What is Corporate Culture?
Corporate culture can be defined as the pattern of shared values, beliefs, assumptions, and working habits of people working in an organization. It creates a working environment in an organization and forms the basis for interaction between all the elements of the organization.
These elements can be employees, different departments, processes, functions, etc. Different management scholars have defined corporate culture differently. The following are some definitions of corporate culture:
Table of Content
- 1 What is Corporate Culture?
- 2 Corporate Culture Definition
- 3 Role of Corporate Culture in Organization
- 4 Dimensions of Culture
- 5 Hofstede’s Five Dimensions of Culture
- 6 Trompenaar’s Seven Dimensions of Culture
- 7 Types of Corporate Culture
- 8 Components of Corporate Culture
- 9 Corporate Culture And Communication
- 10 Human Resource and Corporate Culture
Corporate Culture Definition
Hofstede et al. (1990) have defined corporate culture by presenting its seven characteristics, which are:
- Culture is holistic and cannot be restricted to single individuals but rather encompasses a large group of individuals.
- Culture is historically related and is passed through the traditions and customs of different generations.
- Culture is stable and cannot be changed easily because it is difficult to change the ideas, values, and traditions of people.
- Culture is a social phenomenon and is shared by people of various groups. Different groups have different cultures and culture cannot be dictated by people.
- Culture is qualitative, not quantitative because it can be implied but not expressly defined.
- Anthropological words like myth, ritual, symbols, etc. are generally used to characterize the culture.
- Culture refers to the ways of thinking, values, and ideas of people rather than the concrete, objective, and visible parts of an organization.
Role of Corporate Culture in Organization
Corporate culture is the main aspect of many important organizational concepts such as employee commitment and motivation, resource allocation, competitive advantage, and organizational change. In an organization, culture enables employees to feel comfortable so that they can better work towards the accomplishment of organizational goals. The following points explain the role of corporate culture in an organization:
- People working in an organization interact with each other as per corporate cultural norms; thereby developing a sense of belongingness.
- Corporate culture enables employees to relate themselves to the values, beliefs, and philosophies of the organization, which makes them committed to the accomplishment of organizational goals.
- Corporate culture defines the standard code of conduct for employees in an organization by providing a set of norms, processes, policies, rules, and regulations.
Dimensions of Culture
A multicultural work environment has become a trend in today’s globalized business practices. It helps organizations with a global presence to serve their customers effectively from distant locations.
However, this new trend gives rise to cultural differences that impact the performance of employees as well as of the organization. The main problem that people generally face due to cultural differences is to communicate with the other members of their teams especially when they operate from different geographical locations.
Managing cultural differences is a significant challenge for managers. Thus, managers should learn the managerial skills required in a multicultural team environment. To manage cultural differences effectively, managers need to consider the various aspects of corporate culture. These aspects are called the dimensions of culture.
Organizations use various models to understand and analyze the dimensions of the corporate culture. Two commonly used models are Hofstede’s five dimensions of culture and Trompenaar’s seven dimensions of culture.
Hofstede’s Five Dimensions of Culture
This model was developed by Dr. Geert Hofstede as a result of research performed for a decade in 40 countries. Hofstede provided the four dimensions of corporate culture. The fifth dimension was added to this model later on.
Let us discuss these dimensions in detail.
- Power distance
- Individualism and collectivism
- Uncertainty avoidance
- Long-term orientation
It refers to the degree of inequality that exists in a particular country and is accepted by people. In countries or societies where power distance is high, unequal distribution of power is accepted by the people. On the other hand, in countries having low power distance, power is shared and well dispersed among people. In these countries, the members of a society consider themselves as equals.
As per the Hofstede model, Malaysia scores high on power distance. In this country, organizations are characterized by centralized structures where reporting is made directly to the top management. Moreover, there are large gaps in compensation, authority, and respect. On the contrary, in countries with low power distances like Australia, organizations are characterized by decentralized structures and close teamwork.
