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An organizational culture is the key behind successful enterprises which decides operations direction, strategic, vision and mission. From organizational culture, the reputation, trust, impression and images are developed. The purpose of this essay is to critically examine the importance of organizational culture to an understanding of strategic management. Strong culture leads to increasing in revenue, profitability and shareholders' value. Additionally, corporate culture supports and underpins an organization's brand proposition, helps businesses create and maintain competitive advantage. In term of human resource, strong culture attracts talents, retains employees, engages people, creates energy and momentum, creates greater synergy and changes the view of 'work' (French and Rayner 2001). Management partly plays an important role in creating organizational culture, motivating creativity and productivity as well as driving the organization to its right direction. Practical examples are provided accordingly to make this essay clearer and be more realistic. The impacts of organizational culture to employees, customers, shareholder and society are also illustrated. Culture is an element that management needs to consider before making decision of growth and expansion strategy for company. How customers and public recognize the brands/image of an organization decides how successful the enterprise is. In order to survive and compete, good reputation, trust and positive impression are always necessary (John and Saks 2008). Organizational culture, therefore, has the responsibility to develop the enterprise's own uniqueness to stand out in the market place. Moreover, at the end of the essays, some barriers and challenges that a strong corporate culture can occur in term of changing and improvement, diversity workforce, merger and acquisition will be identified.
Definition of organizational culture
Definitions about organizational culture are many. However, it is usually known as the personality of the organization, involves the underlying values, beliefs and codes of practice that make a business what it is. Culture provides members the rules for behavior in their organization. An organizational culture can be viewed in vision, mission, core value, the stories people tell, the working atmosphere (hushed and luxuries or dirty and noisy), the relation among people and so on (Martin 2002).
The connection between organizational culture and national culture
Organizational culture is different from national culture, but there is a strong connection between the two. Organizational culture frequently derives from national culture. In other words, many of the shared beliefs and values that develop in institution are from the culture of local society. Nevertheless, organizations will still develop their own culture instead of depending on host culture (House and Hanges 2004). For example, companies in Japan often promote high discipline but in United States, employees are encouraged to break traditional perception and be more creative. It is influenced by the national culture and the diversity of religions, but it also derives from the particular characteristic and experience unique to the organization (Wood and Wallace, 2004).
Reasons make organizational culture important
Let make a question to understand more about the importance of organizational culture. If an organization does not have people pulling together in a common direction, how can employees 'work together effectively' as a team and 'achieve the goal'? Martin (2002) said 'a strong corporate culture is the glue that holds people together in touch times and motivates them to pull together when a change plan needs to be implemented'. For instance, Hewlett-Packard Company or HP is a multinational hardware and software corporation heart quartered in California, United State. Due to a few problems in 2006, HP is encouraged to change its culture; staff are required to formulate three personal and three professional goals each year, and are encouraged to cheer those that meet them, such as getting away early to be with family. Two years into the program, HP reports no loss in productivity despite staff working shorter hours and an increased staff retention rate (Parker 2012). In this case, the change of organizational culture was made on time to motivate and lead HP through rough time.
Capable of increasing revenue, profitability and shareholders' value
A strong culture enables an organization to increase its revenue, profitability and shareholders' value. Additionally, an organization's brand proposition which is supported by a strong culture would help businesses create and maintain competitive advantage. Talents are always attracted by fantastic working environment and unique organizational culture (Pepper 2011). Once employees like and accept culture, they are less likely to leave. Cultural values increase the power and authority of management in 3 ways: employees accepting the rules when it is the right thing to do, internalizing the organization's values when they believe they are right, and being motivated to achieve the organizations' goals. Another function that culture performs in an organization is to enhance employees' commitment because there is a comfortable match between an individual's characteristics and the organizational culture (Andre 2008). The above example of HP shows that strong culture retains employees, engages people, creates energy and momentum, creates greater synergy and changes the view of 'work'.
