The Importance of Organizational Culture

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Competitive Advantages of Organizational Cultures
Competitive Advantages of Organizational Cultures: The Role of Leadership in Catalyzing,
Structuring, and Profiting from Organizational Cultures
hitney !ontford
alden "niversity
# Competitive Advantages of Organizational Cultures
A$stract
This paper suggests that there are competitive advantages to implementing organizational
cultures that are focused on innovation and communication% These cultures are e&pressed through
the value systems, and operational processes of the organizational climate, and promoted through
the use of transformational leadership% L!' theory offers options for implementing the changes
and providing leadership and learning opportunities for individuals throughout the organization%
The advantages of an organizational culture (ith innovation as a core motivator includes
increased profita$ility and greater employee engagement%
# Competitive Advantages of Organizational Cultures
Competitive Advantages of Organizational Cultures: The Role of Leadership in Catalyzing,
Structuring, and Profiting )rom Organizational Cultures
Research suggests that organizational culture has $een a su$*ect of (idespread
discussion, $oth in academia and in the constellation of $usiness professionals around the (orld,
since at least the past four decades% ith an offering of almost countless definitions and
suggested applications, the study of organizational culture has informed research on leadership
theory, crisis management, innovation, and even financial profita$ility +,agliardi, -./01 2arney,
-./03% The implementation of an organizational culture is an organizational change that must $e
prepared for and re4uires employee engagement to $e successful% 5t is the focus on overall
profita$ility, not *ust financial profita$ility, that (ill guide this paper6s assertions a$out the
potential competitive advantages an organization can have if its top leadership catalyzes,
structures, and eventually $enefits from an organizational culture%
Catalyzing an Organizational Culture
The role of leadership in creating an organizational climate $egins at the definition of the
organizations6 mission and vision statements% The mission and vision of the company, and thus
the organizational climate, are governing devices that sets the values parameters in (hich the
organization operates, and the processes $y (hich it runs and gro(s +S(ales 7 Rogers, -..83%
The organizational climate orients employees e&pectations regarding the performance, values,
and priorities of the organization, particularly as they approach a tas9, challenge, or crisis
+Ahmed, -../3% The climate is also governed $y the array of documents, sym$ols, and
catchphrases that represent the mission and vision of the organization in a more ela$orate (ay
such as the organization6s credo, code of conduct, tagline, employee slogan, and even dress code
# Competitive Advantages of Organizational Cultures
+S(ales 7 Rogers, -..83% The concept of organizational climate is directly related to
organizational culture as the latter is often seen as a reflection of the former +Ahmed, -../3%
5mportance of :alues Congruency
The culture developed $y an organization is reflective of the organization6s 9ey priorities,
values system, and approach to crisis and change% Organizational culture and climate are deeply
rooted in the processes, routines, systems, and professional o$ligations of the organization and its
mem$ers +Schneider, 2rief, 7 ,uzzo, -..03% Therefore it is important to maintain a certain sense
of values congruency $et(een the $eliefs and goals of the organization and the values and needs
of its mem$ers, especially (hen catalyzing an organizational culture% The measure of values
congruency of course depends on the individual6s 9no(ledge of their o(n values as (ell as those
of the organization1 and the values of the organization are $oth made 9no(n and put in practice
through organizational climate and culture respectively +Posner, #;-;1 Schneider, 2rief, and
,uzzo, -..03% Posner +#;-; found <strong support%%%for the continuing claim that personal values
congruence and clarity around organizational values pay dividends for $oth individuals and their
organization= +p%8>;3%
hile it is important for individuals to align their values (ith those of the organization
for the $est results, and vice versa, the organizational culture is often used as an agent for
facilitating organizational change% Organizations must constantly adapt to changes internally, in
active competition against other firms, (hen implementing attrition or (or9force reduction, and
even in cases of crisis or environmental disaster +)rohman, -..?3% The list can $e endless% 5n the
4uest for overall profita$ility, tangi$le and intangi$le, organizational culture should $e geared
