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  • BUSHOR-1370; No. of Pages 10

    What leaders need to know aboutorganization culture

    D. D. Warrick

    Graduate School of Business, University of Colorado, Colorado Springs, 1420 Austin Bluffs Parkway,Colorado Springs, CO 80918, U.S.A.

    Business Horizons (2017) xxx, xxxxxx

    Available online at www.sciencedirect.com


    KEYWORDSOrganizational culture;Culture building;Organizationalleadership;Organizational values;Leadership influence

    Abstract A major factor in the success of an organization is its culture. Organiza-tional culture can significantly influence the performance and effectiveness of acompany; the morale and productivity of its employees; and its ability to attract,motivate, and retain talented people. Unfortunately, many leaders are eitherunaware of the significant impact culture can have, are aware but overwhelmedby the extensive and sometimes conflicting information available on culture, or arenot well informed about how to build and sustain cultures effectively. This articleintegrates the most consistent findings that leaders need to know about culture andwhat they can do to build strong, successful cultures that bring out the best in people.Developing organizational culture requires far more than talk about culture andemphasis on its importance. In order to achieve the best results, culture develop-ment requires leaders who see it as one of their key tasks and who understand theimportance of aligning organization strategies and decision making with culturalideals. 2017 Kelley School of Business, Indiana University. Published by Elsevier Inc. Allrights reserved.

    1. Culture matters

    Culture has been the long-time focus of anthropol-ogists as they seek to understand different groupsaround the globe. However, it has been only recent-ly that organizational researchers have begun todiscover the close links between culture, the per-formance of organizations, and the behavior andattitudes of people in organizations. Culture is

    E-mail address: dwarrick@uccs.edu

    0007-6813/$ see front matter 2017 Kelley School of Business, Ihttp://dx.doi.org/10.1016/j.bushor.2017.01.011

    recognized as such a significant factor in the successof organizations that Fortunes annual 100 BestCompanies To Work For report is based primarilyon information employees anonymously reportabout their workplace culture (Levering, 2016).

    Culture is increasingly becoming a concern ofskilled leaders. Tony Hsieh, the CEO of Zappos,has said, At Zappos, our belief is that if you getthe culture right, most of the other stufflike greatcustomer service, or building a great long-termbrand, or passionate employees and customerswillhappen naturally on its own (Hsieh, 2010, p. 152).

    ndiana University. Published by Elsevier Inc. All rights reserved.


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    2 D.D. Warrick

    Lou Gerstner, the former chairman of IBM said,Culture isnt just one aspect of the gameit isthe game. In the end, an organization is no morethan the collective capacity of its people to createvalue (Gerstner, 2002, p. 182). CEO of Wells Fargo,John Stumpf made a similar point about theimportance of culture when he said, Its about theculture. I could leave our strategy on an aeroplaneseat and have a competitor read it and it would notmake any difference (Guerrera, 2008). Later inthis article, we will see how even in cases like WellsFargo (where culture is highly valued), leadershipdecisions that are not carefully considered interms of the cultural implications can override theintended culture.

    Even if leaders recognize the importance of cul-ture, they are unlikely to be aware of the researchindicating the significant role culture can play in anorganizations success or failure, or they do nothave the training or knowledge of what it takesto build successful cultures. Because of this, theclose relationship between leading and managing anorganization well and achieving a winning cultureescapes many leaders. It is the purpose of thisarticle to help leaders develop a better understand-ing of culture, the advantages of having healthycultures, the costs of having unhealthy cultures,and what is involved in building and sustainingstrong cultures.

    2. Understanding organizationalculture

    Many definitions are available to describe cul-ture. Formally, culture can be defined as the[predominant] beliefs, values, attitudes, behaviors,and practices that are characteristic of a group ofpeople (Warrick, 2015, p. 4). In defining culture,Edgar Schein, a leading authority in the study oforganizational culture, uses the word group to de-scribe social units of all sizes (Schein, 1992). Inother words, the term group could pertain to awhole organization or any group of people of anysize such as a country, sports team, symphony, orfamily. The point is that groups of people, regard-less of group size, are likely to form specific cul-tures. Organization researchers typically use theterm organizational culture in a broad sense to referto the culture of a whole organization or any unit ofpeople working together within the organization.

