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Strengths and weaknesses of organizational culture

management, business, organization, corporate culture, organizational culture, excellent organizations

How is culture actually exhibited in organizations? The issues we will address are the strength or weakness of the organization's culture and the identification of an organization's culture.

Strength of Culture
Three features that determine a culture's strength can be identified. The first is thickness of culture, measured by the number of important shared assumptions. Thick cultures have many such assumptions, thin cultures few. The second dimension is extent of sharing. In strong cultures, layers and layers of beliefs are shared. Clarity of ordering is the third determinant of cultural strength. At McDonald's, product quality and customer service are clearly the highest priorities, but the two goals appear to be equally important. In some cultures, shared beliefs and values are clearly ordered, and their importance in relation to one another is known. Strength of culture is significant because strong cultures—that is, thick cultures in which the sharing of clearly ordered beliefs and values is pervasive—are more resistant to change than are weak cultures.

Two factors affect the strength of an organizational culture: the number of employees and geographic dispersion. Small work forces and more localized operations contribute to the development of strong cultures because beliefs and values easily develop and become shared. These characteristics are not essential for a strong culture, however. With 10,000 restaurants spread around the world, from Illinois to Yugoslavia to Russia, McDonald's clearly employs a large number of people and is very dispersed.

Nevertheless, it enjoys a strong organizational culture. Similarly, Nordstrom's, a department store chain from the Northwest that is expanding nationally, has cultivated a strong culture based on customer service. According to one story about the chain, "Salespeople have paid parking tickets for customers unable to find legal spots, delivered purchases to customers' homes on Christmas Eve and lent a few dollars to customers who have found themselves short at the cash register." The result was a tenfold growth in sales in the 1980s and a jump in size from 15 stores to 42.

Strong cultures are not always desirable. There appear to be organizational conditions that do not necessarily warrant them. If one looks at organizations as mechanisms for governing transaction costs (the organization requires something of the employee, who in turn benefits from the organization), there are three ways to manage those transaction costs. Whichever method is used to mediate costs, it must be viewed as equitable to everyone.

The first two mechanisms, the marketplace and bureaucracy, are used under conditions of fairly low uncertainty and complexity. The market form, appropriate in competitive situations, manages transaction costs with a price mechanism. Contracts are made and kept between parties at a "fair" price so that competitors won't take over the business. Bureaucracy creates the appearance of equity by creating an employment contract, whereby employees contract to receive wages and in turn submit to supervision, which is designed to reduce uncertainty and monitor employee performance. A hallmark of bureaucracy is the simplification of complex tasks into discrete, easily monitored activities. The bureaucracy uses the mechanism of rules or standards of behavior; as long as uncertainty is low, the rules in place can guide behavior.

When uncertainty or complexity increases, these mechanisms do not work. A third mechanism, a clan or culture, then becomes viable. The clan is a culturally homogeneous organization in which members share a common set of values, objectives, and beliefs; this common core empowers them to act with greater flexibility in a fluid situation. This approach addresses the social exchange problem quite differently than either the marketplace or bureaucracy method: it socializes parties to the exchange in such a way that all participants see their objectives in the exchange as congruent. Clans require a tremendous amount of group process activity.
Published: 2007-04-21
Author: Martin Hahn

About the author or the publisher
Martin Hahn PhD has received his education and degrees in Europe in organizational/industrial sociology. He grew up in South-East Asia and moved to Europe to get his tertiary education and gain experience in the fields of scientific research, radio journalism, and management consulting.

After living in Europe for 12 years, he moved to South-East again and has worked for the last 12 years as a management consultant, university lecturer, corporate trainer, and international school administrator

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