Factors Affecting Organisational Culture 


Organisational culture is affected by the interaction of four main factors, which are as follows:

factors affecting organizational culture


1) Characteristics of People within the Organisation: The ultimate source of organisational culture is the people who make up the organisation. People may be attracted to an organisation whose values match theirs; similarly, an organisation selects people who share its values. Over time, individuals who do not fit-in leave. The result is that people inside the organisation become more and more similar, the values of the organisation become more and more pronounced and clear-cut, and the culture becomes more and more distinct from that of similar organisations.


2) Nature of Employment Relationship: Another factor shaping organisational culture is the nature of the employment relationship a company establishes with its employees via its human resource policies and practices. A company’s hiring, promotion, and lay-off policies along with pay and benefits, can influence how hard employees will work to achieve the organisation’s goals, how attached they will be to it, and whether or not they will buy into its norms and values.

3) Design of Organisational Structure: This source of cultural values comes from the organisation’s structure. An organisational structure is the formal system of task and reporting relationships that an organisation establishes to coordinate and motivate its employees. Because different structures give rise to different cultures, managers need to design a certain kind of organisational structure to create a certain kind of culture.

4) Organisational Ethics: An organisation can purposefully develop some kinds of cultural values to control the way its members behave. One important class of values that falls into this category stems from organisational ethics, the moral values, beliefs, and rules that establish the appropriate way for an organisation and its members to deal with each other and people outside the organisation: Ethical values rest on principles stressing the importance of treating everyone fairly and equally.

Ethical values are the product of the following three ethics:

  • i) Societal Ethics: The ethics of the country or society in which the organisation exists are important determinants of its ethical values. Societal ethics are the moral values formalised in a society’s legal system, in its customs and practices, and in the unwritten norms and values that its people follow in their daily lives. 

  • ii) Professional Ethics: These are the moral values that a group of similarly trained people develop to control their performance of a task or use their resources. People internalise the values and norms of their professions just as they do the values and norms of their societies. Generally, they follow these norms when deciding how to behave. These ethics help to shape the organisation’s culture and determine how members deal with other people and groups. 

  • iii) Individual Ethics: These are the personal moral values that people use to structure their interactions with other people. In many instances, individual ethics mirror societal ethics and develop in the law. But, personal ethics are also the result of a personal upbringing. They may stem from his or her family, friends, or membership in a church or other social organisation. Because personal ethics influence how a person will act in an organisation, an organisation’s culture is strongly affected by the people who are in a position to establish its ethical values.

These factors work together to produce different cultures in different organisations and cause changes in culture over time.

Creating Culture

When an entrepreneur plans to begin a business, the foremost thing in his mind is to create a product or service and sell it to his customers. He does not give much importance to the creation of organisational culture. When this organisation matures and gains success, it certainly develops a culture that is unique and different from other organisations. Hence, it can be said that a company becomes successful due to two reasons.

First, what it does i.e., its strategy and second, how it does it ie, its culture. The culture of an organisation is associated with its strategic principles either when a new company is being formed or when the culture of an existing firm is to be changed.

Organisational culture can be created using various steps as shown in the figure:

Process of creating culture

Step 1: Establish Values: When a new organisation is developing its culture, the first step is the creation of values. Firstly the management devises strategic values on which the organisation would be based. Strategic values refer to the views regarding an organisation’s environment that determines its strategy. Environmental and strategic analysis is conducted to examine economic, demographic, public policy, social and technological practices to recognise the demands in the marketplace that the organisation can fulfil. Based on this analysis strategic values can be formed. Hence, strategic values help the organisation connect with its environment.

  • Secondly, the management needs to develop cultural values, Cultural values are the basic values that the employees must possess and must follow to help the organisation in performing its strategic values. Employees should firmly believe in the organisation’s strategic methods which help the organisation in attaining success. Cultural values should be very consciously developed as those values which are not linked with the organisation’s strategic values result in futile values that do not contribute to the growth of the organisation. Thus, employees should value work ethics that contribute to the growth of the organisation and relates to its strategic values i.e., economic production, customer service, or technological innovation.

Step 2: Create Vision: Once the strategic and cultural values are developed, an organisation needs to create a vision. Vision refers to the image of how the organisation would appear in the future. It shows how the organisation will mix its strategic and cultural values to shape its future.

For example, the vision of an insurance company might be to improve the standard of living of twenty lakhs customers by 2015″. In this case, the company combines both its strategic and cultural values so that employees become aware of their performance targets. Theoretically, the vision statement should be written first, but practically strategic and cultural values should be prepared before it makes a meaningful vision.

Step 3: Initiate Implementation Strategies: This step focuses on developing implementation strategies, based on its values so that the vision organisation can be attained. Strategies include various factors ranging from creating the organisation’s design to recruiting and training employees.

For example, a bank has a custom of handling customer loans, deposits, and savings. If the bank decides to change its focus and give more attention to customer service, then it will have to hire new employees who can build and sustain relations. Bank also needs to provide long-term training to its present manpower to guide them regarding new culture whose focus is on customer service. Implementation practices are stimulated by the strategic and cultural values of the organisation.