    In practical terms, organizational culture de-scribes the environment in which people work andthe influence it has on how they think, act, andexperience work (Warrick, Milliman, & Ferguson,2016). Cultures can differ significantly within and

    between organizations. They can bring out the bestin people and create excellent environments forpeople to work in or they can bring out the worstin people and create dysfunctional environmentsfilled with stress and tension.

    3. The impact of organizationalculture on performance and otherfactors

    Especially in the late 1980s and thereafter, studieson organizational culture began to provide convinc-ing evidence that culture can have a significantinfluence on performance, morale, job satisfaction,employee engagement and loyalty, employee atti-tudes and motivation, turnover, commitment tothe organization, and efforts to attract and retaintalented employees (e.g., Denison, 1990; Fisher,2000; Marcoulides & Heck, 1993; Rollins & Roberts,1998; Weiner, 1988).

    One study in particular began to catch the atten-tion of leaders. John Kotter and James Heskett(1992) published an 11-year evaluation of companycultures. They found that over an 11-year period,companies with healthy cultures had a 682% averageincrease in sales versus 166% for comparable com-panies without such healthy cultures. Similarly,Kotter and Heskett found that these companies withhealthy cultures saw stock increases of 901% versus74% for comparable companies. Since then, otherstudies have identified the characteristics of highand low performance cultures (see Daft, 2015;Kilmann, Saxton, & Serpa, 1985; Lussier & Achua,2016; Rosenthal & Masarech, 2003; Weiss, 2011). Asummary of common themes from these studies isshown in Table 1. What becomes evident in studyingthe themes is that, to a large degree, healthycultures are the result of effective leadership andmanagement whereas unhealthy cultures are theresult of ineffective leadership and management.

    4. Is culture primarily the cause orresult of organization practices?

    Some culture experts believe that culture is thecure for many organizational problems. In this view,the main remedy for problems at General Motors,the Veterans Administration, the government, andmany other organizations is to fix the culture.Others believe that culture is the result of organi-zational practices and an outcome rather thana cause. Among these are Lorsch and McTague(2016, p. 98), who proposed that cultural changeis what you get after youve put new processes or

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    Table 1. Characteristics of high and low performance cultures

    High Performance Cultures Low Performance Cultures

    Leaders are skilled, admired, and build organizationsthat excel at results and at taking excellent care of theirpeople and their customers

    Leaders provide minimal leadership, are not trusted andadmired, and do little to engage and involve their people

    Clear and compelling vision, mission, goals, and strategy Vision, mission, goals, and strategy are unclear, notcompelling, not used, or do not exist

    Core values drive the culture and are used in decisionmaking

    Core values are unclear, not compelling, not used, or donot exist

    Committed to excellence, ethics, and doing things right Lack of commitment to excellence, questionable ethics,and a reputation for doing what is expedient rather thanwhat is right

    Clear roles, responsibilities, and success criteria, andstrong commitment to engaging, empowering, anddeveloping people

    Unclear roles and responsibilities and little interest infully utilizing and developing the capabilities andpotential of people

    Positive, can-do work environment Negative, tense, stressful, and/or resistant workenvironment

    Open, candid, straightforward, and transparentcommunication

    Guarded communication, reluctance to be open andstraightforward, and consequences for saying thingsleaders do not want to hear

    Teamwork, collaboration, and involvement are the norm Top-down decision making with minimal teamwork,collaboration, and involvement

    Emphasis on constant improvement and state-of-the-artknowledge and practices

    Slow to make needed improvements and behind times inknowledge and practices

    Willingness to change, adapt, learn from successes andmistakes, take reasonable risk, and try new things

    Poorly planned change, resistance to change, minimallearning from successes and mistakes, and either riskaverse or risk foolish

    Source: Adapted from Warrick (2016)

    What leaders need to know about organization culture 3

    structures in place to tackle tough businesschallenges like reworking an outdated strategy orbusiness model. The culture evolves as you do thatimportant work.