Individualism and collectivism
Individualism refers to the tendency of individuals to give high importance to personal achievement. In individualistic societies, people do not form relations with anyone outside their immediate families.
As per this model, the U.S. and Germany are individualistic countries. On the other hand, collectivism refers to the tendency of people to treat themselves as a part of a group. In such societies, people are empowered to make decisions. Countries like Panama and Guatemala are highly collectivistic nations.
According to this dimension, there is a division of roles between genders in society. In masculine societies, values like achievement, power, and materialism are given priority. On the other hand, in feminine societies, values such as compromise, life quality, and friendship have more importance. As per this model, Japan is a highly masculine nation, while Sweden follows a feminine culture.
Uncertainty avoidance depicts the degree of tolerance towards uncertainty and ambiguity in a society. In a country like Germany which scores high on uncertainty avoidance, people like to be safe and take various measures to avoid risks. Such people like to be governed by rules and regulations.
On the other hand, in societies with low uncertainty, people willingly deal with changes and challenges. These societies are often governed by fewer rules. An example of such a society is Denmark.
This refers to the extent people are willing to value long-term traditions. In countries, where long-term orientation is high, people adopt those practices and values that prevail in the future too. On the other hand, in countries with a low long-term orientation, people like to stick to those traditions that have been in the past and present. Long-term orientation is high in Japan, while African countries have a low long-term orientation.
Trompenaar’s Seven Dimensions of Culture
A Dutch theorist Trompenaar along with his partners Hampden-Turner developed another model to analyze cultural dimensions. This model can be used for developing cross-cultural communication in businesses.
The model has seven dimensions, Let us discuss these dimensions in detail.
- Universalism versus particularism
- Individualism versus communitarianism
- Specific versus diffuse
- Neutral versus emotional
- Achievement versus ascription
- Sequential time versus synchronous time
- Internal direction versus outer direction
Universalism versus particularism
In universal culture societies, high regard is given to rules, laws, and regulations. People in such societies prefer relationships that are based on rules. For example, the U.S. and Canada show high universal culture. On the other hand, in societies where particularism is high, people believe in forming social relations and have no concern for rules. Russia is an example of a particular culture.
Individualism versus communitarianism
Societies that show high individualistic culture provide freedom to people. In such culture, people are empowered to make decisions and are the promoters of creativity. Example of such culture is the U.K. However, in a communitarian culture, people like to be in groups and subordinate individual goals to a common good. Japan is an example of communitarian culture.
Specific versus diffuse
In specific cultures, personal and professional lives are separated. People believe in attaining their objectives and following specified rules. For example, Germany exhibits specific culture. On the other hand, people in diffuse cultures like to form bonds in their professional lives too. Example of diffuse culture is India and Russia.
Neutral versus emotional
In neutral culture, people find it difficult to express themselves and limit their interactions. For example, the U.K. and Sweden are neutral cultural countries. In emotional culture, people have high regard for emotions and are willing to express their feelings. They also believe in making a rapport with other people. Italy and France are examples of emotional culture.
Achievement versus ascription
In achievement-oriented countries, people focus on achieving goals and reward good performance. Here, a person’s position and power is not important. For example, Canada exhibits an achievement culture. However, in ascription-oriented culture, people have a high concern for position and title. Italy is an example of an ascription culture.
Sequential time versus synchronous time
In sequential time culture, high regard is given to events that are planned in a sequence. An example of such culture is the U.S. On the other hand, in synchronous time culture, people focus on flexibility and do not emphasize sequential events. Argentina is an example of synchronous culture.
Internal direction versus outer direction
People in internally directed control cultures focus on self-control as well as on controlling the environment. For example, the U.K. and U.S. exhibit an internal direction culture. However, in outer direction culture, people believe in being controlled by the environment. An example of such a culture is China.
Types of Corporate Culture
In an organization, corporate culture plays a vital role in bonding people. There are different cultures present across organizations depending on their vision, philosophy, and values. Moreover, there can be more than one culture existing in organizations. Irrespective of its type, culture prevails in an organization in the form of dominant culture and subculture.
