Importance of Organizational Culture in Business

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Introduction

Organizational culture can be considered as one of the main tools of any modern management organization and staff development. It implies a certain set of values, norms and rules that form the guidelines for behavior and actions taken by employees. It is through the organizational culture that every staff member knows how to interact with others and with the external environment. Organizational culture can also be considered as a kind of result of the development of an organization that allows consumers and employees to identify it among the others. Modern management views organizational culture as a powerful strategic tool that allows all departments and employees to be focused on the same goals. Kraśnicka et al. (2017) state that “innovation supportive culture stimulates the generation of new solutions or their absorption from the outside and contributes to the more effective implementation of creative ideas” (p. 745). High-quality management of the organizational culture gives a business a certain competitive advantage and strengthens an enterprise’s position on the market.

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Elements of the Organizational Culture

Analysis of the organizational culture’s structure allows one to highlight its elements. The specificity of these elements, as well as the originality of their combination in each and every case, creates the unique image of an organization. Researchers of organizational culture highlight its various elements, and in this regard, there is no full agreement between them. However, they all primarily talk about the role of the inner values ​for every organization. At the same time, a distinction is made between the ​​proclaimed values and the values that exist in reality. Proclaimed values ​​are publicly stated – they are explicit ​and officially preferred by an organization. These values ​​are usually set by the founder of a new or relatively small company, or by senior management authority in large organizations. Manifested values, on the other hand, are those that are found or embodied in the actual behavior of workers. The gap between proclaimed and displayed values ​​is very important because it can significantly influence the organizational culture.

Types of the Organizational Culture

The first attempt to classify the phenomenon, which later was named “organizational culture”, was undertaken in 1972 by Roger Harrison, who explored ideologies of different organizations. Developing his ideas, Charles Handy replaced the term “ideology” with “culture”. This way, it was possible to better explain the complicated network of values, traditions and relationship inside an enterprise. In addition, Handy identified the following four types of organizational culture.

Clan Culture

A clan-like organizational culture is primarily represented by small companies. It is based on a central source of power that spreads its influence everywhere. This culture operates on the basic principle of precedent, anticipating the wishes and decisions of central sources of power. There are few rules and established procedures, as well as little bureaucracy. Control is carried out by the center mainly through the selection of key people, with periodical control checks from the leaders of the organization. The organizations based on clan culture are capable of quick actions and can respond well to economic threats. However, the main course of such enterprises depends on the company’s leading group, so the effectiveness of these leaders becomes of paramount importance in the organization. Workers here will thrive and feel satisfied enough if they are power-oriented, policy-sensitive, risk-averse, and value guarantees only as a secondary element. This culture builds a lot of trust in an individual and much less in different committees. It judges by results of the work and is quite tolerant of the means used.

Adhocracy Culture

The culture of adhocracy attracts people who prefer to solve new problems. It is mainly focused on getting work done, and adhocratic organizations prefer to develop a wide variety of projects simultaneously. This type of culture requires a constant search for appropriate resources and personnel to be carried out, and influence in the organization is based more on expert power than on the power of a position. Moreover, the influence and responsibilities are dispersed much more widely in an adhocracy culture than in other types. Each individual believes that they are all engaged in a common cause. It is a result-oriented team culture that erases individual goals and status differences among employees. The main advantage of this culture is that it is very adaptable. Operational and working groups, project teams are formed for the implementation of special goals, and they can be reformed, disbanded or extended. Within the framework of this culture, people get the opportunity to control their work themselves, evaluate its results and establish good working relationships based on individual abilities rather status.

Market Culture

This type of organizational culture dominates among results-aimed organizations. In this culture, the main concern is the fulfillment of the assigned task. Employees are purposeful and compete with each other, and leaders are the toughest competitors, unwavering and demanding. Due to the ever-present profit run that defines the modern market, this kind of culture ties the organization together with an emphasis on winning. Success is measured in market share and market penetration, and leading the competition is considered the most crucial task for every employee. The advantage of this culture is that people can unite around the leader. Respectively, internal changes in such an environment can be done quickly and efficiently. However, a market culture will exist only within the framework of the leader’s vision and degree of flexibility, and, consequently, reflect all their weaknesses. People would not be disposed to argue with the leader or question their assumptions or intentions, even if serious potential errors in their plans are evident. In addition, workers are distracted from the essence of the matter, because this culture is very “politicized”.

Hierarchy Culture

Hierarchy-based organizational culture is often associated with bureaucracy because it is based on logic and rationality. The strength of a hierarchical organization lies in its “pillars” – structural divisions and their functions, as well as in a clear division of responsibilities. The activities of the departments and the interactions between them are controlled by specific procedures and coordinated by a narrow circle of top management. In a hierarchy culture, a role or job description is often more important than the individual performing it. People are selected to fulfill a role satisfactorily, and no further action is required. The official position of power is the main source of influence in this culture, and personal power is frowned upon. Expertise is only allowed in appropriate places. This organizational culture values established rules and procedures as the main methods of influence. The economy of such a culture is based on the rationality of the distribution of work and responsibility, and not on individuals. Hierarchy provides an individual with guarantees and predictability of the future.