    Each stance presented above possesses an ele-ment of truth, in both that culture significantlyaffects how an organization is run and organizationpractices significantly affect organizational cul-ture. In other words, both are important, bothaffect the other, and both need attention to achievethe best results. Strong cultures cannot be achievedwithout running an organization well and runningan organization well requires efforts on the partof leaders in building and sustaining culture.

    5. Insights about culture of whichleaders need to be aware

    For leaders to sort through and make sense of themany culture articles and books could be a daunt-ing, complex, and at times confusing process.Therefore, an effort is made here to summarizesome of the consistent findings about organizationalculture of which leaders need to be aware. The

    point of making leaders aware of the many factorsthat can influence culture is not to preoccupy themwith concerns about culture but rather to makethem better informed and discerning about keyfactors and decisions that can either build andsustain culture or adversely affect it.

    5.1. The influence of leaders in shapingculture

    Although many factors influence culture, organiza-tional cultures primarily reflect their leaders. Lead-ers influence culture through their strategies,practices, values, leadership style, and example(Steers & Shim, 2013). The impact of leaders onculture is particularly influential at the top level.Tony Hsieh was the primary architect of the Zapposculture (Warrick et al., 2016). Jeff Immelt was ableto make significant changes in the culture of IBM(Brady, 2005). Tim Cook has reinforced the positiveaspects of the Apple culture and has made changesthat have improved the Apple culture (Tyrangiel,2012). Although culture is often thought to beresistant to change, Alan Mulally was able to changethe culture of a struggling Ford Motor Company and

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    4 D.D. Warrick

    transform the performance of Ford in a relativelyshort time span (Hoffman, 2012).

    The examples mentioned above are positiveexamples of a leaders influence on culture.However, it should be pointed out that leaderscan also create unhealthy cultures. An ineffectiveleader, a leader who is not a good fit for a desiredculture, or even a good leader who makes baddecisions that impact an organizations culturecan tear down or damage a culture that took decadesto build.

    5.2. Dominant cultures and subcultures

    When using the term organization to describe thewhole of a company or institution, it is important torecognize that while organizations are likely tohave an overriding dominant culture that definesthem, they are also likely to have a number ofsubcultures in various parts of the organizationthat stray from the dominant culture (Martin& Meyerson, 1988). The dominant culture atSouthwest Airlines encourages employees to coop-erate with one another, take great care of custom-ers, and have fun. However, within SouthwestAirlines there are likely to be some departmentsor teams where the culture differs from thedominant culture. Fortunately, even in unhealthydominant cultures, there may be pockets of excel-lence where there are healthy cultures.

    5.3. Visible and invisible factors thatdefine culture

    Culture can be viewed on two levels (Schein, 1992).There is a visible level that can be observed byartifacts such as dress, office layout, office design,and the emphasis on technology. Artifacts could alsoinclude leadership style, the nature of the workenvironment, how people are treated, and howdecisions are made and get implemented. Thereis also an invisible level characterized by expressedvalues, underlying assumptions, and deep beliefs.Expressed values are consciously held convictions,clearly stated or practiced, that influence thebehavior of group members. For example, theexpressed values of the U.S. Army are loyalty, duty,and selfless service (Crandall, 2007). These valuesinfluence the behavior of soldiers at all levels.Another example may be the expressed value:It is important to take great care of our peopleand our customers. This sentiment will create adifferent culture than that of an organization withthe dominant value: What we really care about ismaximizing bottom line results, no matter what ittakes to get there.

    5.4. The impact of traditions and groupdynamics

    Leaders need to know the past and present historyof the groups they lead. Group histories will provideinsight into the traditions and dynamics that shouldbe sustained and those that need to change. Tradi-tions are practices that have become common to agroup over a period of time. A group, for example,may have a history of great teamwork, group in-volvement in the decision making process, highlevel performance, and strong group loyalty. Onthe other hand, a group might have a history ofminimal teamwork, leader-driven decision makingwith little team involvement, and satisfaction withgood but not great performance. The dynamics of agroup describe its interactions and practices interms of how people relate and get things done.Groups may be...