Understanding Corporate Culture: Types, Functions, and Importance

Posted on Sep 16, 2024 in Arts and Humanities

Corporate Culture

Corporate culture encompasses an organization’s beliefs and philosophy regarding how it should conduct its business. It reflects a way of life, a belief system, expectations and values, and a specific form of interaction and relationship within the organization.

Steps to Achieve a Culture of Entrepreneurship:

  1. Identify the required organizational culture.
  2. Determine if a culture is already established.
  3. Identify any cultural deficiencies.
  4. Outline methods to address inefficiencies.
  5. Implement the chosen solutions.
  6. Regularly repeat this process.

Fundamentals of Corporate Culture

Here are some theories about the origins of corporate culture:

  1. Deal and Kennedy (1982): They argue that an organization’s common values form the core of its culture. Organizations should cultivate these values and provide “exemplary heroes” and “leaders” for others to emulate.
  2. Fons Trompenaars (1993): His book utilizes survey research to identify and define common cultural dimensions across various organizations.
  3. Peter D. Anthony (1994): He examines corporate culture from the perspective of its founder and leaders, emphasizing their personality, communication style, initiative, responsiveness, and negotiation skills.
  4. Ed Young: He defines corporate culture as the set of meanings attributed by different groups and interests to events within an organization, aiming to achieve their goals. Any cultural change will create both winners and losers.
  5. Smircich (1983): She views organizations as social instruments that produce goods and services, as well as byproducts like rituals, legends, and ceremonies, which contribute to a distinctive culture.
  6. Deal and Kennedy (1985), Schein (1988), Handy (1986): They consider culture as the social and policy mix that supports and binds an organization together.

Two types of culture exist within the established knowledge base:

  • Formal Culture: The idealized expression of values, beliefs, and behaviors expected of members.
  • Informal Culture: Encompasses the actual behaviors exhibited within the organization.

These two cultures can sometimes clash with the overall organizational culture. Several aspects to consider include:

  1. Cultural Inbreeding: Occurs when there is limited formal or informal exchange between cultures.
  2. Clashes Between Subcultures: While some tension between subcultures can be healthy, excessive conflict can be detrimental.
  3. Exclusivity: When subcultures impose restrictions on membership or arbitrarily exclude individuals.
  4. Subcultural Hierarchies: When subcultural values take precedence over the shared values of the company.

Functions of Corporate Culture

Corporate culture plays a vital role in shaping enduring behavior and serves several important functions:

  • Provides a sense of identity to organizational members.
  • Facilitates commitment to something larger than oneself.
  • Strengthens social system stability.
  • Offers recognized and accepted premises for decision-making.

Cohesion

Humans naturally seek group affiliation. Corporate culture fosters communication, helping team members feel connected. In larger companies, effective communication and a strong corporate culture are crucial for group cohesion and achieving objectives.

Undoubtedly, culture plays a significant role in organizations. Cultural artifacts, including design and management style, convey values and philosophies, socialize members, motivate staff, and facilitate group cohesion and commitment to relevant goals.

Organizations with strong cultures are open to continuous learning and design flexible structures for change. Recent studies have provided a broad foundation on the subject and tools for creating and fostering a culture of success. Universities and academic institutions play a crucial role in this process.

Involvement of the Person in the Organization

For employees to feel integrated and committed, they need to understand the organization’s objectives and align them with their own values.

Types of Corporate Culture

Four types of corporate culture exist in organizations:

  1. Power Culture: Typical of powerful organizations, often monopolies, centered around key individuals who act quickly and effectively.
  2. Role Culture: Based on bureaucracy, with a focus on professional expertise and logic. Job descriptions and security are prioritized.
  3. Task Culture: Emphasizes teamwork and task completion. Individuals feel confident supporting their peers and utilizing their knowledge and experience.
  4. Person Culture: Common in small companies or those with highly skilled individuals, where structure may not be clearly defined.

Corporate Culture Through Socialization and Mentoring

Corporate culture is crucial for organizational success. A weak culture can lead to negative behavior, misunderstandings, and even fraud. Evaluating corporate culture should involve assessing leadership’s influence on conduct, not just the creation and enforcement of rules. While companies often state their values, the level of integration and implementation by staff can be unclear.

For cultural changes to be effective, they must:

  1. Motivate staff and create a favorable disposition towards change.
  2. Encourage the sharing of ideas about the company’s future.
  3. Establish support for policy changes.
  4. Empower company members as key agents of change.
  5. Ensure key members recognize the need for change and are attracted to its potential positive outcomes.
  6. Foster a willingness to adapt norms and procedures for greater effectiveness.

The exchange system model for cultural change depends on six variables:

  • People
  • Culture
  • Task
  • Design
  • Strategy