Ch3 Influences on
Organisational Culture
Study guide
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The formal and informal organisation
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Organisational culture
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Their relationships
impacts
Definition
Factors
various theories
Stakeholders of business organisation
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Internal and external stakeholders
Main stakeholder groups and their objectives
Interactions and conflicts between different
stakeholders
1 What is culture?
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Culture is the ways of behaving,
understanding, that are shared by a group of
people.
Spheres of culture:
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Nation, region
Gender
Social class
Profession or occupation
Type of business
organisation
Elements and levels of culture
(Schein)
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Observable behaviour
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Values and beliefs
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Behaviour
Artifacts
Attitudes
Including slogans, strategies and goals
Assumptions
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Most difficult to understand and change
*The link between culture and leadership is very
strong.
2 Organisational culture
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The collection of traditions, values, policies,
beliefs and attitudes that constitute a
pervasive context for everything we do and
think in an organisation. (Mullins)
A pattern of beliefs and expectations shared
by the organisation’s members, and which
produce norms which powerfully shape the
behaviour of individuals and groups in the
organisation. (Schwartz & Davies)
*The way we do things around here. (Handy
& ACCA)
Manifestation of culture
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How formal the organisation structure is
Communication
Office layout
Type of people employed
Symbols
Management style
Freedom for subordinates
Attitudes to quality
Attitudes to risk
Attitudes to customer
Attitudes to technology
What shapes organization culture?
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Organization’s founder
History
Leadership and management style
Organization’s environment
* The cultural values can be used to guide process,
motivate employees, drive changes or preserve the
status quo.
Kaplan:6 factors
Size, technology, diversify, age, history, ownership
3 Culture and structure (Handy& Harrison)
Power culture
(club
/Zeus)
Role culture
(bureaucracy
/Apollo)
Task culture
(Athena)
Person culture
(existential
/Dionysus)
Power and
Bureaucratic and
influence stem from rational
a key central figure organization,
emphasis on
hierarchy and status
No dominant or
clear leader, experts
are important
persons
To satisfy the
requirements of the
individuals in the
organization
Few formal
procedures & rules
Formal rules and
procedures, duties
Performance is
judged by results
Depends on talent
of individuals
Informal structure
Functional basis
Formal structure
Team-based,
horizontally or
matrix structured
Management are
often in lower status
Suited to smaller
entrepreneurial org.
where people get on
well.
Efficient if org. are
large and
impersonal in a
stable environment
Reflected in project
teams and task
forces, suited to
rapidly changing
environment
Found in a small,
highly participatory
org.
Culture and structure
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Types of culture do not necessarily equate to
specific organisation types.
Some styles of organisation culture may
accompany particular organisation structure.
It is quite possible for different cultures to
prevail in different parts of the same
organisation.
*Pilot paper: p36 #4
*question bank: p562 #7
Culture and managerial activity
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Strategic management suits power culture.
Tactical management suits task culture.
Operational management suits role culture.
Type of activity
Organizational level
Policy-making
activity
Top management
Innovative
activity
Middle management
Routine
activity
Operatives
Type of culture
Power
culture
Task
culture
Role
culture
The impact of national culture
(Hofstede model)
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Power distance
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Uncertainty avoidance
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Preference for security, order and control; need for
written rules and consensus; tolerant for risk
Individuality
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Unequal distribution of power; extent of centralisation;
subordinates’ participation in decision-making
Preference for living and work in individualist;
emphasis on autonomy, individual initiative; concern
on personal relationship
Masculinity
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Distinct social gender roles; different values
*Confucianism vs. dynamism- attitude to change over
the long term
Main dimensions of difference between national cultures
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Power distance
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Uncertainty avoidance
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High UA: Latin, near east, Germanic and Japan
Low UA: Anglo and Nordic countries
Individualism
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High PD: Latin, near east, less developed Asian countries
Low PD: Germanic, Anglo and Nordic countries
High individualism: Anglo, more developed Latin and Nordic
countries
Low individualism: less developed Latin, near east and less
developed Asian countries
Masculinity
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High Masculinity: Japan, Germanic and Anglo countries
Low Masculinity: Nordic countries
4 Informal organization
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An informal organization exists side by side
with the formal one.
It is loosely structured, flexible and
spontaneous.
Its mechanisms:
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Social relationships and groupings
Informal communication
Behavioural norms
Power/influence structures
Influences on organisations
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Informal organisation may be beneficial or
detrimental to the organisation:
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Benefits:
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Employee commitment
Knowledge sharing
Speed
Responsiveness
Co-operation
Problems:
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Social groupings may act collectively against organisational
interests
Informal communication may be inaccurate
May be too important in fulfilling employees’ needs
Informal work practice may cut corners
Minimise the problems of
informal organisation
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Meeting employees’ needs as far as possible
via the formal organisation
Harnessing the dynamics of the informal
organisation
Involving managers themselves in the
informal structure
* Question bank: p562 #8
Group norms
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A work group establishes norms to which all
members of the group are expected to
conform.
Individuals may react to group norms in the
following ways:
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Compliance
Internalisation
Counter-conformity
Norms may be reinforced by:
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Identification
Sanctions
5 Stakeholders goals and objectives
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Stakeholders are those individuals or groups
that potentially have an interest in what the
organisation does.
Types of stakeholders:
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Internal stakeholders
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Primary stakeholders
Connected stakeholders
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Employees, management
P132 another approach
Shareholders, customers, suppliers, financiers
External stakeholders
Secondary stakeholders
 Community, government, pressure groups
Stakeholders and interests
internal
Managers and
employees
connected shareholders
bankers
suppliers
external
Job security, pay, promotion,
benefits, working
conditions
Shareholder wealth, risk
Security on loan
Profitable sales, payment,
long-term relationship
Goods as promised
customers
Jobs, tax, legislation
government
Pollution, rights, etc.
Pressure groups
Professional bodies Members’ ethics
Stakeholders conflict
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Since their interests may be widely different,
conflict between stakeholders can be quite
common.
Conflict between managers and shareholders
is a typical example
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Vehicle for managerial skills
Dividend stream, value of shares
Conflict can be detrimental to the company’s
stability
Stakeholder dependency
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A firm might depend on a stakeholder group
at any particular time
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Degree of dependency can be analysed by:
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Bankers, customers, etc.
Disruption, replacement, uncertainty
Relationship between company and
stakeholders is a function of parties’ relative
bargaining strength
Stakeholder mapping (Mendelow)
low
high
Level of interest
low
A
Minimal efforts
B
Kept informed
e.g. community
representatives
power
C
Kept satisfied
e.g. institutional
shareholders
high
D
Key players
Implication for the organisation
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Stakeholder mapping is used to assess the
significance of stakeholder groups
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The framework of corporate governance should
recognise stakeholders’ level of interest and
power
Sometimes, repositioning of certain
stakeholders may be appropriate
Blockers and facilitators of change should be
identified
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Stakeholder groups may choose loyalty, exit and
voice.
Strategic value of stakeholders
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Firm can make strategic gains from
managing stakeholder relationships
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Employee loyalty and customer loyalty
Continuity and stability in relationships with
employees (customers, suppliers) and
capability of responding to changes.
Measuring stakeholder satisfaction
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Measuring the stakeholder satisfaction may
be difficult, ’cause it’s difficult to quantify
Employees
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Government
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Staff turnover; pay and benefits relative to
market rate; job vacancies
Pollution measures; promptness of filing
annual returns; accident rate; energy efficiency
Distributors
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Share of joint promotions paid for; rate of
running out of inventory
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Pilot paper: p36-37 #7,8
Question bank: p562 #9