A group of people who always spend time together will form certain values, norms, or beliefs about what is right and what is wrong. This is how culture slowly builds into community. In an organisation, people that always work together from time to time reflect people mostly behave and perform in a familiar manner. Thompson (2001) stated that culture is at the heart of strategy creation and implementation. In this paper, it will be discussed in more focus of what is organisational culture, characteristic of organisational culture, what are strategy, and the key relationship between organisational culture and strategic management.
What is Organisational Culture?
Before go into detail about the importance of organisational culture to strategic management, people must understand what organisational culture is. According to Johnson, Scholes, and Whittington (2008), organisational culture is basic concept that is adopted to every members of an operation that have been ingrained in members' behaviour. In other way, culture forms from routines that a community have done over time which lead to how group behave and deal with the issue that they have. In addition, culture is an intangible yet is a principle with direction and influence to actions. So, overall, organisational culture is principle, direction and norm of an organisation that lead them to have certain behaviour. From the definition itself, it shows that there are 2 characteristics of organisation culture. First, it is communicated to members by socialisation. Second, it influence members' behaviour and last, it operates in different levels. Levi Strauss has a very strong organisational culture which focuses on the employees. Their aspiration statement is as follow (Kreitner and Kinicki 1995):
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"We all want our people are proud and committed to, where all employees have an opportunity to contribute, learn and grow and advance based on merit, not politics or background. We want our people to feel respected, treated fairly, listened to and involved. Above all, we want satisfaction from accomplishments and friendships, balanced personal and professional lives, and to have fun in our endeavours."
The statement above shows that Levis' organisation culture focuses on their people from top to lower level units. The communication way to reinforce the culture is by having core curriculum classes to every employee with the discussion of diversity, leadership, and consulting. So, how does an organisation determine their employees based organisational culture? There are three critical layers of organisational culture which each layers influence the decision of other layers (Kreitner and Kinicki 2010).
Artefacts refer to physical appearance of an organisational culture. It consists of awards, dress-codes, history or the organisation, decorations and so on. Example given is one of the way for Ritz-Carlton hotel to communicate its culture, exceeding customers' expectations, is by sharing stories in every briefing about guests' stories. Awards were given to one of the housekeeper which sacrificed himself to get back the stuffed bear from the dumpster.
Values are beliefs that influence the guidance of the selection of behaviour. Adopted values stated norms that are ingrained in an organisation. It is usually set up by the owner from small establishment or corporate level of large organisation. For instance, most of the companies espoused the value of sustainability. One of it is Holiday Inn Hotel Singapore which have the programme of sustainability such as planting tree as the compensates of the land that they have used for their hotel.
It turns organisational values that have been espoused for over time to be the core of the organisational culture that guide to organisational behaviour. In this layer, people have high resistance to change. For example, Singapore Airlines' basic assumption is to operate operation according to employee's and customer's priority. People in Singapore Airlines would be surprised to see management act as not in the way of their value.
From the three layers above, it can be determined that organisational cultures which have been implemented to the organisation are different from one organisation and others. Some are weak due to its inability to fit with the corporate characteristics and others are strong due its ability to touch the heart of organisation.
Strong and Weak Organisational Culture
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An organisation culture can be weak because disjointed subcultures of an organisation and also norms did not widely shared to everyone. There is no solidarity around the organisation department as managers did not adopt the culture deeply as his basic assumption in a positive way. It results in the sense of not belonging in the corporate identity, identification and loyalty toward each other (Thompson and Strickland 2003). Usually weak organisational culture may occur because of the methods that used by top management to communicate the organisational culture. The lack of sense of corporate identity may cause the view of employee that organisation is just a place to make a living. As an outcome, weak organisational cultures result in no strategy implementation since there are no beliefs, values and norms in common that can be used to push the commitment of the strategy. Example of weak culture organisation is NuSystems Inc. NuSystem Inc. is a public service that focuses on home electronic integrator. This organisation was dwindling after much competition come in to the industry. NuSystems' strategy did not focus on competing, after competitors come in, they are unable to priorities the focus and still operate like usual without any competing strategy involved. For the culture itself, they could not focus on the innovations that allow them to move upwards instead of downwards. NuSystems' CEO, Mr.Liam, was not ready to have culture change, since he still insisted all decision-making must go through him before it was proceed by the executives and operations staffs (McGuire and Thodes 2009). Due to that, minor changes were done by NuSystems Inc. which led to their lowest point of organisation's life-cycle.
Organisation with strong organisational culture normally have aspiration or values statement with the frequently stressed the importance of the principles and norms as basic assumptions for behaviour and action taken accordingly (Thompson and Strickland 2003). Strong organisational cultures organisation has clear-set of norms and principles to follow as it is also communicated well by the top management about how the culture are relate to the business environment and organisation. People in the context of employees know clearly what is their direction and behaviour should be. Credlow is an organisation with strong organisation culture. Credlow is selling used car to buyers mostly in North American. To sell used cars in difficult economy time, Credlow's strategy is to have community support services in neighbourhood. They adopted values based on service relationships to the community. They provide security and safety in how a used car would perform in a fair price. Their challenges in unstable market is dissatisfied customers and the increased of competitors (McGuire and Rhodes 2009). Their CEO, Roger, had done a very good job in communicate the culture to the workforce as he become a seen reminder of culture to his workforce in decision making.