Motivate creativity, productivity and drive organization to right direction
Besides, an example about Prudential Assurance is going to demonstrate how strong culture can motivate creativity and productivity, thus drive the organization to its right direction. The story behind the Malaysian Insurance company Prudential's success is about a song. Prudential Assurance used to rank at number nine out of all life insurance companies in Malaysia in term of new business annual premium income. At that time, the company had decided to become number one and had crafted a song 'We are number one' which was sung at the start of every function the organization held. There was a debate about whether the song should be 'We are number one' or 'We will be number one', but it was decided to stay with the former. The song seems to have served as a symbol of the company's aim of 'selling ambition', and has encouraged the staff and agents to maintain their goal. They are proud of the song and adopt it in all the company's business. When the company becomes number one, there will still be a place for the song, encouraging people to be more creative and perform even better (Driskill and Brenton, 2008).
The lessons from Prudential and HP indeed proved that 'positive corporate culture' is now a prerequisite for success rather than a competitive advantage. Improving workplace culture makes employees feel happier and this in turn leads to improved profitability.
Impacts of organizational culture to strategy/ strategic management
Relating to strategic management's perspective, strategy is about moving an organization forward from its history into its future; in other words, it recognizes the past, focuses on the present to create future. Strategic management includes understanding the strategic position of an organization, making strategic choices for the future and managing strategy in action (Calingo, 1997). Organizational culture, therefore, has significant impacts on employees, customers, shareholders and society.
Impacts to employees
It is clearly indicated by Barrows and Powers (2009) that cultures enhance service. This is because emotions displayed by employees are related to how customers feel; simply, happy employees create happy customers. Therefore, employees need to feel well-treated by the whole corporate culture to deliver quality service. In hotel industry, manpower is very important because service is delivered by human being, not by robot. Thus, to maintain the good service, hotels need to create the best working environment with suitable policy, ensure all employees are satisfied (Barrows and Powers 2009). Specifically, Four Seasons Hotel and Resorts can be used as a typical example. Their Golden Rule is 'We aimed to treat others as we would want to be treated ourselves'. Four Seasons Hotel and Resorts treats employees like the way it treats customers. In this corporation, employees are empowered, received higher salary comparing to industry average. They also provide unique opportunity to be promoted within the group as well as other special benefits such as paid vocation, educational assistance and complementary stay. Four Seasons Hotel and Resorts is ranked 85th out of 100 best companies to work for with 12,439 employees by Fortune magazine (CNN Money 2012). The company policy is well developed, targeted to all employees in order to achieve the goal of 'providing best service to customer'. The result presents that employee efficiency was improved, customer satisfaction and retention also increased.
Impacts to customers
A strong culture impacts to not only employees but also company's customer. Remaining as the king of search, Google Inc.'s mission is to organize the world's information and make it universally accessible and useful. It is listed as one of the most admired companies in the world for spreading through its deep dive into devices with its free, open-source operating systems. Customers benefit from its system as well as service provided. The free-searching engine is now popular as the essential tool for any million Internet users in all over the world. Google is linked to billions websites all over the world to ensure its customer are able to access to useful information. In order to serve multi purposes of customers, more free engines have been developed such as Google Images and Google Maps. Google Images allows people do their research through image while Google Maps shows customers the shortest direction from one destination to the next by different (CNN Money 2012). Both of them help users to save time in research information and transportation. Google always puts customer benefits on top and does not stop improvement and development to provide better service to its customer.
Impacts to society
Unable to survive without society's support, a good culture needs to pays attention to the society that it operates in and makes the place better. Genting Hongkong - a leading global leisure, entertainment and Hospitality Corporation can be a practical example for its comprehensive and excellent Corporate Social Responsibility program which helps the company gained "Best CSR" winner at Asian Excellence Recognition Awards 2012 (Parker 2012). Genting Hongkong cares about the community and makes it as a part of their corporate culture. "Genting HK Volunteer Team" was officially formed in 2008 as an employee volunteer activity. Since then, employee activities directly touched on thousands of those in need including elderly, children and under-privileged families. In 2009, the company donated HK$150,000 to raise funds to provide livestock and training to families to end hunger and poverty in rural area in China. Besides, Resorts World Manila - a joint venture integrated resort of Genting Hongkong - was recognized by the Philippine Red Cross as one of the top volunteer organizations that helped save lives through its blood donation drive annually (Parker 2012). Through the above social activities, Genting Hongkong has successfully brought its culture to public and justified responsibility to the operating place.
