Just as individuals have habits and behaviors in their everyday life which are second nature, so do organizations. Corporate culture is simply the way an organization conducts business every day - a shared system of beliefs, values, norms, and rituals common to and guiding an organization, thus driving it forward. According to Higginson and Waxler, "an organization does not so much "have" a culture as it "is" a culture." For any organization to be successful, it needs to have an adaptive culture, characterized by managers who pay close attention to all of their responsibilities, especially to their customers, and initiate change when necessary by taking risks. To many academics, a company without an adaptive culture is less effective and successful.
Experts believe that companies should strive for what is considered a "healthy" organizational culture in order to increase productivity, growth, efficiency and reduce employee turnover.
For a firm to have a healthy culture, it needs to have characteristics such as:
- Acceptance and appreciation for diversity
- Regard for and fair treatment of each employee as well as respect for each employee's contribution to the company
- Employee pride and enthusiasm for the organization and the work performed
- Equal opportunity for each employee to realize their full potential within the company
- Strong communication with all employees regarding policies and company issues
- Strong company leaders with a strong sense of direction and purpose
- Ability to compete in industry innovation and customer service, as well as price
- Lower than average turnover rates (perpetuated by a healthy culture)
- Investment in learning, training, and employee knowledge
Schein and Fairfield-Sonn (1984, 1985) likened corporate culture to a volcano in the sense that it has many layers to get through before reaching the core of the concept. They identified four layers of corporate culture; these are cultural artifacts, cultural history, core ideology and core values. The pair also believed that to truly understand the culture of an organization, all layers will have to be examined in detail. Cultural artifacts are what you see on the surface; these refer to a company's physical facilities such as buildings, formal policies on work hours and promotion requirements as well as official documents about what is important to a company.
Underneath cultural artifacts, comes the next layer described as cultural history by Fairfield-Sonn, (1984). Every company has cultural history, usually anecdotes about success and failures as well as how misbehaviors are punished and how to move up in ranks within the company. Cultural history cannot be found in a company's handbook but will be passed down through word of mouth and provides real insights into how the company works. Below cultural history lies a company's core ideology, this usually comes in the form of a formal statement which clearly identifies the cultural imperatives in order of priority as well as the morals and responsibilities of the company, and are central to how a company is run and how decisions are made; it embodies what the company stands for.
The final and deepest level of culture is the core values of a company or organization. Core values are usually known only to the decision makers of the organization, and are not made public or shared like other layers that form the corporate culture of a company. Core values guide decisions makers on how future progress should be made. Studies have shown a company can have either a strong or weak corporate culture. A strong culture is said to exist where staff respond to stimulus because of their alignment to organizational values. In such environments, strong cultures help firms operate like well-oiled machines. Research indicates that organizations may derive the following benefits from developing strong and productive cultures:
- Better aligning the company towards achieving its vision, mission, and goals
- High employee motivation and loyalty
- Increased team cohesiveness among the company's various departments and divisions
- Promoting consistency and encouraging coordination and control within the company
- Shaping employee behavior at work, enabling the organization to be more efficient
On the other hand, when a company has a weak culture, there is little alignment with organizational values and control must be exercised through extensive procedures and bureaucracy.