Moreover, according to Thompson and Strickland (2003) stated that there are three factors to determine whether it is a good organisational culture. First, top management should consistently stated norms, values and principles in customer needs, competitors' situation and strategic planning. Second, it must have the commitment from the management to operate operation along with the norms that support the strategies. Third, it is not only benefits for the organisation and top management only, but as well as the customers, employees, and shareholders. Most importantly, it is not only organisational culture communicator that adopted the organisational culture but all employees without any coercion. Ford Motor Company is a good example for good organisation culture. Everyone including CEO of Ford carry a plastic card that listed company's vision, mission, and values. It is a form of reminder to all employees about Ford's culture. In Ford, quality of product and services is crucial. They won President's award as in services not sales (Hitt, Ireland and Hoskisson 2009). Hodge et al. (1996) stated that values and award system are both used to communicate culture. Ford is considered as a good organisation culture is because Ford communicates culture by the card and briefing every weekly meeting. And also it benefits the employees in a way of problem-solving behaviour and the quality of service.
What is Strategy?
It is necessary to comprehend the term of strategy in the context of an organisation before relate it to organisational culture. According to Brown (1998), strategy is defined in three ways. First, strategy refers to formal plan to deal with the competitive environment which aim is to achieve organisation goals. It also affects how the organisation behaves in its environment. He also stated that strategy as a plan is usually created by top management as a long-term step. Ben & Jerry's Homemade Inc. competed with competitors such as Haagen-Dazs of its quality and innovation. So to keep interest of buyer, Ben and Jerry's create innovative flavours with different character to represent it. To the concern of environment, they also use organic farms as their supplier of dairy milk and others in Vermont Family in order of the image and quality (Nelson and Alkhafaji 2003). Second, strategy refers to the process of managing and leading an organisation. In this context, strategy is in a role of a set of rules and principles which is flexible and adaptable in changing environment to manage an operation. In 1994, Nintendo assigned Lincoln, head of Nintendo America, to make changes in its strategy to deal with SEGA. So he decided to pay companies to make unique software. They paid almost million dollars just for a game. And then they also invented Game Boy colour in 1998 (Thompson and Strickland 1998). In this condition, leadership strategy is important because it did not only affect America, but all around the world. Finally, strategy refers to decisions and activities that merge without any anticipated events or planned manner. Wal-Mart has always adopted 'backward' expansion areas. Director of Wal-Mart decide to expand to any town that have 15,000 people or more than to metropolitan area (Mason and Ezell 1993). Overall, strategy is decision of ways that created by top management to manage and lead to achieve the vision and mission that have been set.
Relationship between Organisational Culture and Strategy
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From the definition itself, it can be seen that there are common similarities between organisational culture and strategy. Appendix A (Refer to Appendix) shows the relationship between organisational culture and Strategy. Organisational culture consists of beliefs, values, norms, and philosophy of an organisation which have the ability of guide the strategic formulation. For example, fundamental beliefs as phone market leader such as Apple, fair-trade to staffs and customer such as Singapore airlines and sustainable to the environment such as Holiday Inn Resorts and Hotels. Strategic formulation then plans steps of organisation action. Individuals are one of the fundamental components of an organisation which means that how individual's behaviour such as interaction and expectation to each other, directed and influence the achievement of strategy (Hodge, Anthony and Gales 1996). Overall, it affects organisation end up performance. Southwest airlines adopt efficient routing strategy, point to point trip, such as flies through pairs of cities. And also they have thick culture and personality that had been adopted in. They have mission to provide the best quality of customer services and working environment to their people. It has made Southwest airlines become short trip flies industry leader (Thompson and Martin 2005).
In other words, organisation culture and strategy share commonalities. It describes the organisation phenomenon. It guides the interpretation, consistent identity, and summarise the past experience, evaluate and amend it. Moreover, strategic planning documents are considered as one of the fundamental layers of organisation culture, observable artefacts. Nature relationships of these 2 aspects are the implications of these two are organisation performance (Brown 1998). Due to the commonalities, organisation culture and strategy are liability toward each other as their firmness becomes the determinant to the changes in the external environment which means that both organisational culture and strategy could not stand by its own to deal with the problem and activities in the organisation's internal and external environment. Due to this reason, the importance of organisational culture in the context of strategy is shown. Another example to prove that how organisational culture link with strategy is Southwest Airlines. Southwest Airlines which based on US is one of the organisation balances between the organisation culture and strategy implementation perfectly. The culture of Southwest Airlines is that people clearly know how to perform task in order to achieve organisation's goal as it is communicate clearly from the top management. The strategy consists of long-term and short-term objectives. The result is in 2008, Southwest Airlines achieved company's 36th consecutive year of productivity (Naomi 2010).
