Managing Organisational Culture (AQA A-Level Business): Revision Notes
Managing Organisational Culture
What is organisational culture?
Organisational culture (also called corporate culture) refers to the way things are done within a business. It's about how employees carry out their work, the behaviours they display, and what they expect from each other and management. Think of it as the personality of the company—the unwritten rules and shared values that guide daily activities.
A company's organisational culture is shaped by its core values and objectives. These form the foundation of how the business operates and what it prioritises. Culture affects several crucial aspects of business operations:
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Staff behaviour and decision-making: The culture influences how employees make choices and approach their work. For example, in some businesses, employees might be encouraged to take risks, while in others, following strict procedures is the norm.
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Planning, objective setting and strategy: Culture shapes how the business sets goals and develops long-term plans. A culture that values innovation will set different objectives compared to one focused on stability and tradition.
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Expectations and attitudes: Culture determines what employees expect from their workplace and the attitudes they develop towards their work, colleagues, and managers.
Organisational culture is both created and reinforced through various mechanisms. These include company rules and formal policies, managerial attitudes and leadership styles, managerial behaviour (what managers actually do, not just what they say), and recruitment policies that determine who fits into the organisation. The culture is maintained through how employees are rewarded—the behaviours and achievements that earn recognition shape what people value.
Example: The Impact of Reward Systems on Culture
If an employee achieves high sales figures but acts unethically, rewarding them could create a culture that prioritises short-term profits over the company's reputation and ethical standards. This demonstrates how reward systems directly influence cultural values.
You can identify a company's culture by observing its heroes (people who embody the company's values and are held up as role models), the stories that are repeatedly told within the company about past successes or failures, the symbols that represent company values (such as staff mottos and slogans displayed in the workplace), and the ceremonies the business holds, such as office parties, award ceremonies, or team-building events.
Strong vs weak culture
Understanding whether a culture is strong or weak helps predict how employees will respond to change and how well the business will perform.
Strong culture
A strong culture exists when employees genuinely agree with and share the corporate values of their company. This alignment creates several important advantages for the business.
When culture is strong, employees need less supervision because their natural behaviour already fits with what the company values. They don't need constant monitoring or instruction—they instinctively know what's expected because they share those values.
Strong cultures also create greater loyalty among staff. When employees believe in what the company stands for, they're more committed to staying with the business. This reduces staff turnover, saving the company money on recruitment and training, and preserving valuable organisational knowledge and experience.
Additionally, strong cultures increase employee motivation. When people feel connected to their company's values and purpose, they work more productively and with greater enthusiasm. They're not just working for a wage—they're working towards goals they believe in.
Weak culture
A weak culture occurs when employees don't share or understand the company's values. Instead, they have to be forced to comply with company expectations, often through strict company policies, detailed rule books, or constant supervision.
In weak cultures, employees may go through the motions of their work without genuine engagement or commitment. They do what's required to avoid punishment rather than because they believe it's the right thing to do. This creates a less positive working environment and typically results in lower productivity and higher staff turnover.
Four main types of organisational culture
Charles Handy identified four main types of organisational culture in 1993. Understanding these types helps explain how companies handle change and why staff might be open to change or resistant to it. Each type has distinct characteristics that affect decision-making, communication, and adaptability.
Power culture
Power cultures have a centralised structure where decision-making authority rests with a small number of people—sometimes just one person at the centre of the organisation, possibly the owner or founder.
This centralised control can work well when a business is small, allowing quick decisions and clear direction. However, power cultures often struggle if the business grows significantly. As the company expands, the central authority cannot be involved in every decision, and the structure becomes inefficient. The business cannot be effectively run from the centre alone when operations become too complex or geographically spread out.
Employees in power cultures are likely to be more resistant to change. This resistance occurs for several reasons. First, they don't have the opportunity to give their opinions on what changes should or shouldn't be made—change is imposed from above. Second, they may be resistant to changes because they lack faith in senior managers, particularly if those managers are out of touch with the day-to-day activities and realities of the business. When leaders seem disconnected from operational realities, employees are less likely to trust their decisions about change.
Role culture
Role cultures are common in bureaucratic firms where authority is defined by job title rather than individual characteristics or expertise. In these organisations, decisions come from senior managers, which means employees lower down the hierarchy don't have the opportunity to get involved in the decision-making process.
These organisations suffer from poor communication between departments. Different parts of the business often work in silos, not sharing information effectively. This communication breakdown means they respond slowly to change. When the business environment shifts or competitors introduce innovations, role cultures struggle to adapt quickly. This could result in them losing out to competitors in new or expanding markets where strategies need to be developed and implemented rapidly.