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Organizational Culture and Its Impact on the Company’s Efficiency

Organizational Culture as a Motivation Tool

Organizational culture is rightfully considered one of the main components of a complete and effective management system of team motivation. The culture of a company allows it to manage its development more efficiently using the employees’ ambitions and goals. Moreover, it is also a powerful tool to create a positive microclimate in the team, which will help unleash the creative potential of the workers and motivate them to use innovative methods when solving emerging problems. In the corporate motivational system, a healthy and proper culture establishes a rational and fair structure for remunerating employees’ labor depending on their professional level and qualifications, as well as the results of their work. It also gently pushes employees to constantly improve and develop, which is the main task of the organization’s motivational policy. Complex interaction and integration of corporate concepts of motivation and organizational culture involve combining them into a single whole to carry out joint practical actions and educational activities that lead to a synergistic effect. Overall, in the personnel motivation system, organizational culture allows the company to achieve a balance between power and responsibility and effectively stimulates its employees’ innovative work attitude.

Organizational Culture as a Means of Managing an Enterprise

The complexity and turbulence of modern markets, as well as an increase in the speed of obtaining information and new knowledge determine the need to develop new methods and tools of management activities. A distinctively new approach has to ensure economic growth, increase production and competitiveness of enterprises on both domestic and global markets. Therefore, the most important resource capable of creating a flexible, adaptive and effective socio-economic system is the organizational culture of an enterprise. The objectives of the organizational culture as a management tool are to create a working climate that is more suitable for the implementation of the company’s strategy, ensure the employees’ proper guidance, as well as provide further enterprise development. Jankoff (2021) states that “a culture that is risk averse, or very process driven, is almost by definition discouraging employees from acting in an entrepreneurial manner” (p. 31). Organizational culture ensures healthy relationships with both consumers and employees, and helps manage professional connections to governing structures and other enterprises. Implementation of organizational culture’s management functions is based on the development of the company’s qualities such as unity, openness to innovations and ability to communicate with the market.

Organizational Culture and Innovations

New approaches to management presuppose, first of all, the creation of a strong organizational culture of the appropriate type. This culture would specifically contribute to the growth of personnel, and, through it – to the innovative potential of the organization as a whole. Kraśnicka et al. claim that “in certain areas organizational culture strengthens the connection between management innovation and enterprise performance” (p. 754). With the right choice of organizational culture, enterprise’s innovative human resources would increase, as employees will have different personality traits. Guven (2020) adds that “it is the process of discovering innovations that are based on strategic intrapreneurship and future competitive advantages, and ensuring that business people strive to benefit from today’s competitive advantages” (p. 234). Moreover, the conditions corresponding to these properties would allow the culture to reveal creative and innovative potential of the personnel and apply it in reality. In the healthy conditions of such culture, employees will best develop and apply their skills and knowledge to ensure the enterprise’s profit.

Best Organizational Culture for an Innovative Enterprise

Of the four types of organizational culture, adhocratic one is the most appropriate for an innovative enterprise. A distinctive feature of this organizational culture is the assumption that the true way to success lies in the employees’ collective understanding that innovation is key to efficient development. Such an organization culture has in itself a certain impulse prerequisite for the implementation of effective innovation activities. This culture is quite democratic and focused on individualism. All relationships are built on the principle of power decentralization. Responsibility shifts from one target brigade to another, depending on the specific task being solved by the organization. There is no authoritarian relationship with the leaders of the company, and each employee knows almost all aspects of the enterprise. Considering that employees who generate innovative ideas have certain sets of personality characteristics, this type of organizational culture is best suited for the development of innovative human resources potential. It gives employees a certain amount of freedom and independence, both in decision-making and self-expression. Enterprises with an adhocratic type of culture are the most flexible. They are aimed at the external environment, since they see there opportunities for the implementation of their innovative projects.

Conclusion

An innovative entrepreneurship requires a continuous improvement of employees’ qualifications and perpetual training. The desire for constant development can truly become a secure basis for creation and implementation of innovations. The organizational culture remains the most effective lever of influence on the employees of an enterprise and a means of ensuring the required comfort for their labor. Moreover, the culture connects employees’ inner ambitions and aspirations with the goals of the enterprise they are working for to maintain a thriving business. An organizational culture concerns all activities of an innovative organization and influences the efficiency of its work by affecting human innovation potential. This, in turn, supports company’s innovation sensitivity and secures commercialization of potential projects. Thus, with the skillful use of organizational culture, one can lead their enterprise to success, prosperity and stability. Consequently, the organizational culture must be studied in detail for its proper manifestation, improvement and regulation.

References

Guven, B. (2020). The Integration of Strategic Management and Intrapreneurship: Strategic Intrapreneurship from Theory to Practice. Business and Economics Research Journal, 11(1), 229–245. Web.

Jankoff, C. (2021). Leading Innovation and Change. The Risk Doctor. the Risk Doctor. Web.

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Kraśnicka, T., Głód, W., & Wronka-Pośpiech, M. (2017). Management innovation, pro-innovation organisational culture and enterprise performance: testing the mediation effect. Review of Managerial Science, 12(3), 737–769. Web.

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BusinessEssay. 2022. "Importance of Organizational Culture in Business." September 14, 2022. https://business-essay.com/importance-of-organizational-culture-in-business/.

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