Importance of Organisational Culture to Strategic Management Fundamental Aspects
Many writers argue about how organisational culture influences in many aspect of strategic management or vice-versa and shows how important it is between each other. There are four fundamental aspects of strategic management that accentuate the importance of organisational culture; which are strategy formulation, operation strategy, strategy change, and performing as strategy executing skills.
First, strategy formulation is essentially influenced on organisation's scanning behaviour which means that how organisation gains the information from the external environment (Brown 1998). Culture, in the context of selective perception, believed that environment is always changing that might lead to opposed strategies between organisations in the same market but with different cultural assumptions. The decision of which suitable strategy will be used by an organisation depends on the values and assumptions of the organisation, how the information has been selected to be focused on and how the information has been inferred. In this manner, the importance of both is about how they digest the information that they get from changing environment and turn it into compatible strategy for the organisation. Milliken & Co. prefer statistic and quantitative information because they believe that facts and numbers are the way to assure the changing environment. On the other hand, Honda is an organisation which prefers qualitative information from newspaper, magazines or event association meetings about the information of socio-political issues (Alvesson 2002). This is the example of how selective perception in the context of organisational culture affects the strategy formulation used for an organisation.
Second, traditional view of hierarchy operation strategy is the decision is being taken by the top of organisation and which must understand the organisation culture very well as guideline for strategy. This is known as top-down perspective to the management. In a big organisation, top management will come out with corporate strategy which consist of the decisions such as what market is the organisation in, where does it want to be distributed, how to allocate the financial, and so on (Slack and Lewis 2008). From top management, each function will also need to gather its own business strategy according to its individual and organisation principles, norms and values. Business strategy must be able to cover the competitiveness of the business that guides its actions according to organisational culture. Top-down approach is not only focusing on decision-making from top management and distribute in to lower management, but also how the business level management adopt their own business level strategy to top management decision according to their values. Another famous example of top-down approach is the Sony Walkman was apparently considered by Sony founder, the late Masaru Ibuka, and honorary Chairman Akio Morita. They asked subordinates to develop a portable tape player with headphones that young people could use to listen to music anywhere (Pitta 2009). This example is considered as famous example of top-down approach because of the communication channels worked perfectly in the organisation.
Third, interaction between organisation culture, strategy and changes are necessary to establish new strategy and fit into the cultural assumption and the external environment. There are some situations to describe whether what situations that will be faced by an organisation in implementing new strategy with changes that fit into the organisation culture. Mostly their objectives of new strategy is to take chance to expand into bigger market locally. In these situations, key things to take note are; first, changes must link to company core mission. Company core mission is one of the fundamental foundations in organisation culture. Second, previous personnel should be involved to implement new strategy as they have shared the values and norms of the organisation (Pearce and Robinson 2009). In this aspect, link between changes, culture and exist personnel play a very fundamental role in executing strategy. Best example of organisation in this situation is Procter and Gamble. P&G's core mission is to be consumer Products Company that is developed and innovative design. Alan Lafley planned to push innovate effectively to the people carefully and also link it nicely to its 100 years tradition, The Global Consumer Products Innovator. Then he communicated it to P&G's people and believed in him about the changes. He emphasises on existing personnel and reward to encourage the acceptance of the new changes. It had lead P&G become one of the world's top 5 innovation companies in 2007 (Griffin 2010).
Lastly, building spirit of high performance into individual commitment is crucial to strategic success and pressure to perform as it is one of the essential aspects on strategy-implementing skills. When an operation performs well throughout the time, the result will not be seen in strategic success, but also the organisational culture ingrained with spirit of high performance. An organisation with spirit of high performance point-out merit and accomplishment. A results-oriented culture practices people management to motivate people to do their best, it helps to advance the strategy implementation (Thompson and Strickland 2003). Organisations with high performance are usually people-oriented; they focus their concern for individual in every single way. They treat employees with respect, train every one of them patiently, motivate people to work innovative and creatively, set vision and mission clearly to the people, using reward management to implement high-performance standards, and so on. The push factor of spirit of high performance is values in the importance of individual. One of the organisations that adopted performance as strategy executing skills is McDonald's. McDonald's Canada has made competition between the chefs about who cooked most perfect eggs in one minute time. The winner was given a pin with wording 'Best Eggs Chef' to wear on their shirt. The video was uploaded to McDonald's Canada YouTube channel (Your Question: McDonald 2012).
In conclusion, connection between strategy and organisational culture is crucial to business success based on the analysis from the examples given above. Without strong and healthy culture implemented to the organisation, it is very hard to have clear strategy execution. On the other hand, good strategy could not be performed with weak organisation cultures; it will lead to business failure. Individuals play significant roles in organisational cultures which influence strategy, either implementing new strategy or strategy executing, as individuals is the important aspect of culture. People' selective perception of information, in the sense of organisational culture, influences the decision making of strategy formulations which decide the success of the business. Both organisational culture and strategy is linked between one and another. It does not work well when there are no balances between both.
Appendix A. Relationship between Organisational Culture and Strategy
Source: Hodge, B.J., Anthony, W.P., and Gales, L.M. (1996)