Thursday, 8 December 2011

Organisational culture v Business strategy - How v What

Business leaders, HR Professionals and academics, in addition to the tremendous importance these ascribe to organisational strategy and its implementation, are lately showing a growing interest in and attention to organisational culture.

Taking into consideration the final aims and objectives that organisations essentially aim at achieving, it could be maintained that whilst business strategy is mainly concerned with the “what” organisations want to attain, organisational culture is actually much more concerned with the “how” things need to be done.

Whilst strategy is in fact concerned with the determination and identification of the objectives employers want to attain, culture is mainly concerned with the behaviour employers are expected individuals will exhibit and conform to in order to achieve those objectives and ultimately competitive edge.


Armstrong (2009) claims that the impact of organisational culture on individual behaviour is so relevant as to need “to be taken into account as a contingency factor” in every plan concerned with businesses development and in all of the HR practices intended to sustain and facilitate that process.
According to some Authors (Ouchi, 1981; Deal and Kennedy, 1982 and Peters and Waterman, 1982) a clear, well-designed and strong organisational culture can reveal to be particularly useful to enable organisations to better integrate individuals into businesses. In addition to that, Deal and Kennedy (1982), defining organisational culture as “the way we do things around here”, put even more direct emphasis on the behavioural side of culture.
Culture is clearly part of the internal organisational context and, by reason of the powerful impact it has on individuals’ behaviour, it has been lately considered as one of the most important components of the overall internal environment (Boddy, 2008). Yet, as suggested by Boddy (2008), it is important to consider that the components forming the internal environment have a much more considerable impact on influencing individuals within an organisation than the elements typically characterising the external environment have.

Boddy (2008) argues that forces and events unfolding in the external context, with the opportunities these offer and treats these pose, not necessarily generate immediate receptive adaptations in an organisation internal context, these are in fact considered by the Author as a “fourth set of forces” (internal environment – competitive (micro) environment – general (macro) environment – external environment). What apparently Boddy (2008) seems to suggest is that external events can influence an organisation internal context only if and when it is decided by the stakeholders concerned to put these events in the management agenda.

This does not clearly mean that organisations need to develop a tendency to stay isolated from the exogenous environment. In contrast, the link and interaction between the internal and external environment is constant and steady so that business leaders have to relentlessly observe what occurs in the external environment in order to be ready to timely change things within their organisation accordingly (Boddy, 2008).

The existence of a process of constant adaptation is identified and widely recognised by some Authors in terms of organisational strategy where, to the extreme, it can take the form of emergent strategy (Mintzberg, 1987), that is, a process according to which business strategy changes at such a speed that it can only be retrospectively understood and identified. Although on the one hand this view, or rather this extreme, can be considered questionable, it cannot be denied on the other hand that, especially in modern times, business strategies are subject to constant and frequent changes as a matter of course as a consequence of the relevant and recurring changes occurring in the exogenous environment.

Inasmuch as business strategy is influenced by the developments occurring in the external context, it is also obvious that in turn organisational culture cannot stay completely immune from the changes occurring in the external context. Boddy (2008) claims to this extent that it actually exists a “constant interaction between an organisation’s culture and its external environment.”

Having identified the presence of a clear link between the external context and organisational culture, and more in particular taking as axiomatic that the latter is influenced by the former, it needs to be added that it can hardly be considered that business culture might react and adapt to the external environment changes and developments at the same speed at which strategy does. To support this concept both organisational culture definitions and the way it usually develops can definitely help. 


Culture definitions
Considering as “values” what both the employees and the employer believe is important in terms of behaviour and as “norms” a set of behavioural unwritten rules, organisational culture can be defined as “the pattern of values, norms, beliefs, attitudes and assumptions that … shape the way in which people in organisations behave and things get done” (Armstrong, 2009). As Deal and Kennedy (1982) put it, corporate culture is basically about a set of informal rules. Furnham and Gunter (1993) also refer to culture as the commonly held beliefs, attitudes and values existing within a business.

The way organisational culture develops
Thinking about the way corporate culture actually develops, it can definitely be agreed with Boddy (2008) that when individuals start to interact and work together they consequently and instinctively start identifying and developing common values. These shared values basically represent the basis for individuals working within the same context to further develop common beliefs and behavioural norms. It is important not to forget that organisational culture is about unwritten norms, which are actually intended to shape the behaviour of all the individuals of a group both when interacting the one with the other and when interacting with people who are part of the exogenous environment. The positive outcome achieved by means of these behavioural unwritten norms, that is to say success, will clearly reinforce and strengthen the importance and validity of the values and beliefs by which these norms are underpinned, contributing to generate sort of a vicious, or rather, virtuous circle.

As suggested by Schein (1990), the identification of the values and beliefs which can be put at the basis of corporate culture could be inspired by “visionary leaders”; individuals might decide to take as model the way leaders behave in order to identify common values and beliefs. Additionally, like successes, corporate culture can be based on “critical incidents” and “important events” from whose outcomes group can identify undesirable behaviour (Schein, 1990).


The rate at which corporate culture reacts to external changes
Organisational culture definitions and most of all the process throughout which organisational culture develops clearly show that shared values and beliefs, and the norms which these generate, are the fruit of a rather long process during which these norms are growingly reinforced and rooted in an organisation. The circumstance that we are looking at unwritten norms implies that the values and beliefs at the basis of these norms need to be even more genuinely acknowledged and accepted by all of the individuals concerned in order to be respected in practice.

