How the organisational culture works


What evidence is there to suggest that organisational culture can be managed? How might diversities deriving from different national contexts affect the implementation of a global organisational culture change programme for a knowledge intensive multinational firm? Provide examples to illustrate your analysis.

‘Societies, organisations and individuals represent the gardens, bouquets and flowers of social science. ...To understand our social environment we cannot limit ourselves to solely one level; we should be prepared to consider all three.'

Geert Hofstede, (1998)

In this essay I will try to analyse and explain how the organisational culture works in practice and why the cultural differences needs to be understood in terms of human resource management, business and marketing.

Based on the fact, that literature of organisational culture is not only covering numerous aspects but also includes controversy meanings: definitions are needed. A general definition of the concept of organisational culture given by Geert Hofstede (2001:107) refers to culture as the ‘software of mind' and argues that it provides a guide for humans on how to think and behave; it is a problem-solving tool.

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According to prior definition organisational culture is considered to be a set or system of values, formal and informal norms and rules of conduct inherent in a particular economic system that contributed to its efficiency.From the standpoint of marketing and human resource management, organisational culture is one of the most important components of the marketing and business, and plays an important role as a bridge between the market networks, and between the individual structural components and individuals within those entities (economic entities: organisations, enterprises, firms, etc.).

The relationship between culture and business in general and its role in international communication are based on consideration of the overall cultural environment of business.

Organisational culture has become an area of interest in the past decades, in which we have witnessed an explosion in the activities of multinational corporations (MNCs). Sharp declines in trade and telecommunication costs have led to increasing separation of management and production facilities within individual firms. The rise of multinational firms represents an extreme example of expanding geographic distance between leadership and production. Firms that agglomerated in Silicon Valley and Detroit now have subsidiaries clustering in Bangalore (termed the Silicon Valley of India) and Slovakia (nicknamed Detroit of the East). Although many studies have examined the location choices of MNCs, few empirical analyses have investigated the global pattern of multinational firm agglomeration. Little is known about the interdependent networks of MNCs, the most active actors of globalization and the world of international business, and how they compare to the traditional autarkic industrial landscape. It is desirable for many companies to become more internationally inclined. Therefore, it is appropriate to discuss what an MNC is and the role it plays on the scope of international business.

The mention of MNCs usually elicits mixed reactions. On the one hand, MNCs are associated with exploitation and ruthlessness. They are often criticized for moving resources in and out of a country; as they strive for profit, without much regard for the country's social welfare. For example, Varity Corp., a well-known Canadian multinational firm, was criticized for its action in 1991 to relocate its headquarters from Toronto to the United States (Buffalo) in order to take advantage of the U.S. - Canadian Free Trade Agreement. For a long period of time, India referred to MNCs as ‘agents of neocolonialism'. It was not until 1991 that socialist India began wooing multinational companies. In other words, it can be said that every organisation chooses its own personal, methods or goals which can lead to more profitability and success on the business market.

MNCs power and prestige; additionally they create social benefit by facilitating economic balance. As explained by Miller, 'with resources, capital, food, and technology unevenly distributed around the planet, and all in short supply; an efficient instrument of quick and effective production and distribution of a complex of goods and services is a first essential. And this instrument is, of course, the MNC. Miller591 Regardless of whether MNCs are viewed positively or negatively, they are here to stay; and the important point is to understand when a company becomes a member of this elite group.

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The term implies bigness. The top ten multinational giants based on market value are the following:

  • Nippon Telegraph & Telephone,
  • Royal Dutch/Shell Group,
  • Exxon,
  • General Electric,
  • Industrial Bank of Japan,
  • Phillip Morris,
  • International Business Machines or IBM,
  • Fuji Bank,
  • Mitsubishi Bank
  • Dai-Ichi Kangyo Bank.

It is not unusual for corporate size in terms of sales to be used as a primary requirement for judging whether or not a company is multinational. As a matter of fact, according to the United Nations Department of Economic and social Affairs, companies ‘with less than $ 100 million in sales can safely be ignored'. Based on this definition, some 300,000 small and midsize German companies do not qualify even though they (called the Mittelstank, or midranking) contribute mightily to Germany' export success. These midsize firms account for two-thirds of the country's gross national product and four-fifths of all workers.

