Organizational culture is the way people behave in a company, based on their values (personal and collective), rituals, artifacts, incentives, role models, and stories. The organization's values determine its examples, its rituals, its incentives, and its artifacts. These, in turn, determine and reinforce the behaviors of their members.
Have you ever heard of Organizational Culture? According to the 2018 Brazil HR Panorama, 77% of participating companies have values and/or a code of culture disseminated in writing in their respective companies. So much concern about the topic, however, does not translate into clarity about what, in fact, culture is: it is difficult to find two similar definitions.
Through this content, you will understand a little more about the topic, as well as check out strategies for your company to develop based on culture. Enjoy your reading!
Culture in society
In everyday life, many of us refer to culture as something related to the arts: museums, theater, cinema, music concerts, and so on. It is very common to hear "I really like going to São Paulo. My city doesn't have such a rich cultural life".
Culture can also be used as an adjective, when we say that someone "has a lot of culture" or "is very cultured" when we want to describe that person as well-read, well-studied or sophisticated in various subjects.
Anthropologists, to add yet another aspect to the term, speak of culture as being the set of customs and practices that a society develops over time.
Here we are interested in what culture means in the context of an organization, whether for-profit or not-for-profit.
Culture in organizations
In recent decades, scholars of organizations (be they business administration theorists, industrial psychologists, or executives from the "practical" side of the counter) have been calling culture the set of norms and practices that an organization develops, or the set of values and beliefs that a company speaks of as its own (that is, it refers to both what it is and what it should be).
To begin to answer this question, let's first turn to quotes from business leaders and business thinkers. Let's reproduce and discuss some quotes that we find interesting about culture to try to build our own definition.
"The values and day-to-day behaviors of each team member in pursuit of the company's mission"
- Tony Lin, partner at Sequoia Capital
"A pattern of premises learned by a group"
- Edgar Schein, MIT Scholar
"The beliefs and ideas a company holds and the way in which they affect how the company does business and how its team members behave"
- Cambridge Business Dictionary
"The collective story that a group tells itself...and that guides thoughts and behavior"
– Charles Jacobs
"Assumptions, values, beliefs, behaviors, and artifacts"
- James Heskett, author of The Culture Engine
"Made of habits and emotional responses, a company's culture is the sum of the self-reinforcing patterns of behavior, feeling, thinking, and beliefs that determine the way we do things here."
- Jon Katzenbach, founder of Strategy&'s Katzenback Center
We see that there are common elements to the definitions, but there is no significant cohesion between them. Several of them talk about values, some talk about behavior, others about beliefs, artifacts, and even feelings.
Now that we have seen various academic and business views and opinions on what organizational culture is, let's agree on a working definition and move on: **the way people behave in a company, influenced by values, incentives, and artifacts.**
The values of an organization
Next, we’re going to understand a little more about an organization's values.
What is the meaning of values?
According to the Cambridge dictionary, a value is defined as: *"Principles or standards of behavior; one's judgment of what is important in life. "* In a free translation, we have "principles or standards of behavior; one's judgment of what is important in life."
Thus, values are beliefs, fundamentals, and principles held to be true by people in a group, and which ultimately determine the way in which these people act, think, and feel. Important: companies don't have values. People have values.
How are values developed?
The shared values of a group, in our case an organization, develop from the personal values of its most influential members, who tend to be its founders and leaders, and which are absorbed by its members through what these most influential members say and, more importantly, do in the day-to-day running of the organization. These behaviors serve as an immediate incentive for mimicry (i.e., imitation).
As the group grows, the original values we have talked about may be diluted in the group, as, on the one hand, new leadership forms, possibly not aligned with the values of original founders or leaders, and on the other, as the group develops its own artifacts and incentives. These new values may eventually become dominant in the group, effectively changing its structure and "culture". Values take on a life of their own.
Incentives for the development of Organizational Culture
Incentives are another extremely important factor in building and developing organizational cultures. Here they also end up in the beginning reflecting the company's initial values (which are confused with the values of its founders and leaders).