The dominant culture is present predominantly in an organization and shared by all its employees, while subculture is limited to a particular department or division of the organization. Apart from this, various types of cultures can be found in an organization.
Let us study some important types of corporate culture.
This type of culture is static where emphasis is laid on following stringent rules and regulations. Organizations that inculcate this culture mainly adopt bureaucratic administration to manage their employees. In such organizations, employees cannot communicate their problems, doubts, and grievances to their superiors. All the decisions are taken by the top management and passed to the lower management through specified channels.
In such a culture, change is not embraced easily. Mechanistic culture generally does not allow a change in the structure. This is mainly due to a lack of innovation and creativity in the organizational structure. Moreover, the need for quick decision analysis is also not needed in organizations following mechanistic culture.
Examples of organizations using mechanistic structures include colleges and universities, where they have strict procedures to maintain students’ loyalty or obedience towards the institute. Similarly, law firms, auditing firms, etc. also follow mechanistic culture, where working procedures are already laid down formally and people work accordingly.
This type of culture focuses on the accomplishment of tasks through the collective efforts of people rather than compliance with rules. Organizations that adopt organic culture emphasized teamwork. People working in such organizations are free to share their ideas and convey their concerns to their superiors. Organic culture focuses on using flexible working methods and promoting innovations.
The organic culture encourages employees to have greater creativity and better problem-solving attitude. An example of an organization with organic culture is Google Corporation which always encourages its employees to develop creative skills for solving problems and developing new products.
In this culture, top-level managers take all decisions that have to be followed by subordinates. This culture is based on a belief that leaders have complete knowledge and they cannot take any wrong decision. In case of disobedience, employees are penalised so that the same mistake cannot be repeated in the future.
A striking example is the New York Times that, in the past, used to be one of the top companies having authoritarian culture. During the 1970s, the New York Times was controlled by A. M. Rosenthal, who was considered a famous authoritarian leader and used his authoritarian control to meet deadlines on a regular basis.
Participative culture promotes the total participation of people in the decision-making process. This culture is based on an assumption that people are important to the accomplishment of tasks, and if they are involved in decision-making, the chances of their resistance are reduced. Thus, in this culture, people are encouraged to freely share their opinions and ideas. An organization with participative culture has a more open flow of communication with lesser formal rules and regulations.
For example, the corporate culture of Southwest Airlines tends to be more participative. Southwest has an employee-centric organizational culture that helps in motivating employees to mix work with fun, which in turn, has resulted in delivering excellent service to customers.
Components of Corporate Culture
So far, you have studied the importance of a strong corporate culture in an organization. But what makes a corporate culture? There are several components involved in building an effective corporate culture.
Let us discuss these components in detail.
To build a strong corporate culture, an organization first needs to have a vision statement that clearly describes the reason for the organization’s existence. The vision statement represents what an organization intends to be in the future.
For example, the vision of an online retailer can be “to provide the best online shopping experience to customers with easy-to-follow instructions, clear and secure payment methods, and fast, quality delivery.” If the employees of an organization are aware of its vision, they would quickly adapt to the organizational culture and work towards the accomplishment of organizational goals and objectives.
The heart of corporate culture lies in the values of an organization. Values are a set of beliefs and ideals shared by individuals in an organization. These values develop the behavior and attitude of the organization’s individuals. For example, Tata Motors emphasized a set of values that are centered on innovation, integrity, customer satisfaction, and concern for the environment.
The values of an organization hold no relevance unless they are incorporated into practices. For example, if an organization promotes the values of care and respect, these values must be incorporated into the practices.
This can be done by providing employees with a platform where they can work, interact, and share their opinions with their superiors without fear. These practices must be reviewed from time to time for further modifications.
No organization can build a culture without having people share their beliefs and embrace them. People who believe in the culture of their organizations tend to stay longer and show high commitment toward achieving organizational goals.