Most multinational companies are large, but corporate sales should not be used as the whole criterion for multinationalism. As noted by one IBM executive, IMB did not become multinational because it was large; rather, it became large as a result of going international. There are some empirical findings to support this view. ‘Size as currently developed in the literature is not useful as an indicator of export attitudes or needs, and activities, Thus it should not serve as a policy instrument for export development purposes.' (Czinkota, Johnston 1983)

There is no single criterion that proves satisfactory at all times in identifying an MNC because the concept of an MNC is not unidimensional. Varying explanations have been used to define a multinational corporation, but these definitions are not necessarily convergent. As a result, whether a company is classified as an MNC or not depends on what set of criteria is used. According to Aharoni, an MNC has at least three dimensions: structural, performance and behavioural.

In assessing the nature of an organisation's culture, it is important to understand the factors which influence culture. The most frequently cited groupings of factors include the following: the business environment in which an organisation operates helps to determine the culture. Society at large will influence opinions about work, money, status and different types of jobs. The researches of sociology and anthropology show the differences in cultural attitudes between geographical regions as well as differences between different levels of social strata. These differences will affect commitment, respect for managers, attitudes towards service and the customer. ‘Good cultures are characterised by norms and values supportive of excellence, teamworking, profitability, honesty, a customer service orientation, pride in one's work, and commitment to the organisation. Most of all, they are supportive of adaptability - the capacity to thrive over the long run despite new competition, new regulations, new technological developments, and the strains of growth' (Baker, 1980)

Many of the companies who had greatest need for a culture change have been those who have lost their monopolistic position (privatised companies such as British Telecom) or where an industry-wide cartel had broken down (ICI) as the non-competitive market environment had impacted on employees and their attitudes (Drennan, 1992).

Leadership is also said to be one of the influencing factors on the culture of an organisation. However, there is no empirical evidence to offer that it has the totally overpowering and guiding hand suggested by these authors. Newly created organisations have the link between leadership and culture, but even there are some ambiguities concerning cultural diversity. The entrepreneur or founder influences the culture through his own ambitions, the interactive processes between entrepreneurs and their followers (employers) and the more general processes through which purpose and commitment are generated and sustained. Culture is the result of a complex group learning process that is only partially influenced be leader-behaviour. It is where diversity of cultures meets within MNC or organisation.

And if the founder is surrounded by colleagues and employees who are not willing to accept his initial assumptions, the process of culture development will involve conflict, negotiation, compromise, and in some cases can lead to the removal of members from the group. Diversity can refer to any organisational culture whether it is an IT company, Research & Development firms (R&D firms), etc.

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Diversity causes cross-cultural differences and they impact all interactions. According to Cindy King's experience, the differences are nuanced. They centre on collective “soft” skills. This obviously stems from the nature of “international skills” and “cross-cultural skills”. When people work inside an international company, they learn how to adapt to these cultural differences. They stop interfering with communication. Some people may think that conflict within an international organisation is a result of the confrontation between cultures. Although, cultural personality issues and misunderstandings do happen, and it is difficult to identify how culture influences teamwork within an organisation.

Most people learn to adapt to the different cultures and this enhances personal growth, interpersonal relations and intercultural interactions. And this is where there may be differences in an international organisation and an organisation that is not international. Most of the employees in an international organisation will be at a comparable level of personal growth. They will have similar interpersonal and intercultural skills. And in an organisation that is not international, there could be wider differences in these areas.

While studying the concept of organisational culture it is been noticed that the organisations seem to strive harder to implement standard and industry best practices. Best practices seem to lessen the clash of cultures within an organisation. These best practices are more widely acceptable. They can create a collective identity and comfortable work atmosphere. Best practices can also lessen the clash of cultures outside the company when dealing with international clients. It does not matter where your clients are from; it is important that they also appreciate dealing with people that follow standard best practices. And in the end it all comes down to working with good communication and within good business practices. When we apply concepts of culture to groups, organisations and occupations, we are almost certain about the conceptua1 confusion because such units are difficult to define. 569

The types of people working in MNCs are diverse and the way the employees interact with each other, with customers, or other outsiders defines the main concept of the organisation's business.

The design of the organisation with its hierarchies and reporting structures is also seen as having an impact on the norms and values of individuals at different points within it (Schein, 1991). Harrison and Carroll (1991) consider the impact of different organisational forms, such as Japanese-style, governmental-bureaucratic form and collectivist-democratic form in their cultural transmission model. The findings are relatively inconclusive and tend to reflect national traits (e.g. the Japanese providing a stable corporate culture) rather than the design of the organisation. However, aspects such as decentralisation, empowerment of employees and recognition of unions all seem to have an impact on the elements of corporate culture.

