In a survey of CEOs and CFOs reported by MIT Sloan Management Review, 9 out of 10 believed that improving corporate culture would increase their company's value, and nearly 80% ranked culture among the five most important factors driving their company's valuation.

Executive Beliefs About Corporate Culture and Company Valuation

Companies listed among the best places to work based on their corporate culture delivered nearly 20% higher returns to shareholders than comparable companies over a five-year period.

Best Places to Work Shareholder Return Premium

Organizational culture can influence long-term economic and organizational performance. Reported findings include better financial results for performance-oriented cultures and performance drivers such as risk-taking, internal communications, flexibility, innovativeness, and productivity through people. Cultural dimensions may contribute unequally to organizational success.

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Organizational culture refers to the common patterns of thinking and behaving within an organization. It is rooted in underlying beliefs and assumptions people hold about themselves and the organization, and those beliefs and assumptions create mindsets that shape culture. More broadly, organizational culture can be characterized as the set of shared norms, values, and behaviors in an organization that reflect its core values and strategic direction. Some interpretations treat culture as a root driver of the organization itself, shaping behavior and interaction.

Organizational Culture

Spielman, R. M., Jenkins, W. J., & Lovett, M. D. (2020, April 22). Psychology (2nd ed.). OpenStax. https://openstax.org/books/psychology-2e/pages/1-introduction

OpenStax Psychology (2nd ed.) Textbook

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Organizational culture is shown to be a mediating factor in the organizational learning process. Culture is embedded into any form of organizational learning. Organizational culture helps connect and understand learning in an organization to learning by an organization. 

Influence of Organizational Culture on Organizational Learning

Diversity training helps people in workplaces bridge and understand cultural differences. It educates participants about cultural differences with the goal of improving teamwork.

Diversity Training

According to a model by Ostroff, Kinicki, and Tamkins (2003), organizational culture can be analyzed in three hierarchical layers. These layers range from the most visible to the most deeply embedded aspects of the culture and include observable artifacts, espoused values, and basic assumptions.

Layers of Organizational Culture

Groups within an organization may act according to their own subcultures that are not fully aligned with the organization as a whole. Specialized groups, such as computer technicians, may bring expertise, language, and behaviors gained independently of the organization, and their presence can influence the larger organizational culture.

Organizational Subcultures

Sexual harassment is unwelcome sexual conduct, including sexual advances, requests for sexual favors, or other verbal or physical conduct of a sexual nature, when it explicitly or implicitly affects employment, unreasonably interferes with work performance, or creates an intimidating, hostile, or offensive work environment.

Sexual Harassment

The prevention and handling of sexual and other forms of workplace harassment are considered significant components of a healthy organizational culture.

Workplace Harassment as an Aspect of Organizational Culture

Organizational cultures are generally framed and influenced by the top-level leader or founder, whose vision, values, and mission set the "tone at the top." This tone influences ethical and legal foundations and models how other officers and employees work and behave.

Founder and Leader Influence on Organizational Culture

One axis in the Competing Values Framework, external focus versus internal focus, indicates whether an organization's culture is externally or internally oriented.

External versus Internal Focus Axis in the Competing Values Framework

Another axis in the Competing Values Framework, flexibility versus stability and control, determines whether a culture functions better in a stable, controlled environment or a flexible, fast-paced environment.

Flexibility versus Stability Axis in the Competing Values Framework

In the Competing Values Framework, Adhocracy Culture combines an external focus with a flexibility orientation. It is dynamic and entrepreneurial and emphasizes creating, innovating, visioning the future, managing change, risk-taking, rule-breaking, experimentation, entrepreneurship, and uncertainty. This profile is often found in fast-paced industries such as filming, consulting, space flight, and software development.

Adhocracy Culture

Clan Culture focuses on relationships, team building, commitment, empowering human development, engagement, mentoring, and coaching. Organizations that emphasize human development, human resources, team building, and mentoring fit this culture profile.

Clan Culture

In the Competing Values Framework, Hierarchy Culture combines an internal focus with a stability and control orientation. It is process-oriented and structured, emphasizing efficiency, process and cost control, organizational improvement, technical expertise, precision, problem solving, elimination of errors, logical and cautious decision-making, management and operational analysis, and careful decision-making.

Hierarchy Culture

In the Competing Values Framework, Market Culture combines an external focus with a stability and control orientation. It is results-oriented and competitive, focusing on delivering value, competing, delivering shareholder value, goal achievement, driving and delivering results, speedy decisions, hard driving through barriers, directive and commanding behavior, and getting things done.

Market Culture

A single company can have a mix of cultures and be effective.

Mixing Multiple Cultural Profiles in One Organization

Organizational culture is rooted in underlying beliefs and assumptions people hold about themselves and the organization, and these beliefs and assumptions create mindsets that shape the culture.

Beliefs, Assumptions, and Mindsets as Roots of Organizational Culture

Culture change may be attempted to reduce member turnover, influence behavior, make organizational improvements, reset objectives, rescale the organization, or achieve specific results.

Culture Change in Organizations

The industry in which an organization participates may influence its organizational culture, including how the organization is run, how it operates, and how it makes decisions.

Industry Influence on Organizational Culture

Researchers have developed survey instruments to measure organizational culture.

Survey Instruments for Measuring Organizational Culture

Organizational culture is also referred to as business culture, corporate culture, or company culture. The term corporate culture emerged in the late 1980s and early 1990s and was initially used by managers, sociologists, and organizational theorists during the 1980s.

