CHAPTER 5

ORGANIZATIONAL CULTURE AND

CONTROL
• Edgar H. Schein is a
Professor of
Management at M.I.T.
• One of the founders of
organizational
psychology.
• He coined the term
“Corporate Culture”.
• Died January 26/2023
 Introduction
• Amazon has grown into a huge, multinational corporation and
owns more than 40 subsidiaries, including Zappos, Twitch, and
Whole Foods Market.
• What makes Amazon distinctive is that it retains many elements of
the startup culture embedded by its founder Jeff Bezos and other
early leaders.
• Some former employees, or escapees as some call themselves,
refer to Amazon’s internal environment as a “gladiator culture”
where a fierce competitiveness among employees seems
embedded in everything
• At Amazon, all aspects of performance are subject to constant
measurement and review. Strict rules, aggressive goals, and
surveillance keep behavior tightly controlled.
• Amazon also encourages people to report on their colleagues
through various internal systems.
 Cont’d…

• Google is known for its unique company

culture that treats employees like gold and
provides them with numerous perks in a
laid-back, fun work environment.
• As co-founder Larry Page puts it, “it’s
important that the company be a family,
that people feel that they’re part of the
company, and that the company is like a
family to them. When you treat people
that way, you get better productivity.”
 What is Organizational
Culture
• Culture is the set of values(እሴት), norms (ተለምዶ),
guiding beliefs(assumed truth), and understandings
that is shared by members of an organization and
taught to new members as the correct way to think,
feel, and behave.
• Culture is the unwritten, feeling part of the
organization.
• Examples of corporate values include Loyalty,
Honesty, Trust, Ingenuity, Accountability, Simplicity,
Respect. Bad values may include lack of diversity.
• Norms are unwritten rules and can be of two types
articulated norms (Visible, spoken norms) or
Unspoken norms(implied norms that are assumed).
E.g Respect privacy of others, respectful behavior.
 Cont’d…

• Culture represents the informal

organization, whereas such as structure,
size, strategy, and technology, represent
the formal organization. Hence Every
organization has two sides at work.
• Everyone participates in culture, but
culture generally goes unnoticed.
• It is only when managers try to implement
new strategies, structures, or systems that
go against basic cultural norms and values
that they come face to face with the power
of culture.
 Cont’d…
• Organizational culture exists at two levels: The Visible
level and invisible level.
• The surface are visible artifacts and observable
behaviors—the ways people dress and act;
office layouts; the type of control systems and power
structures used by the company; and the symbols,
stories, and ceremonies organization members share.
• The visible elements of culture, however, reflect deeper
values in the minds of organization members.
• The invisible level includes the underlying values,
assumptions, beliefs, and thought processes operate
unconsciously to define the culture.
Emergence and purpose
of Culture
• An organization's culture is typically initiated by
founders or leaders who set forth and
embody values and ideas as a vision,
philosophy or business strategy. When these
ideas and values lead to success, they become
institutionalized.
• E.g culture at Amazon, described in the opening
example, reflects the values of founder Jeff
Bezos, who thrives on disagreement and
challenge. Other Instilled cultures include
frugality, customer obsession, innovation, and a
bias for action.
• E.g MERID BEKELE- IE solutions
Major Purpose of
Culture
Cultures serve two critical functions in
organizations:
A. To integrate members(Internal integration) –
To develop a collective identity and understand
how to work together effectively
• E.g How to communicate, acceptable behavior,
power and status allocation
B. External adaptation- To help the organization
adapt to the external environment. Meeting goals
and deals with outsiders.
 In addition to the above critical functions it
guides employee decision making in the
absence of written rules or policies.
INTERPRETING/SHAPING
CULTURE
• One cannot understand or Interprate an
organizational culture by observing its
visible elements.
• As a researcher we also need to see Other
aspects that shape and influence culture
• They include rites and ceremonies, stories
and sayings, symbols, organization
structures, power relationships, and
control systems.
Factors that influence
and shape culture
A. Rites and Ceremonies- They are planned
activities that make up a special event and are
often conducted for the benefit of an audience.
Managers hold rites and ceremonies to provide
dramatic examples of what a company values.
These are special occasions that reinforce specific
values, create a bond among people, and anoint
and celebrate heroes and heroines who symbolize
important beliefs and activities.
Organizations as diverse as religious orders,
sororities and fraternities, businesses, and the
military use rites to initiate new members and
communicate important values.
 Cont’d …