The factors and components of organisational culture are seemed to be complex and intertwined. As a fact, these changes may be too slow for the market and the management. The question arises as to whether changes in an organisation's culture or cultures can be managed.

There is significant debate between researchers on this topic, with some seeing organisational culture as another critical component by which strategic managers can influence and direct the course of their organisations (Schwartz and Davis, 1981; Tichy, 1982; Deal and Kennedy, 1982; Schein, 1991; Peters and Waterman, 1982). In many cases these are the same authors who see a desirable culture as one where there is organisation-wide consensus and consistency (the integration perspective).

Some researchers question whether organisational culture is indeed manageable because of the existence of subcultures, or even countercultures competing to define the nature of situations within organisational boundaries (Smircich, 1983). Although this may not rule out the management of culture, it may make it far more difficult and complex than the popular “newstand” texts suggest. As stated by Bryman (1984), no one genuinely seems to argue that cultures are absolutely inert and incapable of new directions. However, there is controversy over the degree of ease with which change can be embedded and managed.

There is also a debate as to whether the popular texts actually relate to culture or whether they simply relate to strategic directions and structures. Many of the changes discussed as successful culture changes refer to improved entrepreneurship, the adoption of a customer or market orientation, teamwork or a financial discipline. Bryman (1984) described such orientations as superficial indicators of cultures, that would have been subsumed under umbrella terms like structure or strategy had culture not become so fashionable in recent years. Changes in the underlying values and norms that determine behaviour may not change and what companies may witness is merely behavioural compliance. As a result, the implied benefits of the adoption of such orientations may be short-lived.

Influencing factors in turn are unclear and contradictory. What is clear is that each of the factors does have some influence to a greater or lesser extent. They also interact by reinforcing and weakening the influence of each other and therefore it is likely that each of the factors requires to be managed if culture is to be changed.

As stated by Schein (1991), culture operates as a set of implicit assumptions, which cannot change. Therefore change may come about by getting employees to surface and re-examine the assumptions they hold. The role of management of the organisation is to identify and manipulate the culture-influencing factors that will motivate employees to re-examine and potentially change their own internal assumptions and values. In addition, managers are part of a company's culture and therefore their own values and assumptions need to be reviewed (Irons, 1993). Overall, managers and their activities may therefore only act as catalysts for change rather than as dictators of change.

This paper clarifies the nature of organisational culture and highlights the complexity of the phenomenon. Organisational culture is multifaceted and complicated, encompassing a variety of forms, and is determined by myriad of influencing factors. Therefore, a manager's goal of having an organisation's corporate values and attitudes shared and reinforced by all personnel may be unattainable. If one considers the following quote from Olins (1991), this potential obstacle may raise major questions about corporate marketing as a whole:

‘The most important audience for any company is its own staff. I cannot understand how people can say that the most important audience they have is the consumer. Because if you cannot train your own staff in what you are, in what you think, in how to behave, and in what your moves and perceptions are, how the hell can you expect to train your customer?' (Olins, 1991, 17).

Staff and their behaviour and attitudes are influenced by more than simply the formal communication channels of the organisation, areas such as leadership; the business environment and the informal socialisation process also play a part. As a result, staff values and behaviour are slow to change, difficult to manage and may differ significantly from department to department. This means that internal corporate communications activities need to be ongoing and continuous if they are to have any impact. One-off campaigns or communication events are unlikely to have any lasting effect on staff values and behaviour. Integration with other management activities is essential; for example, if an organisation's culture is to be influenced by senior management it is likely that in addition to corporate communications, significant changes may also be required in recruitment procedures, training, performance measurement and rewards.

Although these areas may be seen as relating specifically to the activities of a human resource function rather than corporate communications, it is important that they are undertaken with the knowledge that they have an influence on the behaviour and values held by staff. As such, corporate communications personnel need to work together with other departments and functions in generating coherent messages and signals to staff, and in particular, to those service personnel who may influence the attitudes of external stakeholder groups.

There is also a need to understand the role of these service personnel in the communication of corporate goals and values to other stakeholder groups. The organisational culture which exists within an organisation may have as much influence on external stakeholders through the behaviour and attitudes of service personnel as do the more formal corporate communications and visual identities.

If this is the case and companies wish to communicate a coherent corporate profile to their stakeholders, then the choice may be between influencing the organisational culture of the service personnel and introducing greater standardisation of the service encounter through automated delivery or the use of scripts. Each of these approaches requires significant investment in time and money. As such, the communication role of service personnel is an area requiring vital research and one has to find the best ways to achieve them.

