While there is universal agreement that organizational culture plays a crucial role in shaping organizations, there is little consensus on what it actually is, never mind how it influences performance and, crucially, how leaders can change it.
This is a problem, because without a clear understanding of culture, we cannot hope to discern its connections to other key elements of organizational design, such as strategy, structure and incentive systems. Nor can we develop good approaches to analyzing, preserving and transforming cultures. If we can define what organizational culture is, we will better understand how to diagnose cultural problems and develop better cultures.
Here are some ways to think about organizational culture and the implications for changing it:
1. Culture is “how we do things here”
Culture gives rise to consistent, observable patterns of behavior in organizations. As Aristotelian thought might express it, “We are what we repeatedly do.” This view highlights that behavioral patterns or “habits” are a central element of culture; it’s not just what people feel, think or believe. This view also focuses attention on the forces that shape behavior in organizations and their critical importance in making culture change happen.
Implication: It’s not enough to focus just on changing values and attitudes – if behaviors don’t change, culture doesn’t change.
2. Culture acts as a control system – for better and worse
Culture promotes and reinforce “right” thinking and behaving, and sanctions “wrong” thinking and behaving. Key in this view of culture is the idea of behavioral “norms” that must be upheld, and associated social sanctions that are imposed on those who don’t “stay within the lines.” This view also focuses attention on how the evolution of the organization shaped the culture. That is, how have existing norms and values promoted the survival of the organization in the past? Critically, what happens when the organizational environment shifts dramatically due, for example to technological developments or the rapid emergence of new competitors?
Implication: Established cultures can become impediments to survival when organizations face substantial environmental changes.
3. Culture is powerfully shaped by incentives
The best predictor of what people will do in organizations is what they are incentivized to do. By incentives, we mean here the full set of incentives — not just monetary rewards, but also non-monetary rewards such as how people get status, recognition and advancement — to which members of the organization are subject. So to understand an organization’s culture, it helps to focus on incentives and the behaviors they encourage and discourage.
Implication: Changes in incentives can powerfully influence behaviors and hence, over time, reshape culture.
4. Culture helps people “make sense” of what is going on
Sense-making has been defined as “a collaborative process of creating shared identity and understanding out of different individuals’ perspectives and varied interests.” Culture is more than just patterns of behavior; it’s also jointly-held beliefs and interpretations about “what is.” A crucial purpose of culture is to help orient its members to “reality” in ways that provide a basis for alignment of shared purpose and joint action.
Implication: The right changes in culture can better help people “make sense” of emerging challenges and opportunities, and so adapt more easily.
5. Culture is an essential source of shared identity
Cultures provides not only a shared view of “what is” but also of “why it is.” Culture is about “the story” in which people in the organization are embedded, and the values that reinforce that narrative. This view focuses attention on the importance of organizational values and the benefits of having people feel connected to and inspired by them. It also highlights the danger that attempts to change values can result in a loss of a sense of shared identity and connection to the organization.
Implication: Leaders considering developing a new set of values should weigh the benefits having “better” values against the potential costs of people experiencing a loss of connection to the past, and diminution of the loyalty and engagement that flows from it.
6. Culture is the organizational equivalent of the human immune system
Culture is a form of protection that has evolved from the situational pressures the organization has faced in the past. It prevents “wrong thinking” and “wrong people” from entering the organization in the first place. It says that organizational culture functions much like the human immune system in preventing viruses and bacteria from taking hold and damaging the body.
Implication: Organizational immune systems also can attack needed agents of change, and this has important consequences for what needs to happen to successfully on-boarding and integrate people who are “different” into organizations.
7. Organizational culture is shaped by societal culture
Organizational culture is shaped by and overlaps with other cultures — especially the broader culture of the societies in which it originated and operates. This view highlights the challenges that regional and global organizations face in establishing and maintaining a unified culture when operating in the context of multiple national, regional and local cultures.
Implication: Leaders must strike the right balance between promoting “one culture” in the organization and allowing for influences of local cultures.
8. Organizational culture always is multi-layered
The cultures of organizations are never monolithic. There are many factors that drive internal variations in the culture of business functions (e.g. finance vs. marketing) and units (e.g. a fast-moving consumer products division vs. a pharmaceuticals division of a diversified firm). A company’s history of acquisition also figures importantly in defining its culture and sub-cultures.
Implication: If acquisition and integration are not managed well, the legacy cultures of acquired units can persist for surprisingly long periods of time and so contribute to a lack of shared identity and challenges for people moving between units.
9. Organizational cultures are dynamic
Cultures shift, incrementally and constantly, in response to external and internal changes. So, trying to assess organizational culture is complicated by the reality that you are trying to hit a moving target. But it also opens the possibility that culture change can be managed as a continuous process rather than through big shifts (often in response to crises). Likewise, it highlights the idea that a stable “destination” may never — indeed should never — be reached.
Implication: Organizational cultures always should be evolving and developing; it’s far better to continually evolve the culture than to have to drive dramatic shifts.
10. Culture is resilient
Finally, for precisely the reasons cultures can be so powerful, they are difficult to change.
Implication: Changing a culture takes commitment on the part of leadership, often requiring years of concerned and consistent effort, including intensive work to communicate and reinforce desired new behaviors and values.
These 10 perspectives provide a holistic, nuanced view of organizational culture that should help leaders better understand their organizations — and change them for the better.
Michael D. Watkins is Co-Founder of Boston-based global leadership development consultancy Genesis Advisers and Professor of Leadership and Organizational Change at the IMD Business School. He has spent the last two decades working with executives — both corporate and public — as they transition to new roles, transform their organizations, and craft their legacies as leaders.