• One type of rite that appears in organizations

is a rite of passage, which facilitates the
transition of employees into new social roles
• Another type often used is a rite of
integration, which creates common bonds
and good feelings among employees and
increases commitment to the organization.
 Cont’d …
• A rite of passage at Gentle Giant Moving Company, based in
Somerville, Massachusetts, is the “stadium run.” Founder and
CEO Larry O’Toole decided to have new hires run the tiers of
Harvard University stadium as a way to emphasize that people at
the company work hard, challenge themselves, and go the
distance rather than letting up if things get tough. After the run,
O’Toole provides a hearty breakfast and gives an orientation
speech. “You’re not a Gentle Giant until you’ve done the run,”
said employee Kyle Green.
• Pope Francis, leading an organization that has been rife with
scandal, has used rites to capture attention and re-energize
Catholics around the world. For example, to symbolize the values
of humility and inclusivity, he modified a traditional ritual by
washing the feet of prisoners at a youth detention center on Holy
Thursday instead of washing the feet of priests, as his
predecessors had done. The ritual also reportedly included two
females and two Muslims for the first time. This might be
considered a rite of integration.
 Cont’d…
B. Stories and Sayings- Stories are narratives based
on true events that are frequently shared among
employees and told to new employees to inform them
about an organization.
• Many stories are about company heroes who serve as
models or ideals for upholding cultural norms and
values. Some stories are considered legends because
the events are historic and may have been embellished
with fictional details.
• Stories keep alive the primary values of the
organization and provide a shared understanding
among all employees.
• Sayings are mottoes or mantras that encapsulate key
cultural values, such as Walmart’s “Save Money, Live
Better” or Google’s “Don’t be evil.”
 Cont’d…

C. Symbols- A symbol is something that

represents another thing.
• Physical symbols like basic name tags,
marked parking spaces, offices with labels
and listed job titles all serve the internal
corporate culture and are important
symbols in the workplace.
• In one sense, ceremonies, stories, sayings,
and rites are all symbols because they
symbolize deeper values.
 Cont’d …
• When Mike Hyatt took over as CEO of Thomas Nelson
Publishers, one of his first acts to change the culture
from hierarchical to more egalitarian was to change
the boardroom conference table.
• The boardroom was seldom used and had a long,
narrow rectangular-shaped table that signaled hierarchy
with the most important person sitting at the head of
the table.
• Hyatt replaced that long table with a large circular
table, signaling a new egalitarian culture.
• Hyatt also changed the boardroom to a conference
room that was used often for employee meetings.
Whenever Hyatt attended a meeting in the room, he sat
in a different location to signal equality with other
employees at the meeting.
 cont’d…

D. Organization Structures: How the

organization is designed is also a reflection
of its culture. Does it have a rigid
mechanistic structure or a flexible organic
structure, Is there a tall or a flat hierarchy,
• The way in which people and departments
are arranged into a whole, and the degree
of flexibility and autonomy people have,
tells a lot about which cultural values are
emphasized in the organization.
 Cont’d…

E. Power relationships- means deciphering

who influences or manipulates or has the
ability to do so in a firm.
• Which people and departments are the key
power holders in the organization?
• In some companies, finance people are quite
powerful, whereas in others engineers and
designers have the most power.
• Power relationships also distinguish consider
source of power as formal(Authority) or
informal(expertise or admirable character)
Examples power
relationship
• Most Commercial banks in Ethiopia “inner
sanctum” with special offices, restrooms, and a
dining room for senior executives. The entry
door has an electronic lock that only members
can access. First-level supervisors and other
employees share a general cafeteria. Dining
facilities and titles signal who has more power
in the vertical hierarchy of the organization.
• At W. L. Gore, few people have titles, and no
one has a boss. Rather than people having
power based on their position, leaders emerge
based on who has a good idea and can recruit
people to work on it.
 Cont’d…