Role cultures also tend to avoid risk because of a fear of failure. This fear makes change quite rare in these organisations. Additionally, any changes that are proposed will meet significant resistance from employees who are not used to doing things differently. They've become comfortable with established procedures and routines, making them reluctant to adopt new approaches.
Person culture
Person culture is common in loose organisations of individual workers, usually professional partnerships such as solicitors, accountants, doctors, or architects. In these firms, highly qualified professionals work relatively independently.
The objectives of person culture firms are defined by the personal ambitions of the individuals involved, rather than by a central corporate vision. Each professional has their own goals and career aspirations. However, the firm must ensure that individuals share some common goals to maintain cohesion and direction.
Decisions are made jointly in person cultures, with all employees involved in the discussion. This collaborative approach means employees are likely to be comfortable and accepting of changes that are made, because they have agreed to them through the joint decision-making process. They have ownership of the changes.
However, decisions on change can be difficult to make in person cultures. Individuals often think about what is best for themselves rather than considering what is best for the organisation as a whole. Personal interests can conflict with organisational needs, making it challenging to reach consensus on major changes.
Task culture
Organisations with a task culture place emphasis on getting specific tasks completed. This culture brings small teams together to work on a project, then disbands them once the task is finished. This flexible approach keeps the organisation dynamic and responsive.
However, this structure can create conflict between teams competing for resources and budgets. Additionally, it can be confusing if a firm has too many products or projects running simultaneously, as priorities become unclear and coordination becomes difficult.
Task culture supports objectives which are based around products—for example, making a particular product the market leader. The culture responds well to management by objectives, where corporate objectives are translated into specific targets for each department and each individual employee. This clarity helps everyone understand their contribution to overall success.
Staff working in companies with task cultures are likely to think that change is normal and expected. They're used to changing teams frequently and working with a variety of different people on different projects. This regular exposure to new situations means they are likely to be less resistant to change in general. Change becomes part of their regular working pattern rather than a disruption.
Other types of organisational culture
Beyond the four main types, several other organisational cultures exist, each with distinct characteristics.
Entrepreneurial culture
In an entrepreneurial culture, employees are encouraged to look for new ways of bringing revenue into the company. Innovation and creativity are highly valued, and taking calculated risks is encouraged.
Change is a significant part of entrepreneurial culture. All employees are responsible for generating new ideas to improve how the business is run. Everyone is expected to contribute to innovation, not just senior management.
When employees are encouraged to be creative and innovative, they are likely to be much more open to change, especially when changes are made based on their own suggestions. This creates a virtuous cycle where employees propose improvements, see them implemented, and become even more engaged with continuous improvement.
Other culture types
Customer-focused culture bases its values on customer feedback and satisfaction. Every decision is made with the customer's needs and preferences in mind. Businesses with this culture prioritise customer service and loyalty.
Clan culture operates where the organisation acts more like a family, with managers taking on parent-figure roles. This creates a supportive, collaborative environment with strong interpersonal relationships and loyalty.
Market culture focuses on competition with other organisations and between employees internally. These businesses are driven by competitive advantage and market position, often with aggressive targets and performance metrics.
Why organisational culture matters to stakeholders
The organisational culture of a business significantly affects its stakeholders—the people and groups who have an interest in how the business operates.
Staff
Culture directly affects the motivation of employees. For example, a power culture or role culture can demotivate creative staff who can see ways to improve things but don't have the power to put changes into practice. When employees feel their ideas are ignored or undervalued, their engagement and productivity decline.
Conversely, cultures that empower employees and value their input can significantly boost motivation, job satisfaction, and retention.
Customers
Organisational culture affects customers' loyalty to a business. Businesses with a customer-focused culture are more likely to have customers who remain loyal to the firm or their brands. When a company genuinely prioritises customer needs and satisfaction, customers notice and respond with repeat business and positive word-of-mouth.
Culture influences every customer interaction—from how front-line staff behave to how complaints are handled and how products are designed.
Shareholders
The level of risk that businesses take depends on their organisational culture. This directly affects shareholder returns on investment.
Shareholders might get low returns on their investment if they invest in a company with a low-risk culture. These businesses play it safe, which may mean stable but modest returns.
Conversely, investing in a company with a high-risk culture gives shareholders the possibility of high returns through aggressive growth strategies or innovative products. However, there's also the risk that they'll lose money if those risky ventures fail. Shareholders need to understand a company's culture to make informed investment decisions that match their risk tolerance.