What are the strongest behavioral incentives in a company?
The strongest behavioral incentives in a company are promotions and layoffs. It is how the company shows which behaviors are desired and which behaviors are not desired in its team members. These people (both promoted and dismissed) end up becoming role models - both of what to do and what not to do - and thus the values end up perpetuating themselves.
What are the culture-diluting factors in a company?
One of the biggest culture-diluting factors occurs when people who do not represent the organization's values end up, for some reason, being promoted or kept in their positions despite showing, through their behavior, a lack of synchrony with what is preached as culture in the organization. Members of the organization may notice the discrepancy and have lower incentives to act in accordance with the values.
What are other incentives for building organizational culture?
Stories and behaviors that influence the way everyone behaves in the organization also serve as encouragement. Naturally, when there is a founder present in the group, he ends up serving as a great example to all its other members, who seek to imitate his behaviors and beliefs.
Frequently told stories and "causal tales" also end up becoming examples in the organization. The company chooses to reproduce certain events, with more or less fidelity to what actually happened, and this generates incentives for people to reproduce the told behaviors.
Artifacts in the development of Organizational Culture
Artifacts are also important factors (although less important than incentives) in the development of an organizational culture.
What are the artifacts in an organizational culture?
Values written on the wall are a great example. Office floor plans (which can be opened or closed) are also important artifacts, as are the structure and decoration of the spaces occupied by the leadership, and the existence - or non-existence - of doors, "sheriff desks" and other barriers, physical or psychological, to access to the leadership.
The way people dress in the organization is also an artifact of culture (have you noticed how companies can have subtle differences in the way dress is reinforced by the examples of leaders? Think of Ambev's jeans; Itaú's white shirts; IBM's navy blue suits).
Rituals: what is this artifact in an organizational culture?
An important type of artifact is the rituals developed by the group. Rituals are events such as regular meetings, awards, breakfasts with the president, and other such less formal things (even Thursday's happy hour can be considered a ritual) that end up reinforcing certain group values and behavior.
At Google, for example, TGIFs (thank god it's Friday) are held, events that bring together all employees who want to participate (physically or remotely through virtual video conference rooms) and in which announcements are made, priorities are discussed, but most importantly, employees can ask questions directly to the company's leadership, without censorship.
Meetings like TGIF (which is now conducted on Thursdays) are powerful rituals that reinforce the Google leadership's belief that transparency is important to the company's success as everyone has the maximum possible access to all company information, empowering them to make more informed and complete decisions, for example.
The creation of the Organizational Culture
You don't deliberately create culture "from scratch" unless you are the founder of your company and start shaping it from the first moment someone starts working with you. In all other cases, some culture will be created organically. So whether you know it or not, whether you like it or not, your company - most likely - already has a culture.
How is the Organizational Culture created?
How is this "organic" culture created? Our view is that culture is created from the values of highly influential people within the group. Usually this is the founder of the company and a small group of other people who are in his or her circle of influence.
As the founder begins to imprint his values on the group (values that, as we have seen, are beliefs and behavior patterns), rituals, stories and examples are formed and begin to shape the behavior of its members. This is how a company's culture begins to take shape.
How to figure out your Organizational Culture?
If we assume that any company, whether it knows it or not, has a culture, the first step in taking control of it, that is, consciously influencing it, is to find out what kind of culture already exists in the organization.
We call this "culture discovery". Discovering the culture of an organization is to discover the implicit culture of that organization. It matters little in this effort what the explicit culture of the company is, that is, how the company talks about its culture. As we have seen before, there is always a gap between the implicit and the explicit culture, so the best here is to understand what the "de facto" culture is
The starting point
To talk about culture discovery, the starting point is to look for its premises: the beliefs of the company, held by its leaders (in the sense of members who influence the thinking of the whole much more than in the hierarchical sense that the word sometimes takes), that give support to all the other elements of the culture, such as behavior, principles, and processes.
