How Organizational Culture Shapes Strategic Development
Culture’s Influence on Strategic Development
The ability of a firm to achieve good performance depends on its strategy. An organization’s strategy, in turn, depends on its environment and culture.
Understanding the Organizational Environment
Environment is the collective term for all factors and forces that not only surround an organization but also affect the way it works and its performance. The environment is divided into internal and external categories.
- External Environment: Consists of factors outside an organization that have the potential to influence the organization and its performance.
- Internal Environment: Consists of forces with similar potential that lie within an organization. The most important factor in an organization’s internal environment is its culture, which plays a significant role in the effectiveness of its performance.
Defining Organizational Culture
The culture of an organization pertains to the way the organization and its people work. Organizational culture encompasses the collective norms, values, routines, rules, and regulations that guide a company’s internal operations. People within the organization are consciously or unconsciously influenced by its culture. Organizational cultures vary in type and intensity. Regarding intensity, organizational culture is classified as either weak or strong. Whatever the strength of the culture, it affects the way people work and the resulting operations of the organization.
Layers of Organizational Culture
Organizational culture can be conceived as consisting of different layers:
- Values: These are easy to identify, particularly those formally stated by an organization, as they are often explicit and perhaps written down. However, the values driving a strategy may differ from those in formal statements. Values are important for explaining the strategy being pursued by an organization.
- Beliefs: These are reflected in how people talk about the issues the organization faces.
- Behaviors: These are the day-to-day ways an organization operates, which can be seen by people both inside and often outside the organization. This includes how the organization is structured and controlled. These behaviors may become the taken-for-granted ‘ways we do things around here’, potentially forming the basis for inimitable strategic capabilities, but also significant barriers to achieving strategic change if that becomes necessary.
- The Paradigm: This is the core of an organization’s culture. It is a set of assumptions held in common within an organization about how to view and respond to the different circumstances they face. The paradigm can underpin successful strategies by providing a basis for common understanding, but again, can be a major problem when major strategic change is needed.
The Cultural Web Concept
Johnson et al. (2008) presented the idea of the cultural web as a useful analytical tool to understand culture. In their words:
“The cultural web shows behavioral, physical and symbolic manifestations of a culture that inform and are informed by the paradigm.”
The paradigm is built on collective experience, informs what people in the organization do, and influences how organizations respond to change.