Why managers might want to change organisational culture
There are several compelling reasons why managers might decide to change their organisation's culture.
Leadership preferences
The organisational culture of a business depends on the preferences of its leaders. When a new manager joins a business, they might change the culture to make it more similar to businesses they have worked in before. They bring their own experiences and beliefs about what works well.
Example: Manager Imposing Familiar Culture
If a manager who is used to working in a business with a role culture starts working in a business with a task culture, they might force the business to adopt a role culture because that matches their management style and what they are comfortable with. While this may suit the manager, it doesn't always benefit the organisation or its employees.
Improving competitiveness
A business might change its culture to become more competitive in its market. For example, businesses with a power culture can be slow to spot ways to save money or discover more efficient ways of working because decision-making is centralised and employees aren't encouraged to suggest improvements.
Adopting an entrepreneurial culture where all staff constantly look for ways to improve the business could make the business more competitive. When everyone is actively seeking improvements, the company can adapt more quickly to market changes and stay ahead of competitors.
This shift can lead to increased innovation, better cost control, and improved operational efficiency—all crucial for maintaining competitive advantage in dynamic markets.
How growth can influence organisational culture
Changes in a business's size and structure naturally influence its organisational culture.
Taking on new employees
If a business grows, it often needs to take on new employees. These new staff members may have different expectations and aims compared to existing employees, which could influence the pre-existing culture. They bring fresh perspectives but may also challenge established ways of doing things.
Example: Cultural Shift Through New Employees
Younger employees entering a traditional business might expect more flexible working arrangements or greater use of technology, gradually shifting the culture towards more modern practices.
Increased corporatisation
A business's growth and success can lead to it becoming more corporate, with a more rigid structure. As businesses grow larger, they often need more formal procedures, clearer hierarchies, and documented processes. This can sway the business towards a role culture, even if it previously operated with a more flexible culture type.
This shift often occurs because larger organisations need more standardisation and control to coordinate activities across multiple departments, locations, or countries.
Becoming multinational
If a business becomes multinational, its culture may be influenced by the culture of the country the business has entered. Operating in different countries means encountering different cultural norms, values, and expectations.
Companies can use Hofstede's six dimensions of national culture to analyse the differences between the culture of each country. This analysis helps businesses understand potential cultural clashes and adapt their approach accordingly when entering international markets.
Impact of cultural strength
The amount by which a culture is affected by a change depends on several factors. These include how strong the original culture was (a very strong culture is more resistant to change), how well the culture was reinforced through policies and practices, and whether employees appreciate its values (if employees genuinely value the culture, they'll resist changes to it more strongly).
Why changing organisational culture can be difficult
Changing organisational culture presents several significant challenges for managers.
Natural resistance to change
Employees usually resist any kind of change, including changes in organisational culture. Employees who have worked for a business for a long time are especially likely to resist changes to the organisational culture because they think the way they've always done things is better. They're comfortable with familiar patterns and may feel threatened by changes that challenge their established ways of working.
This resistance is natural and understandable—people develop routines and habits that make their work feel manageable and predictable.
Changing attitudes and behaviour
Changing organisational culture means changing the attitudes and behaviour of staff, which is much more complicated than changing tangible things like pricing structure or office layout.
Example: Cultural Change Requires More Than Structural Change
Managers might want to change from a person culture to a task culture, but simply putting people into small teams and giving them a project won't achieve anything if employees just want to work individually and in their own interests. The physical changes won't create cultural change unless employees genuinely adopt new attitudes and behaviours. This requires sustained effort, communication, and leadership commitment.
Managers must address the underlying beliefs and values that drive behaviour, not just change surface-level practices.
Financial costs
Changing organisational culture can be very expensive. It might involve changing the office layout to facilitate different working patterns, giving extra training to staff to develop new skills and mindsets, devising new processes for how work gets done, changing the company motto on marketing materials to reflect new values, and more.
These changes require significant investment of time and money. The costs aren't just financial—they also include the disruption to productivity during the transition period and the management time required to oversee the change process.
Role of HR department
The HR department plays a significant role in changing the organisational culture of a business. They might need to change their recruitment and induction procedures to attract and onboard people who fit the new culture. They may need to revise their payment and reward system to incentivise behaviours that align with the new culture rather than the old one. They'll also need to update training programmes and development opportunities to support the cultural shift.
HR's involvement is crucial because they control many of the mechanisms through which culture is reinforced daily. Without HR's active participation, cultural change efforts are likely to fail.