Step 4: Reinforce Cultural Behaviours: The organisation needs to keep a check on the employee’s behaviour and reinforce it if employees are deviating from cultural values. This reinforcement can be done in many ways: 

  • 1) Employees can be formally rewarded for excellent behaviour. 

  • 2) Admirable behaviour of the employees must be acknowledged and narrated so that others may know and follow them to achieve cultural values.

  • 3) Organisations must undertake such programmes which help employees in performing as per the vision of the organisation. The organisation must openly acknowledge and praise employees who do excellent work. For example, if an organisation holds parties for employees who retire or provide prolonged existence, then the other employees get the message that only retirement or longevity of service are the things that count. But if an organisation holds a party to acknowledge and award employees for outstanding service to customers, it reinforces desirable employee behaviour as well.


Sustaining Culture

Once the organisation has successfully created and developed its culture, the next important step is to sustain that culture. To maintain the culture, it is of the utmost importance for the manager to understand what the culture is, and how it develops in the organisation. Cultural diagnosis can be used to gain knowledge about the history, beliefs and principles of the existing culture. To maintain the culture, the manager also needs to identify any new practices that are associated with their culture’s philosophy. Organisational culture can be maintained in the following ways:

Sustaining Culture

1) Behaviour of Managers and Teams: A very effective method of maintaining and sustaining organisational culture consists of incorporating those programmes and behaviours that the managers, workgroups and employees notice i.e., the events that gain the attention of people. When these events are handled methodically, they give very powerful signs to the employees regarding what they need to do.

For example, Akhilesh is the president of an e-commerce firm. He calls a 15-minute meeting with his sales staff every day at 7:25 a.m. via cell phone. During this meeting, the salespeople discuss with him their problems and inform him about the target achieved by them the day before. Akhilesh then deeply scrutinise the contacts they have made and gives them an extra 200 per day on achieving the target.
2) Reactions to Incidents and Crises: Crises might occur now and then in an organisation. How the managers handle major crises like terrorist attacks or the detachment of a major customer tells us about the culture of the organisation. How such a crisis is handled can either consolidate the already present culture or develop new morals or ethics that modify the culture.

For example, a situation took place in Hewlett-Packard where the demand for its products was declining Company handled this situation by reducing its working hours instead of firing employees at the company. Hence, the company conveyed the message that employees are important to it.
3) Role Modelling, Teaching and Coaching: Employees learn about the various aspects of the organisational culture by the behaviour of managers towards them.

For example, Arthur Anderson, a reputed public accounting firm, has a policy of sending all freshly recruited accountants for a 15-week training programme. In this training programme, employees are taught about the accounting procedures used by the firm and are also allowed to become familiar with the organisational culture.
4) Allocation of Rewards and Status: Rewards system also teaches an employee about the organisation’s culture. The prize and penalty associated with different behaviour tell them about the importance of both the managers and the organisation.

For example, within NASA there was a change in the reward system which led to drastic consequences. The crash of the space shuttle “Columbia” and the explosion in space over Texas of the “Challenger” have been attributed to a shift in the reward system policy. Earlier the reward system rewarded space safety and technical brilliance but that has changed the efficiency and reuse of the space shuttle. The new motto of NASA emphasises “faster, better, and cheaper” which aims to meet schedules and avoid cost overruns. This motto has established a culture of rewarding performances,
Another feature of culture followed by certain organisations is the status system. The status of a person is determined by the facilities provided to him like a corner office on the top floor, executive dining room, carpeting, personal secretary, private parking space, etc. 
5) Recruitment, Selection, Promotion and Removal: The basic method through which an organisation maintains its culture is through recruitment. Further, the decisions regarding job specification, promotions, early retirements, etc. reinforce the fundamental features of an organisation’s culture. These decisions very quickly become familiar across the organisation and can help in sustaining or changing the current prevailing culture.
6) Organisational Rites and Ceremonies: In any organisation, some customs convey significant cultural meaning to the employees. These are called organisational rites and ceremonies. In due course of time, a particular activity of an employee can become a ritual and can be considered a part of organisational culture. The rites and ceremonies that help in maintaining the organisational culture include rituals associated with passage, degradation, improvement and amalgamation.
For example, award programmes at a retail outlet provide an excellent example of rites of improvement. On achieving sales targets a lavish function is organised where salespersons with outstanding performance are honoured with gold and diamond pins, and fur stoles. These ceremonies enhance the lifestyle and status of the excellent performers and also convey that company focuses on rewarding excellent employees.

7) Organisation Stories: Numerous fundamental morals and ethics of an organisation’s culture are conveyed in the form of stories. These stories convey organisational culture from experienced to new employees and also stress the important features of that culture.

For example, in Proctor & Gamble, a brand manager was removed from his job because he tried to hype the features of a product. This incident narrates that ethical claims are more important than money for an organisation.


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