to(ard innovation, creativity, and a 4uic9ness to adapt to change +)rohman, -..?1 Ahmed, -../1
@as9yte, #;;>3% Ahmed +-../3 descri$ed t(o distinctions in organizational culture, e&plicit and
# Competitive Advantages of Organizational Cultures
implicit, (ith the former alluding to $ehaviors of the organization and its reflection in the
mar9etplace and the latter descri$ing the internal $eliefs, values, assumptions, and norms of the
organization% To affect $oth the implicit and e&plicit functions of organizational culture, (hile
maintaining a focus on innovation and creativity, re4uires transformational leadership%
Transformational Leadership as a Catalyst
Transformational leaders can promote organizational commitment, encourage values
congruency, motivate employees to reach important goals, set up processes for creativity and
autonomy, and measure goals (ith an emphasis on re(arding innovation1 all of (hich are
important (hen considering the ties $et(een organizational culture and leadership +@as9yte,
#;;>3% Organizational changes often fail due to a lac9 of integration of the proposed changes into
the corporate culture and the organizational climate, and transformational leadership can
compensate for this consistent failure $y encouraging innovation, implementing a culture that
em$races change and improving the personal gro(th and competencies of the individuals in the
organization +Schneider, 2rief, 7 ,uzzo, -..01 Aorthouse, #;-B3% 5n )rohman6s +-..?3 study of
dozens of organizations, small and large, he found that change agents (ere easily identified as
<independent yet loyal to the organization, respectful yet 4uestioning of the status 4uo and
authority, determined to ma9e a constructive impact yet not driven $y personal am$ition= +p% >B3%
2ecause organizational culture is a $it more am$iguous and intangi$le, as opposed to the visi$le
processes and procedures associated (ith organizational climate, catalyzing organizational
culture $ased on innovation re4uires a greater focus on vision and can $e communicated through
a variety of internal mar9eting elements, slogans, logos, departmental identifiers, iconography,
and credos +Pettigre(, -..B1 @as9yte, #;;>3% The goal of innovation and creativity, and the hopes
of a$sor$ing the profita$le $enefits of this type of organizational culture, re4uires not only
# Competitive Advantages of Organizational Cultures
transformational leadership to initiate the changes $ut also increased inCgroup lin9ages as
espoused $y leaderCmem$er e&change +L!'3 theory%
Structuring an Organizational Culture
here transformational leadership catalyzes organizational change, in this case the
implementation of an organizational culture that advocates creativity and innovation, L!'
theory prescri$es leadership and professional development that allo(s organizations to progress
through changes (ith a focused and adapta$le frame(or9 of leaders and follo(ers +Aorthouse,
#;-B3% )rohman +-..?3 found that change initiators (ere privy to information that informed their
decisions for action, and gained ne( 9no(ledge, s9ills, and e&periences from their role in
initiating the change% These findings further the idea that organizations must $e active learning
institutions that involve all employees $y offering access to greater training and learning
opportunities%
L!' theory suggests this very setup through the increase of highC4uality leaderCmem$er
e&changes $y shaping mature partnerships $et(een leaders and follo(ers that allo( for greater
communication, professional development, and the su$*ugation of personal interests for the
greater good of the organization +Aorthouse, #;-B3% Pettigre( +#;-B3 ventured past L!' theory
in his consideration of entrepreneurs, either as part of the organization or as a ne( venture leader,
as important change agents (ith a separate set of needs from regular follo(ers% Do(ever, the
consensus that innovation and gro(th are $etter achieved in an organizational culture that is
inclusive in professional development and values congruency and that also allo(s for autonomy
(ithin the conte&t of the needs and goals of the organization%
An Organizational Culture )ocused on 5nnovation
# Competitive Advantages of Organizational Cultures
5nnovation is a $uzz(ord in the $usiness community at large and often refers to a firm6s
a$ility to create a uni4ue selling proposition, (hether that ta9es the shape of a product or service
or rather a ne( set of moneyCsaving processes% The goal of innovation is competitiveness% )irms
are competing for the attention of customers, mar9et share, profit margins, and e&pansion almost
constantly% @as9yte +#;;>3 noted that research sho(s that creating an organizational culture
focused on innovation re4uires an environment conducive to ris9Cta9ing, creativity, and
autonomy1 and more importantly, leaders must hold innovation as a core value and create a set of
shared values that must $e communicated to and upheld $y the organization6s mem$ers% L!'