F. Control Systems- relates to the inner

workings of how the organization controls
people and operations.
• This includes such things as how
information is managed, quality control
systems, methods of financial control,
reward systems, how decisions are made,
and whether managers apply behavior or
outcome control related to employee
activities.
 Question

Top managers typically

should focus their energy
more on strategy and
structure than on corporate
culture?
 Answer

• Disagree. Smart top managers know that for the

organization to be successful, the right culture has
to support and reinforce the strategy and structure
to be effective in its environment.
• Someone once said, “Culture eats strategy for
lunch.” Managers can invest all the time and
resources they have in defining a killer strategy
but implementing it will be impossible if the
cultural values are out of line.
• The correct relationship among cultural values,
organizational strategy and structure, and the
environment can enhance organizational
performance.
Culture and Organization
Design
• Based on two specific dimensions Strategy
(Strategic focus Internal vs External), and
Environment (flexibility or stability) we
associate four categories of culture
• They include Adaptability culture,
Achievement Culture , clan culture, and
bureaucratic culture
 A. The Adaptability
culture
• The Adaptability culture is characterized by
strategic focus on the external environment
through flexibility and change to meet customer
needs.
• The culture encourages entrepreneurial values,
norms, and beliefs.
• This type of company, however, doesn’t just react
quickly to environmental changes—it actively
creates change.
• Innovation, creativity, and risk taking are valued
and rewarded.
• E.g Most Internet-based companies, such as
Google use the adaptability type of culture,
 B. THE ACHIEVEMENT CULTURE

• An achievement culture is suited to organizations

that serve specific customers in a stable external
environment.
• This type of culture is characterized by a focus on
results and performance.
• Organizations with an achievement culture are highly
competitive and have a strong emphasis on
individual performance.
• They also value innovation and creativity.
• E.G Amazon reflects aspects of an achievement
culture with its emphasis on competitiveness,
assertiveness, and achieving growing sales and
market share.
• E.G Huawei illustrates a radical version of the
achievement culture.
 Cont’d…
• Tenacity, drive, determination, and aggressiveness are
core values at Huawei, the giant Chinese
telecommunications and consumer electronics
company that has rapidly expanded around the world.
• Employees are encouraged to work grueling hours, to
persevere under dangerous conditions to gain new
business, and even to bend company rules as long as
doing so enriches the company and not the employee
personally.
• New employees undergo boot camp-style training that
includes morning jogs, classes on the company’s
culture, and writing and performing skits that illustrate
how they would persevere to serve customers in war
zones or other challenging conditions.
 C. The Clan Culture

• This type of culture is characterized by a

focus on teamwork and collaboration.
• Organizations with a clan culture are like
families, and employees are highly loyal to
the organization.
• They also value communication and
consensus-building.
 Cont’d..
• The approach to culture taken by Marc Benioff at
software company Salesforce.com also reflects
elements of a clan culture. “I want a company where
people are excited to come to work every day, where
they feel good when they get here, where it doesn’t
take from them but it’s giving to them, it’s giving to
others,” Benioff says.
• On an employee’s first day at Salesforce, the morning
is spent showing the new hire around the offices and
introducing colleagues. “Then we take them out and
they do service in the afternoon,” says Benioff. “They’ll
go to a homeless shelter or they’ll go to the hospital or
go to a public school. This is a very core part of our
culture.
D. The Bureaucratic Culture

• This type of culture is characterized by a

focus on rules and procedures.
• Organizations with a bureaucratic culture
are highly structured and have a clear
chain of command.
• They also value stability and predictability.
• This organization succeeds by being highly
integrated and efficient.
Culture Strength and Organizational
Subcultures

