ORGANISATIONAL CULTURE
The impact of organisational
culture on business strategies and
performance
Key definitions
• Intangible asset: non-monetary asset
without physical substance which generates
economic benefits; culture as an
organisational asset
• Strong culture: a consistent culture;
understood and felt by people inside &
outside the organisation, consistent with
organisational goals.
• Toxic culture: questionable morals and
unethical behaviour
Key concepts
• Employee engagement: employees'
drive & commitment to use their
energy, skills and resources which
benefit the firm
• Competitive advantage: sustainable
differences compared with the main
competitors
• Cultural glue: organisational culture is
what keeps an organisation together – it
binds people
Features of a positive culture
•
•
•
•
•
•
A source of competitive advantage
Clear set of values, mission & goals
Performance-orientated
Encourages suitable risk-taking & innovation
Strong internal communication
Engaged employees: higher motivation &
loyalty
• Better connection between depts. & divisions
• Not easily copied
Features of a weak culture
• Little alignment with business
values
• Inconsistent behaviour
• A need for extensive
bureaucracy & procedures
Examples of when culture goes wrong!
• News of the World / News International: phonehacking & bribery allegations
• RBS & Fred Goodwin: Reckless external growth &
lending hastened banking crisis of 2008/9
• GlaxoSmithKline: record $3bn fine for misselling of
drugs and bribery
• Enron / Jeff Skilling: US's 7th largest firm turned out
to be an elaborate scam
• Barclays: role in LIBOR rigging & PPI misselling leads to
departure of CEO Bob Diamond
Examples of culture as a competitive advantage (1)
• Zappos: defines its culture in
terms of 10 core values made part
of everyday working life. For
Zappos, the "culture is the brand“
• IKEA: clear link between strong
corporate culture, the business
model and financial success ("to
visit IKEA is to visit Sweden").
IKEA's vision and values ("to
create a better everyday life for
the many people") drives the way
the culture operates.
Examples of culture as a competitive advantage (2)
• Southwest Airlines: A strong
culture based on employee
engagement has helped make it
the most profitable, low-cost
airline in the world. Herb
Kelleher (CEO): "The business of
business is people“
• German mittelstand: familyowned businesses with a strong
long-term perspective have
driven German economic
success; invest in quality.
Key depends on factors
• Research emphasises the complexity of corporate culture &
the risks of oversimplifying what it is and how to change it.
• Larger, longer-established firms have more complex
cultures, consisting of sub-cultures, individuals and groups.
• Having a clear, well-communicated and accepted set of
core values helps to establish a common, positive culture.
• A flawed business model or strategy is unlikely to result in
business success, even if the culture is strong and healthy.
• A culture that fails to adapt to the changing external
environment may hasten the failure of an organisation.
Some possible evaluation points
• There are many potential links between
organisational culture and business success but
difficult to prove.
• Successful businesses often recognise that the
business model/strategy and culture are
interdependent - the whole system is aligned.
• Better-performing firms pay attention to nurturing
culture - they are disciplined (e.g. have reward,
communication systems) and invest time in it.
• Leadership plays a key role in nurturing culture:
Schein: "the only thing of real importance that
leaders do it to create and manage culture"
Background Slides,
Examples and Other
Activities
When Culture Goes Wrong…
4 Factors that Shape Managerial Behaviour
The Corporate Culture
Org Structure, Systems,
Policies & Plans
Leadership
External Environment
(PEST)
Source: Kotter & Heskett
The
Behaviour
of a
Firm’s
Managers
One possible chain of events…
Success generates strong sales growth
Bureaucracy builds to cope with growth
Firm hires & promotes managers, not leaders
Managers become increasingly arrogant
A strong but arrogant culture develops
Alternative hypothesis: culture as a “cult”
Apple
Disney
Goldman
Sachs
Marriott
Hotels
Employment at businesses founded or led by
these has been likened to being “cult-like”.
Shadow of the Leader?
A phenomenon where
the organisational
culture is the
reflection of the
founder or senior
team
Shadow of the Leader…?
“A fish
rots from
the head
first…”
Another great source of examples &
evidence…
The UK Bonus Culture…
A possible essay title…
To what extent to do agree that an
organisational culture based on high employee
rewards will inevitably damage business
performance in the long-run?
Can you make the links between culture >
high rewards > business damage?
July 2012
Corporate Culture as a
Competitive Advantage
Culture as an essential intangible asset
Human capital
3 categories of
intangible assets
essential for
implementing
any strategy
Information capital
Organisation
capital
Source: Kaplan & Norton, The Balanced Scorecard
Culture: an intangible asset with big potential
• Distinctive & individual to the firm
• Hard to copy
• Enables a business to differentiate
itself
• Can help add value
• A source of competitive advantage?
Built to Last
“A clear,
sustained culture
is stronger than any
one individual as a
factor in continued to
success”
Built to Last – “Cult-like Cultures”
“IBM attained its
greatest success
during the same
era that it
displayed its
strongest cult-like
culture”
Signs of a cult-like ideology…
• Orientation & induction
training with ideological
content (values, history)
• Internal universities
• Hire young & promote
from within
• Unique language &
terminology
Source: Built to Last: Collins & Porras
• Corporate songs
• Tight screening
processes for hire & fire
• Celebrations that
reinforce success &
belonging
• Constant reminder of
values & heritage
Culture quotes - IBM
“Until I came to IBM, I probably would have
told you that culture was just one among
several important elements in any
organisation’s make-up and success.
I came to see, in my time at IBM,
that culture isn’t just one aspect of
the game; it is the game”
Lou Gerstner (Chairman & CEO IBM 1993-2002)
Whose corporate culture is this?
Customers are “guests”
A job is a “part”
A uniform is a “costume”
Being on duty is “onstage”
Being off duty is “backstage”
Whose corporate culture is this?
2 Classic Case Studies in Positive Culture
Zappos
Southwest Airlines
(Online Shoe Retailer)
World’s Largest Low-Cost Airline
Zappos
“your culture
is your brand”
Southwest Airlines
“the business
of business is
people”
Where to find other examples of
successful corporate culture
Best place to work for…
The survey methodology identifies workplace performance and best practice according to eight key
factors. These factors are particularly significant as they are defined through the results from the
survey process, and therefore by employees themselves, as critical factors in workplace engagement.
Leadership: How employees feel about the head of the organisation, senior managers,
and the organisations values and principles
My Manager: How employees feel about and communicate with their direct manager
Personal Growth: What employees feel about training and their future prospects
Wellbeing: How employees feel about stress, pressure at work, and work life balance
My Team: Employees feelings towards their immediate colleagues and how well they
work together
Giving Something Back: The extent to which employees feel their organisation has a
positive impact on society
My Company: The level of engagement employees have for their job and organisation
Fair Deal: How happy employees are with their pay and benefits
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