It is hence hardly believable that organisational culture could react to the changes occurring in the external environment at the same speed as strategy does. Furnham and Gunter (1993) claim that corporate culture “is not particularly dynamic and ever-changing” in that they assume that culture is a component of an organisation endogenous context, which is relatively stable in the short run and which is much more likely to be influenced by the internal context. Whether it can be accepted the idea that the internal context can influence more directly and, most importantly, more quickly an organisation’s culture, the circumstance that the external environment may impact less frequently organisational culture remains notwithstanding questionable. The fact that changing corporate culture is a long and demanding process does not necessarily entails in fact that external forces are weak, but that it takes much more efforts and resources to implement cultural changes. After all, it should not be neglected the circumstance that the internal context is strongly influenced by the external environment and its developments.

As mentioned earlier, changing organisational culture definitely represents a very demanding process; it is widely recognised that one of the most difficult change processes, arguably the most difficult type of change process, to implement within an organisation is that concerned with organisational culture. Since culture has very much to do with “the way we do things around here” the restraining forces arising during the implementation of this type of change programmes, at times supported by complacency, are usually numerous and particularly remarkable in strength. Furhnam and Gunter (1993) clearly support this idea, they suggest that since establishing and consolidating organisational culture requires a very long period of time, by the same token it also takes time to change it. Armstrong (2009) claims that quickly changing a culture developed over a long period of time and firmly embedded within an organisation could reveal to be a particularly tricky feat to achieve, if at all. He also adds that the process could reveal to be easier only in those cases in which some traumatic events take place.
At Samsung Mr Jong-Yong Yun (2003), making treasure of the lessons learned from his past experience, decided to put more emphasis on organisational culture, rather than in business strategy in order to enable the company to achieve its overall business objectives and attain competitive edge. To combat complacency and reduce the impact of the restraining forces eventually arising during change processes he opted to put at the basis of Samsung’s organisational culture urgency (Instilling a sense of crisis – Crisis v Urgency in change management (Instilling a sense of crisis – Crisis v Urgency in change management).

The influence exerted by organisational culture over performance
Shared values, beliefs and norms at the basis of corporate culture generate a “we-feeling” which in turn provides a “shared system of meanings” and represents the basis of the internal communications system and mutual understanding. Whether these activities are not effectively and properly designed and implemented, organisational culture may provoke a remarkable negative impact on organisational performance (Furhnam and Gunter, 1993).

The significance of the potential negative impact caused by corporate culture on organisational performance has recently been stressed by many academics and business leaders; insofar as Boddy (2008) suggests that the recent growing interest in organisational culture is actually based on this belief.

Although many Authors, like Schein (2004), consider culture as a tool which can be used by employers to improve organisational performance, others, to put it mildly, appear to be rather sceptic.

An investigation carried out by Kotter and Heskett (1992) over 207 organisations, in the attempt to gather evidence of the positive effects of strong corporate cultures on organisational performance, revealed that the role played by culture was in practice much weaker than expected. 

Notwithstanding, also those who have questioned the existence of a beneficial link between corporate culture and organizational performance recognise the positive impact organisational culture might have on the attainment of organizational results. Parker (2000), who is not an advocate of the idea that a strong organisational culture may improve performance, admits that a strong corporate culture contributes to define a “valuable language which can be used to represent organisation and organising.” Similarly, Thompson and McHugh (2002) recognise that a corporate culture consistent and resonant with the overall business aims and objectives is important for any type of organisation. In particular, they highlight the case of co-operatives where not putting in place the adequate and necessary mechanism to transmit and sustain the original ideas from founders to new members can be the cause of organisational degeneration. Watson (1994) claims that people are basically happy to share values, myths and legends supporting corporate culture, “because to do so is to find meaning in their lives.”

Many academics and business leaders consider the interaction between organisational culture and business performance remarkable and likely to positively impact business performance; insofar as, as suggested by Gilmore and Williams (2008), many early HRM models have duly taken this aspect into consideration. 
Peters and Waterman (1982) and Kanter (1983) are firm supporter of the idea that a strong organisational culture can secure businesses competitive edge. Deal and Kennedy (1982) and Peters and Waterman (1982) even maintained that shared values, beliefs and norms have an as remarkable impact on performance as financial factors have (Gilmore and Williams, 2008).

Storey (1992) identifies in “managing climate and culture” a distinctive approach typical of HRM in managing conflict, as opposed to “reach temporary truces” associated with the personnel and industrial relation approach. Resorting to organisational culture in order to manage conflict has not actually been widely considered in more recent years, probably because taken as axiomatic. At least in theory, inasmuch as corporate culture is based on shared values and beliefs and the unwritten norms generated by these underlying, embedded values are genuinely recognised and respected by each member of the group, individuals should potentially behave in a way which should not indeed give raise to any conflict.

Mannion et al (2010), recalling the findings of some previous studies (namely Department of Health, 2001 and Mannion et al, 2005), claim in a research report prepared for the NHS, that whether NHS organisations want actually achieve improvements in terms of quality and performance they “also need to undergo significant cultural renewal.”
In order organisations to attain their intended objectives and achieve competitive edge, business strategy needs to dovetail with organisational culture. Business strategy and corporate culture also necessary need to be consistent and coherent in order to provide evidence in practice of the integrity which should habitually characterise organisational culture.
The role of HR in the whole process is crucially important during the design, development and implementation phases. HRM policies, with particular reference to reward and performance management practices, need to be fully inspired by and supportive of both organisational strategy, to enable individuals to perform at the desired levels and achieve their agreed and preset objectives, and corporate culture, to favour and foster the behaviour by means of which individuals will attain the pre-identified objectives.

Whenever a relevant change occurs in organisational culture and strategy, HR clearly needs to promptly support the business updating and changing HRM policies and practices accordingly.
Longo, R., (2011), Organisational culture v Business strategy - How v What, HR Professionals, Milan, [online].