The steps to finding out the Organizational Culture
Finding out the premises of the Organizational Culture
A crucial starting point for you to identify your company's culture is to find the basic premises of how the company, its leadership, and its employees view human beings.
In order to talk about this, we turn to a seminal management thinker of the 1960s named Douglas McGregor, who first proposed two ways of looking at how human beings relate to work: the X and Y Theories, which we will detail below.
The average human being:
- inherently dislikes work;
- avoids working if they can;
- prefers to take orders;
- avoids responsibility at any cost;
- has little ambition;
- wants security above all else;
- needs to be coerced and controlled.
The average human being:
- considers work as natural as leisure or rest;
- exercises self-management and self-control;
- acts intrinsically motivated by his ego and self-realization;
- seeks responsibilities;
- realizes only part of their (huge) potential.
These premises translate clearly into the companies' practices and policies. In organizations where work is directed via a rigid command and control structure, for example, one sees a fundamental belief in Theory X.
In organizations where compensation is largely variable and tied directly to the achievement of goals and results, too.
These signals should be used so that you can assess whether your culture tends more toward Theory X values or Theory Y values. It is critical that the company and its leaders understand whose side they are on in these core beliefs. Clarity of thought is key in this case.
Beliefs and assumptions regarding the market
The next step is to understand how the company sees itself in relation to what it does well, its competitive differentials, its competitors, and the market in general.
Certain companies start from the basic assumption that the customer is at the center of everything they do (i.e., Zappos and Amazon, which have a diametrically opposite business strategy, but in essence firmly believe that the customer is at the center of everything they do).
Other companies start from the basic assumption that their employees are at the center of everything they do. Certain companies rely on innovation as a core business competency and believe that this is the only sustainable path (Amazon, Google, and most recently GE).
Other companies are much more oriented toward operational efficiencies in traditional and well-known businesses (Ambev and KraftHeinz). These basic business premises are very important as they must be coherent and aligned with the company's culture.
Another interesting exercise in discovering a company's culture is to ask your employees what behaviors they feel do and do not represent the company's culture.
The idea is that each team member thinks of practical cases experienced in the day-to-day life of the company of attitudes they think represent "our culture", as well as practical cases also experienced in the day-to-day life of the company of attitudes that they think represent "our anti-culture" or the opposite of our culture.
Ideally this should be done with some anonymous response collection tool, such as Google Forms or Survey Monkey. With the answers, you should make an effort to group recurring attitudes and sort the themes by the number of occurrences. Most likely you will see an interesting pattern emerging of things that the group sees as being representative and not representative of the company culture.
Organizational Culture at Amazon
Jeff Bezos, founder of Amazon, understands that three factors are key to his success:
- the customer will always want a greater variety of products;
- the client will always want shorter delivery time;
- the client will always want to pay less.
This viewpoint is derived from Bezos' belief, since the company's founding, that the company needs to have an absurd focus on its customer, and derive all its efforts, initiatives, and products from the customer "backwards."
This value is represented in the company's leadership principles: "Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.”
So, assuming that the customer and his needs are the starting point, all of Amazon's strategic initiatives (in its online retail business) ultimately relate to one of these three pillars:
In order for the company to always be able to get the lowest price, it has to be extremely frugal when it comes to its costs. If not, its business will be unsustainable. So to this day the company is known for its "Spartan" offices (when compared, of course, to peers in the tech world like Apple and Google), two-color business cards, and the lack of fancy free restaurants in its offices (only water, coffee, and tea are served).
In addition to artifacts that reinforce the strategic importance of frugality in Amazon's culture, the company reinforces stories that serve as role models for its team members.
There are well-known references to the desks in the company's early offices, which were supposedly made of doors bought ready-made and supported on trestles.
Stories like this are told inside and outside the company and serve as an example that reinforces the company culture (and which in turn contributes to the business strategy).