• Culture strength refers to the degree of agreement

among members of an organization about the
importance of specific values.
• If widespread consensus exists about the
importance of those values, the culture is cohesive
and strong; if little agreement exists, the culture is
weak.
• A strong culture reflects clear values and social
norms that is, people know what is expected.
• There is generally little differentiation among people
within the culture and a low tolerance for deviation
from the norm.
• Resistance to change is strong because people like
the culture and want to keep things as they are.
 Cont’d…
• A strong culture is typically associated with the frequent use
of ceremonies, symbols, and stories and sayings that express
key values and managers align structures and processes to
support the cultural values.
• Culture is not always uniform even in organizations that have
strong cultures, there may be several sets of subcultures
specially in large organizations.
• Example, although the dominant culture of an organization
may be an achievement culture, various departments may
also reflect characteristics of adaptability, clan, or
bureaucratic cultures.
• Example-The manufacturing department of a large
organization may thrive in an environment that emphasizes
order, efficiency, and obedience to rules, whereas the
research and development (R&D) department may be
characterized by employee empowerment, flexibility, and
customer focus.
 Cont’d…
• Cultural differences can sometimes lead to
conflicts between departments or divisions,
especially in organizations that do not have strong
overall corporate cultures.
• When subcultural values become too strong and
outweigh the corporate cultural values, conflicts
may emerge and hurt organizational performance.
• Cultural conflicts can be particularly challenging in
the case of mergers and acquisitions.
• E.g Facebook(data-gathering about user
activities) and Whatsapp (protecting user privacy )
 The Cultural Focus of Control
Systems

• The ways in which managers control people

and operations vary depending on the
corporate culture. For example, a company
such as Salesforce.com and Amazon
• Some control strategies apply to the top
levels of an organization, where the concern
is for the entire organization or major
divisions.
• Some are Control at the lower(operational
level control) where department managers and
supervisors focus on the performance of
teams and individual employees.
 Organization level: The
Balanced Scorecard
• A recent control system innovation is to
integrate internal financial measurements and
statistical reports with a concern for markets
and customers, as well as employees.
• The balanced scorecard (BSC) is a
comprehensive management control system
that balances traditional financial measures
with operational measures relating to a
company’s critical success factors.
• A BSC contains four major perspectives:
financial performance, customer service,
internal business processes, and the
organization’s capacity for learning and growth.
 Department level Control:
Behavior Versus Outcome Control

• The BSC are techniques used primarily by top

executives and upper-level managers to control
• Lower-level managers focus on the performance of
people at the department level, who must meet
goals and standards if the organization is to attain
its overall goals.
• There are two different approaches to evaluating
and controlling team or individual performance
and allocating rewards.
 One approach focuses primarily on how people
do their jobs(Behavioral control)
 The Second one focuses primarily on the
outcomes people produce(Outcome Control)
 Cont’d …

A. Behavior control is based on managers’

direct observation and supervision of
employee actions to see whether the
individual follows rules and policies and
performs tasks as instructed.
 Do people get to work on time?
 Do they stay focused on their tasks or spend a
lot of time socializing with colleagues?
 Do they dress appropriately for the job?
 Do they perform their jobs according to
established methods or supervisor
instructions?
 Cont’d…
B. Outcome control is based on monitoring and
rewarding results, and managers might pay little
attention to how those results are obtained. With
outcome control, managers don’t supervise
employees in the traditional sense.
• People have a great deal of autonomy in terms
of how they do their jobs—and sometimes in
terms of where and when they do their jobs—
as long as they produce desired outcomes.
• Rather than monitoring how many hours an
employee works, for example, managers focus
on how much work the employee
accomplishes.
 Cont’d…
• As an organization manager, keep these
guidelines in mind: Don’t overdo the use
of behavior control. Set some reasonable
guidelines for behavior and work activities
but emphasize outcome control by focusing
on results and allowing employees some
discretion and autonomy about how they
accomplish outcomes.
• “Always looking to see if people were here. I
should have been looking at what they were
getting done” Behavioral control
Cont’d

• Outcome control is not necessarily the

best for all situations.
• In some cases, behavior control is more
appropriate and effective, but in general,
managers in successful organizations are
moving away from closely monitoring and
controlling behavior toward allowing
employees more discretion and autonomy
in how they do their jobs. In most
organizations, managers use both
behavior and outcome control.