All three examples above have shown the influence of organization culture to the development strategy of Four Season Hotel and Resorts, Google and Genting Hongkong and their impacts to employees, customers and social. The company culture is decided after considering employees, customers and social benefits.
How can an organizational culture be recognized?
Different corporate adopts different culture. However, a strong culture can be recognized easily. It is shown through the corporation's vision, mission, logo, and image. The society can acknowledge organizational culture through printed media such as newspaper, magazines. Besides, organization culture is also presented through logo, advertisement on TV or websites. Some enterprises choose press conferences to express their culture. Walt Disney is famous by the statement 'We create happiness by providing the finest in entertainment for people of all ages, everywhere'. It decides the variety as well as the characteristic of Disney's products. Cinderella, Mermaid, Snow White, Hercules have come out from fairy tale and inspire people at different ages through many generations (Driskill and Brenton 2008). Nowadays, the rapid growth of technology and social media have given many corporations chances to promote their culture, interact with customer and employees by using Facebook, Twitter and Yahoo (Pepper 2011).
Organizational culture impacts to strategy/strategic decision
Beside the impacts to employees, customers and society, organizational culture impacts directly to the strategic decision. Strategic decision are wide ranging in their efforts and are based on future expectations, uncertainty is always present. It is always tempting to seek more information before making a decision. Strategy is about long term impacts of important decision for the corporation (Black 2003). Strategy involves commitment. Strategic decisions cannot easily be reversed and have long term impacts (negative and positive) once they are made. Such decision might include what product range to sell, which geographic to serve, where to locate operating facilities, how to structure the compensation/ reward system, what activities to outsource or what information system to use (Beamish 2008).
Ways of growth and expansion
Organizational culture affects the strategic decision and strategy that an organization chooses to grow and expand. There are many options to select such as organic growth, merger and acquisition, join venture, strategic alliance and franchise. However, the decision is made based on the characteristic and vision of the company. To illustrate, Strategic Alliance is cooperative agreements or joint ventures between two independent firms. When a company does not have enough knowledge and financial ability to serve some goals, it must go beyond the boundaries of the organization into strategic alliances. Samsung Electronics Corporation's vision is 'Inspire the world, create future' (Chang 2008). In order to bring the best technology to the new generation, Samsung has done strategic alliances with a number of other organizations. These alliances often involved research or development projects and technology transfer arrangements. They have included a washing machine development with Mitsubishi, digital home technology with Microsoft and flash memory card (memory sticks) with Sony (Michell 2010). In this case, culture has affected the decision making of Samsung Electronic management to implement vision and motivate organization's growth.
Decision making process
Organizational culture takes part in every steps of decision making even though management is the one that takes control and makes vital decisions. According Black (2003), management is required to do strategic analysis with assistance of a team. Thus, they need to make the best possible decisions to profit their organization. Organizational decision-makers will develop a list of alternatives to the situation. Then management team will review the list until they find a best fit strategic choice that is adequate. The decision-makers settle with the chosen alternative rather than continuing to search for the best possible option. However, organization culture has to be considered before final decision is made (Calingo 1997). Ethical decision-making is based on perceptions. Numerous people of divergent backgrounds hold perceptions of ethical behavior differently. People who perceive one situation as ethical may have others who perceive the same situation as unethical. Religion, culture, nationality, and history influence the perception of an individual's ethical behavior. Thus, organization needs to have a standard and train their employees to follow ethical behavior. When an organization emphasizes what is the right way to behave, employees are more likely to avoid unethical behavior. The most difficult part is to implement the strategy. Managers control the culture within organization and drive it to what the strategy has planned. Suitable culture and right strategy will lead corporation to success (Andre 2008).