theory offers a method $y (hich this can $e accomplished% 5nCgroup mem$ers are given more
responsi$ility, greater tools for assessing ris9 and potentialities, and are guided $y the leader in
implementing change and culture +Aorthouse, #;-B3% These actions not only satisfy the needs of
the $usiness, $ut also the needs of the individuals (ho ma9e up the organization1 particularly
those (ho are initiators of the prescri$ed change $y involving them in the development of the
organizational culture surrounding the change and connecting leaders and follo(ers in a mutual
effort% To this point, Earasze(s9i +#;-;3 noted that satisfying the needs of individual in an
organization <is a$out creating some ground for satisfying higher order needs CC professional
development, increasing 4ualifications, promotions, increasing competencies, etc%= +p% >;#3%
Particularly in the case of creating an organizational culture of innovation, Ahmed +-../3
suggested that considerations must $e made for the intrinsic and e&trinsic motivations of
individuals, tas9s must $e challenging and re4uire a certain level of innovation and creativity,
and individuals must either have the s9ills necessary to complete highClevel tas9s or $e provided
(ith the 9no(ledge, tools, and resources to complete the tas9 (ith the supervision of an e&pert
leader% Ahmed +-../3 also (arned that rigidity, $ureaucracy, and other mechanistic structures can
# Competitive Advantages of Organizational Cultures
prove to $e formida$le hinderances to a culture of innovation% The conversation can $e neatly
(rapped in !artins and Ter$lanche6s +#;;B3 list of the determinants of organizational culture
that is focused on innovation: strategy, structure, support mechanisms, $ehavior that encourages
innovation, and communication +p% ?;3%
Profiting from Organizational Cultures
Organizational cultures focused on innovation and rooted in an organizational climate of
creativity, autonomy, and organizational commitment have $een proven to $e profita$le in
tangi$le and intangi$le (ays +!artins 7 Ter$lanche, #;;B3% Creating and implementing an
organizational culture (ith its $asis in innovation is a dynamic of competition that allo(s
organizations achieve sustained superior performance +2arney, -./03% ,iving individuals (ithin
in the organization an opportunity to not only $e a part of a conversation that affects the entire
organization, $ut also allo(ing them the professional lee(ay to solve pro$lems and react to
sudden changes or crises puts the organization in a much $etter position to react effectively% The
e&ternal profita$ility of an organizational culture of this design e&ists in the a$ility of such an
organization to dra( on its cultural differences and (ealth of collective e&perience to create
profita$le strategies related to the amount of overhead, product development, and invention%
2arney +-./03 noted that <only (hen it is not possi$le to manage a firm6s culture in a planned
(ay does that culture have the potential of generating e&pected sustained superior financial
performance= +p% 00>3% Thus lending credence to the assertions of Ahmed +-../3 and others (ho
propose that increased learning in an organization e4uips more individuals to $e prepared to
manage and react to change in (ay that proves $eneficial to an organization (hile allo(ing it to
$e structurally fluid%
Conclusion
# Competitive Advantages of Organizational Cultures
Organizational cultures are commonly seen as vessels through (hich change agents can
implement ne( value systems that (ill help guide the organizational climate and offer
opportunities for employee engagement and commitment% The process of creating an
organizational culture $egins (ith transformational leadership as a (ay to communicate the
proposed changes to top leadership, management, and the organization at large% DighC4uality
leader mem$er e&changes, as proposed $y L!' theory allo(s leaders at all levels to incorporate
the changes into the larger organizational culture and climate% )inally, organizational cultures
(ith a focus on creativity and innovation offer opportunities for profita$ility $oth internally and
e&ternally% Organizational cultures $ased on innovation prove to $e profita$le to organizations in
numerous (ays, and must allo( for creativity, ris9, and fle&i$ility in order to $e truly effective%
# Competitive Advantages of Organizational Cultures
References
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!anagement, -+-3, B;C>B% doi:-;%--;/G->0;-;0./-;-..-B-
2arney, @%2% +-./03% Organizational Culture: Can 5t 2e a Source of Sustained Competitive
AdvantageH Academy of !anagement Revie(, --+B3% 080C008%
doi:-;%8>08GA!R%-./0%>B;0#-
)rohman, A%L% +-..?3% 5gniting Organizational Change from 2elo(: The Po(er of Personal
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doi:http:GGd&%doi%org%ezp%(aldenuli$rary%orgG-;%-;-0GS;;.;C#0-0+.?3.;;>0C#
,agliardi, P% +-./03% The Creation and Change of Organizational Cultures: A Conceptual
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@as9yte, E% +#;;>3 Transformational Leadership, Organizational Culture, and 5nnovativeness in
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# Competitive Advantages of Organizational Cultures
Posner, 2%K% +#;-;3% Another Loo9 at the 5mpact of Personal and Organizational :alues
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