Corporate culture or organizational culture is a set of values, ideologies, systems, norms, beliefs and behavior in a company. It shapes the way everyone runs the company and interacts. It is the social energy that moves the organization towards its vision and mission.
Organizational values and norms spread to everyone in the organization. It then guides behavior and controls the way people interact with each other and with stakeholders outside the organization.
New members need to learn it. Some of them may take a long time to adapt, while others are faster. No matter how long it takes to adjust, learning the new cultural environment makes it easier for them to synergize with other members.
What factors differentiate one company’s culture from another
Company culture varies because of the difference in the shared values of the organization, hierarchy level, employee cultural background, and company orientation. These factors form the cultural characteristics of each company.
For example, related to orientation, some companies are more people-oriented, while others are task-oriented. In people orientation, culture tends to prioritize people when making decisions and believes that people drive performance and productivity.
Meanwhile, in the task orientation, culture emphasizes efficiency and quality to encourage performance and productivity. Interaction between members of the organization is more rigid and bureaucratic.
How does a leader affect organizational culture?
Business leaders play an essential role in creating, maintaining, and developing corporate culture. They form a culture to smooth the implementation of their plans and strategies.
By developing culture, employees feel a leader helps them complete a goal. Embedded and established culture describes how people should behave. It can not only help employees in their daily activities, but also in achieving their goals. Ultimately, the right culture not only ensures higher job satisfaction but also achieves company goals.
However, the relationship between culture and leadership is not one-sided. In a sense, established culture often influences how leaders must act and behave. And, other times, they are architects of organizational culture.
Why is corporate culture important
If the strategy offers formal logic to steer people toward the company’s goals, then culture expresses goals through values and trust. Culture guides activities through shared assumptions and group norms.
Because it forms attitudes and behaviors, culture can become energy towards a common goal. It not only encourages employees to work hard to achieve targets, but feels happy doing it. Therefore, culture influences their (and also the company’s) productivity and performance.
The company’s image in the eyes of stakeholders also depends on the company’s norms and standards in creating value. When a company demands its employees to respect customers, it gives a positive impression. Providing exceptional customer service requires a culture and mindset that emphasizes perfect service and customer problem-solving. Likewise, when companies put forward environmental concerns, the public will see it as a positive behavior.
In the end, the combination of an influential culture that is aligned with strategy and leadership encourages positive outcomes. Conversely, an ineffective culture can reduce organizational performance. High absenteeism, high turnover, and poor customer relations are examples of the impact of bad culture. It all hurts the company’s bottom line.
The failure of mergers and acquisitions often stems from cultural issues. Cultural conflicts arise because each company carries a different culture. It isn’t straightforward to reconcile the differences between them and build a common foundation for the future.
How the corporate culture emerged and developed
The founders usually have a significant influence on the company’s early culture. They will try to establish a culture to facilitate the achievement of their vision and mission. Without it, the company will not be more structured.
Culture develops as the business grows. The entry of new executives contributes to the change in corporate culture. They may bring a different perspective than the one brought by the founder.
Diverse cultures between companies. Some of them are more bureaucratic, while others are more flexible. Some companies may openly resolve conflict to create consensus, while others resolve it hierarchically and quietly behind closed doors.
Over time, culture and systems become established. It was not disturbed when several people left the company. Or, when several new employees enter.
Even though it has been established, the company culture is still flexible to change. For example, executives pursue radical changes in the direction of companies to adapt to evolving dynamic business environments. These changes require them to develop new cultures that are more appropriate.