Hofstede's dimensions of national culture
Geert Hofstede used a large data set collected from employees across different countries to identify four areas or dimensions of national culture. Since then, two more dimensions have been added, making a total of six.
Countries are scored on each of the six dimensions. These scores allow businesses to assess the cultural differences when dealing with businesses from different countries and plan for any culture clashes that might occur.
This model is particularly useful when businesses are trading with international suppliers, expanding into other countries, or during mergers, takeovers, and joint ventures with businesses in other countries. It also helps businesses foresee any potential issues when entering international markets.
Multinational companies find the model handy because it allows them to assess how proposed changes will affect their employees in different countries. They can then adjust the changes to match the cultures in different countries, making implementation more successful.
Power distance
Power distance measures the extent that people accept that power and wealth is distributed unequally in society.
Societies with low power distance expect equality. People in these societies believe everyone should have similar opportunities and rights. They question authority and expect justification for decisions.
Societies with high power distance (such as Saudi Arabia) accept the hierarchy of power without argument. In these cultures, you would be expected to follow your boss's orders without question, regardless of your personal views. Challenging authority is considered inappropriate or disrespectful.
Understanding power distance helps businesses adapt their management styles when operating internationally. A flat, democratic management approach that works well in a low power distance culture might be ineffective or even offensive in a high power distance culture.
Uncertainty avoidance
Uncertainty avoidance measures the extent to which people attempt to minimise uncertainty. This is achieved by introducing rules or regulations that make the future more predictable.
People in societies with low uncertainty avoidance tend to be more open to change. They're comfortable with ambiguity and don't need detailed rules for every situation. These societies are typically more innovative and flexible.
Societies with high uncertainty avoidance prefer clear rules, structured situations, and predictable outcomes. They're less comfortable with change and prefer stability and security. This affects how businesses should introduce changes in different countries.
Individualism vs collectivism
This dimension measures the extent to which people are expected to look after themselves rather than support each other.
Societies with high individualism focus on personal achievement and rights. People are expected to look after themselves and their close family, but not extended family or wider community. Individual success and independence are highly valued. Western countries like the UK and USA tend to score high on individualism.
Collectivist societies, such as Pakistan, are made up of large groups (such as large extended families) where members are expected to support each other in return for loyalty. The group's needs and harmony are prioritised over individual desires. People define themselves by their group membership rather than individual characteristics.
Understanding this dimension helps businesses design appropriate reward systems, communication strategies, and team structures in different countries.
Masculinity vs femininity
Masculine cultures are highly competitive and powerful, with contrasting gender roles clearly defined. Success, achievement, and material rewards are emphasised.
Feminine cultures focus on caring and quality of life. These cultures value cooperation, modesty, and work-life balance. The higher the masculinity score, the more focus there is on power and money, whereas feminine cultures prioritise relationships and wellbeing.
This affects workplace dynamics, management styles, and what motivates employees in different countries.
Long-term orientation
This dimension measures whether societies look to the future and accept new ideas, or prefer following tradition.
Societies with high long-term orientation are forward-thinking and pragmatic. They value perseverance, thrift, and adapting to changing circumstances. These societies are generally more open to innovation and change.
Societies with low long-term orientation prefer to honour traditions and are more resistant to change. They value stability and maintaining established social norms.
Indulgence vs restraint
Indulgent societies allow their people to satisfy their desires and impulses, within reason. These societies value leisure, fun, and enjoying life. People feel relatively free to pursue happiness as they see fit.
Restrained societies attempt to regulate the desires of their people through strict social norms and rules. These societies emphasise self-control, duty, and following established codes of behaviour.
Understanding this dimension helps businesses adapt their corporate culture and employee policies when operating in different countries. What's considered normal or appropriate in workplace social activities can vary dramatically between indulgent and restrained societies.
Remember!
Key Points to Remember:
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Organisational culture is the way things are done in a business, shaped by company values, rules, managerial attitudes, and how employees are rewarded.
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Strong cultures create natural alignment between employee behaviour and company values, leading to less supervision needed, higher loyalty, and increased motivation.
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The four main culture types are power (centralised control), role (bureaucratic, defined by job titles), person (loose partnerships focused on individual ambitions), and task (project-based teams)—each responds differently to change.
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Changing culture is difficult and expensive because it requires changing attitudes and behaviour, not just policies or structures, and employees naturally resist changes to familiar ways of working.
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Hofstede's six dimensions (power distance, uncertainty avoidance, individualism vs collectivism, masculinity vs femininity, long-term orientation, and indulgence vs restraint) help businesses understand and adapt to cultural differences when operating internationally.