A typical example could be McDonald. This company's mission is 'to be the best employer for people in each community around the world, deliver operational excellence to customers in each of our restaurants and achieve enduring profitable growth by expanding the brand and leveraging the strengths of the McDonald's system through innovation and technology' (Gillbert 2009). Try to fulfill our customer, automatically profit will improve'. Besides, McDonald developed strict rules about delivery timing and attitude toward customers which all franchises must follow. It is to reduce the conflicts between different perceptions and guarantee that customers are treated fairly. The mission statement and regulations have explained simply why McDonald chooses the franchise as an alternative to build 'chain store', distribute goods that avoid the investments and liability of a chain. By creating particular guideline for all employees, McDonald in turn does not have to worry much about service quality while expanding to any regions.
Barriers in term of diversity workforce, merger and acquisition
Hiring and training strategy of a company is also influenced by its culture. It is believed by Driskill and Brenton (2005) that skills and knowledge are easier to access and train rather than attitude. If an employee's attitude does not fit to the unique culture of the company, it is less likely to work together with current staffs. Strong organization culture may cause some barriers and challenges for organization in term of changing and improvement, diversity workforce, merger and acquisition. One of those is what Parker (2012) called 'cultural clash', emerging when a merger or acquisition pushes two different culture under the same corporate organization. In this case, he insisted that strong culture can mix as badly as "oil and water". Therefore, once organizations are expanding abroad, culture should be a factor to consider when a potential partnership or acquisition is being discussed, especially from hiring stage. There should be a balance between bringing in the organization's own people to ensure that its culture is nurtured and grows on foreign soil, while at the same time appreciating local cultures in other market and incorporating them in that process (hiring local people to fit the organization culture) (Parker 2012).
In 2005, there was a communication merger occurred, between Sprint and Nextel Communications in United States (Cummings 2009). It was believed that the combination of the two market's spectrums - Sprint's personal cell phones and home service, and Nextel's business/infrastructure/transportation market - would bring about one big happy communication family (for only $35 billion). However, the merger did not stay long. As claimed by some Nextel executives and managers who had left the new company in droves, the two cultures could not be mixed or get along well (Cummings 2009). Simultaneously, the economy started to take a turn for the worse. Customers (including private and business) were expecting more and more from their providers. As a consequence, sales from competitors like AT&T, Verizon, and the iPhone decreased significantly. Sprint/Nextel began lay-offs. Since its stocks plummeted, for all those involved, the merger clearly failed. It is to say that organization does not carry out activities for their own interest. They carry them out because customers and key stake holders want them to, or need them to, perform that activity. Organizations in the same industry with different types of customers and key stake holders will carry out different activities and act differently. Organizations heavily rely on the choices made for their accomplishments. The right choices can bring victory and negative choices can cause disaster (Heracleous 2003).
To conclude, this essay has been discussed in detail what is organizational culture and its importance. Relevant examples from different industry such as Google, HP, Four Seasons, Genting Hongkong, Mc. Donald, Walt Disney, Samsung Electronics, Sprint and Nextel are given to accordingly to clarify the connection between organizational culture and its impact to employees, customers, shareholders and society. In summary, organizational culture is the foundation for corporation to develop its best working environment, motivate employees, thus increase revenue and build positive image. High management needs to pay high attention in creating unique culture and remain it. Especially in term of human resource strategy, people are hired need to be fit with company culture otherwise it is hard to work effectively as a team and group. Moreover, organizational culture has a remarkable effect to company's growth strategy. A corporate can choose to have organic growth, franchise, joint venture, merge and acquisition. However, the strategy must be suitable with current company culture or the company culture has to be changed to match with the strategy. Culture can be changed through the years due to the effects of society, technology, economy and government. It is hard to predict organizational culture trend but the company will do well in future if they develop appreciate culture to response their challenges.