Therefore, many organizations follow stringent policies to recruit fresh talents who are not only qualified but also fit the organizational culture.
For instance, if the organization has bureaucratic culture, employees may remain dependent on their superiors. As a result, employees may lack motivation and enthusiasm to work toward organizational goals and objectives. Therefore, organizations should take action for making their employees adapt to their corporate culture.
Corporate Culture And Communication
The effectiveness of a corporate culture depends on the way people interact with each other, information is shared, and decisions are made in an organization. Thus, good communication is a key characteristic of corporate culture.
Effective communication helps in running internal processes smoothly and establishing positive relationships among people within and outside the organization. Moreover, employees would only be motivated to adapt to the corporate culture if there is transparency in communication across the organization.
Effective communication is of paramount importance for maintaining the smooth functioning of the organization. For this, the organization must allow two-way communication wherein seniors and subordinates can interact with each other and discuss important issues without any hesitation.
Such communication helps in creating harmony among the people of the organization. This in turn leads to a strong corporate culture where all the employees perform to the best of their capabilities. Therefore, both corporate culture and communication go hand-in-hand to make a successful organization.
Some of the measures that can be taken by organizations to improve communication to create a strong corporate culture are as follows:
- There must be more than one channel of communication so that there are no delays in the delivery of the message. Some of the important channels that can be used for effective communication are e-mail, fax, memos, notices, bulletins, one-to-one interactions, etc.
- Important messages must be repeated from time to time so that they can reach all the targeted people.
- There should be effective listening at the receiver’s end. This is because poor listening may lead to ineffective implementation of the message conveyed.
- Employees must convey their feedback in the form of questions, doubts, or suggestions. In this way, employees can understand the intended meaning of the message and managers are also assured that the correct message has been delivered.
- Managers must handle problems that arise due to cultural differences. In the absence of conflict resolution, misunderstandings, and confusion arise that may be detrimental to the organization’s functioning and performance.
Human Resource and Corporate Culture
As discussed earlier, in an organization, people having different values and beliefs work together to achieve common goals and objectives. These differences may lead to various conflicts, which ultimately affect organizational performance. These differences can be better managed if people are aware of the organizational culture from the day they join the organization. This can be possible if the corporate culture is reflected in the HR practices of the organization. Some important HR practices can help in strengthening the culture of an organization.
Let us study these practices in detail.
- Performance management
- Compensation and reward systems
- Recruitment and selection
- Training and Development
It is a continuous process of improving employees’ performance by setting performance standards and expectations and communicating them to employees. Performance management is a platform where employees can share their ideas and suggestions for the improvement of their performance. This free exchange of ideas and suggestions ultimately helps an organization build strong corporate culture.
Compensation and reward systems
In any organization, compensation and reward systems are important motivating forces for employees. Employees are always keen to perform well if their performance is recognized and awarded from time to time.
In case it does not happen, they may lose interest in performing their jobs, which may harm corporate culture. Thus, to create a positive corporate culture, HR professionals must develop pay and reward programs carefully by taking into account both the behavioral and performance aspects of individuals.
Recruitment and selection
While hiring fresh talents, HR professionals should look for employees who not only possess appropriate skills and capabilities but also have a perfect cultural fit. For this, HR professionals should clearly understand the organization’s culture. Apart from this, while hiring and interviewing candidates, HR professionals must focus on cultural fit questions.
For instance, questions must be asked on team coordination, conflict resolution, the accomplishment of goals, behavioral aspects, etc. This would help HR professionals to hire a pool of efficient employees.
Training and Development
Another important way of creating a strong culture is to conduct behavioral orientation. In such orientation, employees are informed about the organization’s code of conduct and ethical values. Moreover, they are trained on how to adapt to the organizational culture.
In addition, HR professionals must plan development opportunities for those employees who behave as per the organization’s culture and requirements. In this way, the culture of the organization is strengthened.