Depending on what type of MNCs it whether can be high commitment or high performance (HCHP) firms which are designed and led by their founders or by transformational CEOs - those who take charge of a company in a crisis - to achieve sustained high commitment from all stakeholders: employees, customers, investors, and community.

These firms stand out by having achieved long periods of excellence. But what can be applied to one organisation will not work in another one. Here we face the problem of cultural diversity between how organisations' leaders see the best way of achieving their goals. HCHP stalwarts include Southwest, Johnson & Johnson, Hewlett Packard for six decades, Nucor Steel, McKinsey, Goldman Sachs and Toyota. Yet any company can change for the better, no matter the industry. General Electric (GE), Becton Dickinson, Campbell Soup, IBM, and ASDA, a U.K. grocery chain, these are bright examples of companies that were transformed by new CEOs taking charge, usually in times of crisis. These CEOs employed change strategies that focused on both commitment and performance. As ASDA's CEO, Archie Norman, tells it, the new leader has to set a general direction, but must listen and engage people to identify and solve problems. Top-down leadership will not work in this case. That is why it is important to create organisational culture within the company or firm.

Multinational companies have the great advantage of working in and with different cultures to make their products and services accessible to a far wider community. The impetus for reaching beyond their own borders makes commercial sense.

When multinationals develop into or with other countries there may be an assumption that because everyone within the company is working for the one and same goal and to the same values, they will automatically communicate, think and view the world in the same way. But when diverse cultures begin working together, problems or difficulties arise that many people within these companies are not skilled or adapt enough to deal with effectively. This can simply be because they have never had to deal with the representatives from the totally different culture.

Language is often considered to be the least difficult barrier to breach. But when we understand that there may be language differences, we have a greater awareness of facing the problems. However, much more often it is an absolutely different way of seeing things and an inability, or unwillingness, to see what the other person is seeing that causes the difficulties. 3220

Value is one of the crucial components of the organisational culture of an economic system that characterises the targeted bases its philosophy of existence and development (demographic, social or material directed, authoritarian organization, etc.), the account which is a prerequisite for the formation of an effective system of organisation of international communications, understanding of differences between religions, etc.

In rapidly changing world there are so many religions (Hinduism, Buddhism, Islam, Christianity and its varieties, etc.) and it is also very important to understand the religious values that cause a major impact on economic activity of international business communications.For instance, the memory of the worship of ancestors may hamper the application of new techniques in agriculture, fatalism may reduce the desire for change (Iraq, Iran and other Muslim countries), material wealth can be seen as an obstacle to spiritual enrichment and etc. That is why it is necessary for organisation or company to invent its own organisational culture which will be based on principles respecting its diverse staff. 3296

Due to globalisation, MNCs are meeting fiercing competition and the pressure expected to be more competitive and increasing. The characteristics of the companies seem to be more in focus now and ever since the eighties the concept of organisational culture has been a much-discussed topic. Companies expanding abroad face national cultures that may differ from their own. In order to create a common ground and strive towards common goals there is a need for common values and a favourable culture. An important challenge for managers is to determine what the most effective culture is for their organization and, when necessary, how to change the organizational culture effectively.

The facts given above indicate that insufficient attention in the overall system of organisations in which culture and, in particular, economic, culture occupies a specific place can lead to a decrease in the synergistic effect of the use of marketing mix, and to reduce the effectiveness of the functioning of economic systems in general.

It is easy to understand that no well-known company will be able to function without well-built communication. It is needed to be in organisation's agenda or business plan to encourage staff to be active and productive. This model of business communication can carry out the process of business and culture of organization for more effective implementation and progress.

But we must not forget that the structure of MNC networks can vary across regions due to more rigid labour markets impose greater constraints on labour mobility, labour-market externalities over an especially strong incentive for agglomeration in countries with such markets.

Undoubtedly there will be certain ambiguities in achieving the ultimate goal of your organisation, but only by sharing and dividing cultural issues it is possible to build the 'dream team' by forming and implementing international and cross-cultural communications. The ideal concept will be the combination of the culture of the framework for the entire organisation and flexible formation of subcultures (marketing, accounting, R & D, etc).Organisational Culture determines the identity, organisation's reputation and success on the scope of business world. It can only be based on economic and organisational culture of the region or the country on the whole.