Alternate Names for Organizational Culture

Organizational culture shapes how people interact, how decisions are made or avoided, the context in which cultural artifacts are created, employees' attachment to the organization, the organization's competitive advantage, and the internal alignment of its units.

Outcomes Influenced by Organizational Culture

Organizational culture includes an organization's vision, values, norms, systems, symbols, language, assumptions, environment, location, beliefs, and habits.

Elements Comprising Organizational Culture

Organizational culture is influenced by factors such as an organization's history, type of product, market, technology, strategy, type of employees, management style, and national culture.

Factors Influencing Organizational Culture

Organizational identity is a topic related to organizational culture. It refers to statements and images that are important to an organization and help differentiate it from other organizations. Organizational identity influences all stakeholders, leaders, and employees.

Organizational Identity

Elliott Jaques introduced the concept of organizational culture in his 1951 book The Changing Culture of a Factory. The book was a published report of a case study of developments in the social life of one industrial community between April 1948 and November 1950, involving a publicly held British company engaged principally in the manufacture, sale, and servicing of metal bearings. The study concerned the description, analysis, and development of corporate group behaviors.

Elliott Jaques' Introduction of Organizational Culture

Various definitions of organizational culture exist, without consensus.

Lack of Consensus in Defining Organizational Culture

Gallup reported that just 22% of U.S. employees feel connected to their organization's culture.

Employee Connection to Organizational Culture

Researchers have proposed various dimensions, individually and in combination, for analyzing organizational culture. Examples include external versus internal, strong versus weak, flexible versus rigid, and many others. Managers should treat neat typologies cautiously because they can understate organizational complexity, and some scholars have criticized attempts to categorize or pigeonhole organizational culture.

Dimensions for Analyzing Organizational Culture

Organizational culture is distinct from national culture, and reported cross-national differences in the effects of culture imply that organizational culture is rooted in national culture.

Distinction Between Organizational Culture and National Culture

Organizational cultures can be treated as something to improve rather than merely preserve. In Netflix's stated culture, every new employee helps shape how work is done by finding new ways to accomplish more together.

Organizational Cultures Change Over Time

Kotter and Heskett define an adaptive culture as one characterized by managers who pay close attention to their constituencies, especially customers, initiate change when needed, and take risks.

Adaptive Organizational Culture

Cultures otherwise rated as strong were relatively resistant to change during the pandemic; however, strong cultures that emphasized innovation were more willing to change.

Strong Cultures Resisted Change During the Pandemic Unless They Emphasized Innovation

Healthy cultures address members' concerns about the well-being of the organization.

Healthy Cultures Address Members' Concerns About Organizational Well-Being

Workplace bullying refers to when an employee is repeatedly bothered and tormented in their job environment. This could come either from their employer or their coworkers. The three criteria that constitute workplace bullying are repeated negative acts, an imbalance of power regarding resources to seek assistance with the bullying, and escalation over time. In organizational culture, bullying can manifest when workplaces allow higher-status employees to harass lower-status employees, often requiring support or at least forbearance from company leaders. Bullying can cascade down the hierarchy, increase employee stress, decrease productivity, increase turnover, and remain unreported when management fails to hold perpetrators accountable.

Workplace Bullying

Organizational culture has been associated directly or indirectly with outcomes such as organizational performance, employee commitment, and innovation.

Outcomes Associated with Organizational Culture

Impact of Organizational Culture on Organizational Performance

The shadow side of an organization refers to things that substantially and consistently affect productivity and the quality of working life, for better or worse, but are not found on organization charts, in company manuals, or in formal meeting discussions.

Shadow Side of Organizations

The Competing Values Framework is a widely cited and tested model for diagnosing an organization's cultural effectiveness and examining how an organization and its culture fit with the external environment. The framework's effectiveness criteria help identify organizational cultures that fit particular environmental characteristics.

Competing Values Framework

Netflix contrasts itself with workplaces where decisions are top-down and transparency is limited. It says it aims to inspire and empower people more than merely manage them because people can have greater impact when free to make decisions about their own work.

Empowered Decision-Making at Netflix

Netflix states that many people will be happier at companies that are more stable or take fewer risks. The memo says Netflix works best for people who value experimentation, enjoy new or challenging projects, and have the resilience to thrive in that environment.

Employee Fit with Netflix Experimentation Culture

Microsoft publicly describes a set of cultural attributes that includes a growth mindset, curiosity, continuous learning, experimentation, agility, mentorship, collaboration, shared accountability, a beginner's mind toward customers, external insight-seeking, and team empowerment.

Microsoft's Stated Culture

Microsoft states that it embeds security into systems and processes from the start so teams and customers can do their best work with confidence.

Security Embedded in Microsoft Work Systems

Charles O'Reilly and Jennifer Chatman define organizational culture as a set of norms and values that are widely shared and strongly held throughout an organization. The MIT SMR/Glassdoor Culture 500 project follows this definition, which has been widely adopted by researchers studying the relationship between corporate culture and performance.

O'Reilly and Chatman's Definition of Organizational Culture

HubSpot describes its culture as driven by a shared passion for its mission and metrics. It describes the culture as one of amazing, growth-minded people whose values include using good judgment and solving for the customer.

HubSpot's Stated Culture

Ford describes its culture around bold ideas, innovation, sustainable transportation, and support for employees' growth and well-being. It connects work at Ford with redefining what is possible for a more connected and sustainable future.

Ford's Stated Culture

Organizational Culture for Managers

Corporate culture matters beyond its power to drive financial results because the average employee spends 40% of her waking hours at work.

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