What Is Organizational Culture? - Principles of Management

The concept of organizational culture has been around for decades and started to gain popularity beyond academic circles in the 1980s. Today it seems that most corporate leaders actively think about their company’s culture daily or weekly. Certainly it is on the minds of Kevin Rollins and Michael Dell at Dell Inc. What is this abstract thing we call organizational culture ? It consists of the values and assumptions shared within an organization. Organizational culture directs everyone in the organization toward the “right way” of doing things.

It frames and shapes the decisions that managers and other employees should make and the actions they should take. As this definition states, organizational culture consists of two main components: shared values and assumptions. Figure below illustrates how these shared values and assumptions relate to each other and are associated with artifacts.

Organizational Culture Assumptions, Values, and Artifacts

Organizational Culture Assumptions, Values, and Artifacts


Values are stable, evaluative beliefs that guide our preferences for outcomes or courses of action in a variety of situations. They are conscious perceptions about what is good or bad, right or wrong. Values tell us to what we “ought” to do. They serve as a moral compass that directs our motivation and potentially our decisions and actions (Figure below). Everyone has values because they partly define who we are as individuals and as members of groups with similar values.

People organize the dozens of values into a hierarchy or value system. Some people value security and tradition; others give these values a much lower priority. Instead they might give top priority to the values of excitement and challenge.

Security, tradition, excitement, challenge, and dozens of other values exist within individuals. Yet values also exist as a component of organizational culture in the form of shared values . Shared values are values that people within the organization or work unit have in common and place near the top of their hierarchy of values. At Dell, employees place a high priority on winning, meaning that they value performance and achievement more than, say, security or tradition.

It has become trendy for leaders to determine and publicly announce their company’s shared values. Yahoo!, the online portal company, is no exception. Its Web site proudly says that six values represent its corporate DNA or “what makes it tick”: excellence, innovation, customer fixation, teamwork, community, and fun. Do these values really represent the content of Yahoo!’s culture? Maybe, but what companies say they value isn’t necessarily what they actually value.

The key distinction managers need to consider is whether they are referring to espoused values or enacted values. Espoused values represent the values people say they use and, in many cases, think they use even if they don’t. Values are socially desirable, so people create a positive public image by claiming to believe in values that others expect them to embrace.

For instance, one large international corporation hung signs around its headquarters proclaiming that its culture embraced “trust”; yet the same company required all employees to be searched whenever they entered or exited the building. Furthermore, even if the company’s dozen or so top executives embrace these values, they are not necessarily the values held by most people throughout the organization.

Enacted values , on the other hand, represent the values people actually rely on to guide their decisions and actions. These values in use are apparent by watching people in action. An organization’s culture consists of these enacted values, not espoused values.

How Important Is Corporate Culture?

How Important Is Corporate Culture?


The deepest element of organizatioal culture (some experts believe it is really the essence of culture) is the shared assumptions that people carry around in their heads. Assumptions are unconscious perceptions or beliefs that have worked so well in the past that they are considered the correct way to think and act toward problems and opportunities. These assumptions are so deep that they are taken for granted—they are so obviously good and right for the company that no one really thinks about or questions them.

For many decades Hewlett-Packard’s culture was so deeply embedded that no one really questioned its underlying assumptions. The California-based technology company’s legendary culture, known as “the H-P Way,” revered innovation, employee well-being, and collegial teamwork. It was a role model for cultures in other Silicon Valley companies.

The opening vignette to this provides another example of how strong organizational cultures operate at a level of unconscious assumptions. Dell’s focus on winning the competition game had been so successful over the years that no one questioned it. Even when Dell’s executives realized that the company’s winning culture had changed into one that focused too much on the company’s stock price, they didn’t try to disturb the underlying emphasis on winning.

“It’s not that we didn’t have a culture with the qualities that drive business success,” explains Paul McKinnon, Dell’s vice president of human resources. “We were performance-driven, cost-driven, built on speed, very low on politics. We just aspired to do better.… What would a new winning culture look like here at Dell?”

Along with being the deepest part of organizational culture, shared assumptions are the most difficult to change. Consider the corporate culture of Procter & Gamble. Until a few years ago employees at the consumer goods company lived and breathed a culture of insular secrecy and a managerial hierarchy. Top positions were filled through promotions; rarely would anyone consider hiring an outsider to fill a management role.

