
  4. As referring to Geert Hofstede, organizational culture can be seen as the mental programming of the people involved. The scholar refers to the psychological impact on employees and identifies influence in terms of distance to management, trust in colleagues, integration or orderliness amongst others. Hofstede formulated a model that divides organizational culture into four different layers. Culture can affect the organization on different dimensions and degrees.
Organizational culture onion diagram, as described by Geert Hofstede

Company culture can further be categorized into six core elements.

  1. Values are seen as preferable things employees consider desirable to have or worth doing - both extrinsically and intrinsically. Preferences are conveyed of how to behave or what outcome is seen as favorable. These values include creativity, individualism or change amongst others that might be predominant in entrepreneurial environments.
  2. Rules of conduct are another core element of culture. These include the rules and norms that are widely accepted to accomplish certain results within the company such as ethical manners, dress code or informal communication rules.
  3. Language and vocabulary represent another core element. From slogans to special jargon and acronyms, every organizational system has its own language that shapes beliefs, values, and hidden assumptions.
  4. Overall perception and methodology of how things are done set the organizational processes and methods. Innovating companies may include sponsorship or business plans as part of their methodology.
  5. Rituals are another core element of corporate cultures. What kind of traditional rites, ceremonies or taboos are anchored in the company? These less formal customs can have a strong impact on the employees’ emotions and thus be used for motivation or emotional influencing.
  6. Myths and stories are seen as another core component of culture. Organizations tend to have some historical stories or sagas that are frequently communicated and might be subconsciously present to most employees. The company might retell or even create such heroic stories in order to set role models for employees.

Hofstede emphasizes the importance of heroes and symbols that build a frame around the rites and values of an organization. Employees tend to refer to these heroes subconsciously and make use of symbols to express the surface of more hidden values and assumptions. This process of symbolization might be seen as highly related to the organizational climate as it can be seen more at the surface. However, this model must not be understood as stable but rather as very dynamic in nature as the organizational practices pervade all layers of the model and degree of interference is high.

Some predict that people are attracted by organizations whose values and beliefs are rather congruent to their own. The same holds true for the selection and recruiting process of the organizations. Thus, there is a pre-selection that by some means serves homogeneity. Moreover, those employees who do not share the organizational cultures personally are more likely to leave the company sooner or later.

On the other hand, an organization can consist of several subcultures that might demonstrate a culture of fragmentation or differentiation. Fragmentation in this context implies conflicting differences whereas differentiation points toward valuable differences. Edgar Henry Schein, therefore, divides culture into four levels: macroculture, organizational culture, subculture, and microculture.

Macro culture subsumes the different national, religious or ethnical cultures, whereas subculture often consistently used as microculture refer to certain or across several occupational groups within organizations. In this context, all types of culture are touched however not to an equal degree. This is because the individual employee perceives those cultural level that is the closest to him as the most dominant.

For more insight into how these observations can impact your company culture, read our free whitepaper "How to Evolve Your Company Culture."

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