The impact of organizational culture on company performance

Organizational culture is one of the most important elements in building competitive advantage of an organization. It is a determinant of the “quality” of the workplace for its employees. The most important feature of organizational culture is that it is unique to each organization. Organizational culture cannot be replicated, stolen or copied (unlike manufacturing technology, product specifics or marketing strategy).

What exactly is organizational culture?

Torben Rick – a senior executive with extensive experience in developing, leading and managing business improvement, development and change management believes that an organization’s culture consists of:

• the ways in which organizations achieve their goals,
• the values and behaviors that contribute to the organization’s unique environment,
• the image of the organization from the inside,
• the sum of values and rituals that serve as an integrator of the organization’s members,
• the system of shared assumptions, Values, and beliefs that regulate the behavior of people in an organization,
• civilization in the workplace,
• the philosophy, attitudes, beliefs, behaviors, and practices that define an organization.

Levels of organizational culture

American social psychologist and organizational culture researcher Edgar Schein distinguished three levels of organizational culture. Schein’s model of organizational culture was based on two criteria – visibility to an outside observer and the degree of their awareness among organizational members.
We categorize the manifestations of organizational culture into three levels: artifacts, values, and implicit assumptions.

Artifacts

An artifact is the language used in a company, the way people dress, or, for example, the color scheme of interior decoration or style of furniture. Artifacts can also include document templates and stationery. We can also call artifacts “the rituals that take place in the company”. Examples are “fruit Thursdays”, “summer Fridays” or New Year’s parties organized every year in the company. They are visible and easy to identify with the organization.

Values

Values are expressed in the organization’s goals, ideology, role models or maxims functioning in the company. On this level, we can also find different types of prohibitions and orders, regulations and hierarchies functioning in the organization. Values have a lower sensitivity to change than artifacts.

Cultural assumptions

This level is the hardest to see because it does not involve the material realm unlike the other two. At the core of culture are authorities and visions, such as the environment and human relationships. As an outsider, in order to get an idea of what this level looks like, you need to spend some time in the organization so that you “blend in” to see how it works in everyday life.

Schein’s model of organizational culture allows us to see the process of emergence and penetration of cultural assumptions and values existing at the subconscious level of the organization’s employees to the level of external cultural artifacts.

The role of organizational culture

The culture of an organization has three primary roles in a business.

The first – the integrative role. It allows the organization to act and develop as a certain whole, integrating employees around a common center of gravity, which are the goals of the organization. This minimizes personal pursuits and aspirations and allows attention to be focused on the values desired by organizations. Integration provides a sense of identity.

Another role is the perceptual role. It involves unifying perceptions of the environment and assigning meaning to elements of the environment and attitudes toward the world around us. Allows you to make corrections to your own behavior by comparing your behavior to the behavior of other employees.

The third role of organizational culture is the adaptive role. By stabilizing behaviors and beliefs, culture allows for structured adaptation to changing conditions. It reduces the feeling of insecurity and influences a positive atmosphere. This role allows the company to execute its strategy.

Is it worth building an organizational culture?

Companies that have chosen to build a high-level organizational culture have observed many benefits. First, the system of norms and values became visible not only to employees but also to customers. This has improved the company’s image among potential customers and business partners. Employees who identify with the organization’s values are more likely to solve internal problems and communicate more effectively with customers.

Additionally, Lachowski’s survey results state that 91% of senior managers say that organizational culture determines company success as significantly as a good strategy. As many as 81% also believe that even the best business idea has no chance of success without building the right company culture.

This research has been confirmed in Harvard Business Review magazine – companies with higher organizational culture perform up to 20-30% better than their competitors.

Who is responsible for building organizational culture?

Experts’ opinions on the responsibility for building organizational culture are divided. Some believe that it is the responsibility of lower employees to be responsible for their own commitment and attitude in the work environment.

Others argue that the responsibility for employee engagement lies with senior managers. It is they who should inspire others by their attitude and behavior. Experts suggest that managers should ask “active” instead of “passive” questions when communicating with subordinates. Passive questions cause us to get negative answers, encourage us to find fault and point out the causes of problems. The key, however, is to communicate in a way that encourages employees to be proactive and stimulates them to think about improving themselves and the organization as a whole – “how do we make a difference?”

In our opinion, the responsibility for building and functioning organizational culture lies with all employees of the company.