Organizational Culture at Netflix
Growing a company is a big challenge: as the size of the team grows, it becomes impossible to control the team very closely without having a huge cost to its performance in the form of processes and policies that lead to excessive bureaucracy.
In this scenario, a strong culture can be the glue that holds a high-growth company together. Leadership values stay intact and are continuously reinforced as the team grows, and this ensures important aspects such as the way customers and team members are treated.
Strong culture in Netflix's view
Netflix understands that a strong culture is one way to maintain the company's agility and performance despite its dizzying growth. According to the company, which discusses the topic in its culture code entitled Culture Code: Freedom and Responsibility, as they grow many companies see their talent density (high-performance, high cultural fit professionals) decline.
At the same time, the organization becomes more complex, with more people, more products, more regions, etc. Decreasing talent density and increasing complexity create a dangerous gap where errors and, as the company says, chaos arise.
Also according to the company, many of these organizations compensate for the decreasing density of talent with policies and procedures, so that the organization becomes more bureaucratic.
Bureaucracy and talent
With bureaucracy and processes, the company becomes less attractive to talent, which feeds back into a vicious circle of falling performance, where more processes beget more bureaucracy, which begets less talent density, which begets more bureaucracy, and so on.
Even if it produces attractive short-term results, this "bureaucratization" of the company makes it vulnerable to changes in the market and competitive environment, as the organization becomes less adaptable and less attractive to innovative and entrepreneurial talent.
According to Netflix, the only way to break this vicious cycle is through a strong culture that drives employee behavior instead of policies and procedures.
Organizational Culture at Disney
Mechanism: Professional conduct guides in the Disney parks, which are reinforced with:
- coaching and feedback program for the professionals;
- an awards program based on the conduct guidelines;
- courses at Disney University on the company's culture, values, and conduct guidelines.
Objective: To reinforce correct behavior in park professionals, who have direct contact with customers (there called "guests").
"Values" highlighted: Safety, Courtesy, Show and Efficiency. Leverage: Artifacts (conduct guidelines, award clips), incentives (guideline-based recognition), and rituals (bi-weekly guideline-based coaching and award ceremony/- award clips ceremony).
Walt Disney, the founder
Walt Disney, founder of Disney and creator of its parks and main characters, was very concerned about his company's culture and the experience he wanted to transmit to his "guests". This enormous concern for Disney's culture has made the company perhaps one of the greatest sources of inspiration for other companies that want to establish effective culture reinforcement mechanisms.
Leading by example
Walt was extremely concerned with leading by example, so he was known to practice what he preached as a culture in his daily work. A great example of this was his practice of walking around the park picking up any kind of trash he saw out of place, a practice that was quickly assimilated by the "cast" members of the parks.
Walt would also walk around the parks dressed in old clothes so that no one would notice who he was, to audit the quality of the service and the presence of the "cast" members "on stage."
The conduct guidelines were the brainchild of Van France and Dick Nunis, executives who were on the founding team of Disneyland, the company's first park in Anaheim, California.
The idea was to reinforce in the "cast" the Disney guidelines, which were called "Traditions", that were supposed to help the company achieve its mission, to "Foster Happiness" in "guests". The guidelines, which must be secured by all "cast" members in that order of priority, are:
Later, Disney unfolded specific behavior that support the four kinds of key behavior. For Safety, for example, the behaviors (and sub-behavior, in the case of the first behavior).
These conduct guidelines, or key behavior, are applied in the day-to-day life of the "cast" in two main ways:
- structured feedback;
- recognition programs.
Structured feedback is given to all park team members every two weeks. Each team (the one toy team, for example), has a designated coach, who accompanies the cast members fulfilling a predefined shadowing schedule. At the end of the half to one hour period, the "cast" member receives structured feedback on their behaviors in relation to each of the guides, and suggestions on how they can improve on them.
In this content, you have been able to understand what organizational culture is, what its main components are, and some case studies from large companies. As we have seen, it is essential to have this strategy in your business. So find out your culture and use it also for hiring new professionals.