Anyone who left P&G was considered a traitor, never to be welcomed back. New hires were quickly “Procterized”; they completely embraced the culture or left the company. P&G’s culture had been so successful for so long that it would be ridiculous to question it. This culture remained intact even when P&G lost market share during the late 1990s to more customer-focused competitors.

P&G’s chief executive at the time tried to change the culture, complaining that he would “like to have an organization where there are rebels.” The CEO underestimated the depth of shared assumptions. After pushing through culture changes for two years, he was replaced. His successor, A.G. Lafley, was more successful by taking a gentler but equally persistent approach to making employees aware that P&G’s old culture was dysfunctional.


Organizations differ in their cultural content—that is, the relative ordering of values and assumptions. Spend some time at SAS Institute and you will soon discover that the world’s largest privately held software company has one of the most employee-friendly cultures on the planet. Located on a 200-acre campus in Cary, North Carolina, SAS supports employee well-being with free on-site medical care, unlimited sick days, heavily subsidized day care, ski trips, personal trainers, inexpensive gourmet cafeterias, and tai chi classes. Unlike other software companies, SAS encourages its employees to stick to a 35-hour workweek.

In contrast, visit Wal-Mart’s headquarters in Bentonville, Arkansas, and you will find a workplace that almost screams frugality and efficiency. The world’s largest retailer has a spartan waiting room for suppliers. Visitors pay for their own soft drinks and coffee. In each of the building’s inexpensive cubicles, employees sit at inexpensive desks finding ways to squeeze more efficiencies and lower costs out of suppliers as well as their own work processes.

How many corporate cultural values are there? Some writers and consultants have attempted to classify organizational cultures into several categories. One of these models claims that there are seven corporate cultures in the world: attention to detail, outcome orientation, people orientation, team orientation, aggressiveness, stability, and innovation and risk taking.

Another organizational culture model identifies eight cultures organized around a circle, indicating that some cultures are opposite to each other. A rules-oriented culture is opposite to an innovation culture; an internally focused culture is opposed to an externally focused culture; a controlling culture is opposite to a flexible culture; and a goal-oriented culture is opposite to a supportive culture.

Managers like to use these organizational culture models because they are handy templates when figuring out what kind of culture they currently have and what kind of culture they want to develop. Although they probably clarify the messy business of sorting out organizational values, these models oversimplify the diversity of cultural values in organizations.

The fact is, there are dozens of individual values, so there are likely as many organizational values. Thus managers need to be wary of models that reduce the variety of organizational cultures into a few simple categories with catchy labels. By relying on these models, managers could possibly form an impression of their culture that is not sufficiently accurate or precise.


When discussing organizational culture, we are actually referring to the dominant culture: the values and assumptions shared most widely by people throughout the organization. However, organizations also have subcultures located throughout their various divisions, geographic regions, and occupational groups. Some subcultures enhance the dominant culture by espousing parallel assumptions, values, and beliefs. For instance, some teams or departments within Dell probably feel more strongly about customer service than about winning.

Both are important, so the subculture’s values are compatible; but the priorities of values are somewhat different.

Other subcultures are called countercultures because they directly oppose the organization’s core values. Procter & Gamble’s clubby hierarchical culture was likely opposed by a few small teams or work units, whose members protected themselves from the dominant culture and were able to nurture a culture of creativity and innovation within their little niches. These contrarians are typically tolerated if small enough or far enough away from headquarters.

Subcultures (particularly countercultures) potentially create conflict and dissent among employees, but they also serve two important functions. First, they maintain the organization’s standards of performance and ethical behavior.

Employees who hold countercultural values are an important source of surveillance and critique over the dominant order. They encourage constructive conflict and more creative thinking about how the organization should interact with its environment. By preventing employees from blindly following one set of values, subcultures help the organization to abide by society’s ethical values.

The second function of subcultures is that they are the spawning grounds for emerging values that keep the firm aligned with the needs of customers, suppliers, society, and other stakeholders. Companies eventually need to replace their dominant values with ones that are more appropriate for the changing environment. If subcultures are suppressed, the organization may take longer to discover and adopt values aligned with the emerging environment.

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