The Importance of Organisational Culture (AQA A Level Business): Revision Note

An introduction to organisational culture

• Culture refers to the personality of an organisation 

  • This includes shared values, beliefs, attitudes and practices that shape the way people work together within an organisation

• In businesses with a strong culture, it is likely that employees

  • Are united and support the mission of the business 

  • Have a 'can do' attitude and are enthused by their work

  • Have a strong belief that the business is a force for good

• In a business with a weak culture, these signs may be difficult to identify

  • A 'them and us' attitude may exist between workers and management

  • Employees may doubt the sincerity of the corporate mission

  • High levels of staff turnover and low commitment amongst staff may exist

Cultural clashes

• Cultural clashes in businesses frequently happen when people from different backgrounds come together in the workplace

  • Individuals may have diverse values, communication styles or work habits

  • Misunderstandings can occur due to different expectations, communication breakdowns and varying approaches to problem-solving

Consequences of cultural clashes

Charles Handy's organisational cultures

• Charles Handy argued that different cultures are needed for different businesses and different situations

Task culture

• In a task culture, decisions are made by teams made up of employees with specific skills

  • Power lies with those with task-related skills (e.g. a finance specialist may make decisions related to funding within the group)

  • Teams are created and dissolved as projects are started and completed

  • There is an emphasis on adaptability and teamwork

  • PepsiCo is an example of a business that has a task culture

Evaluation of task culture

Role culture

• In a role culture, key decisions are made by those with specific job roles

  • Power lies with those with particular job titles rather than those with desirable skills

  • There is usually a very clear hierarchical structure

  • Employees are expected to adhere to rules and understand their place in the hierarchy

  • Businesses with role cultures may find it difficult to adapt to rapidly changing market conditions

  • Very large organisations in the public sector, such as the NHS, are usually considered to have a highly structured role culture

Evaluation of role culture

Power culture

• In a power culture, decision-making is carried out by one or a small number of powerful individuals, usually at the top of the business hierarchy

  • Few rules exist to determine decision-making procedure

  • A competitive atmosphere between workers vying for power

  • Most communication is by personal contact

  • It is argued that Alan Sugar's Amstrad adopted a power culture with Sugar as its powerful decision-maker

Evaluation of power culture

Person culture

• In a person culture, individuals with extensive experience and skills are loosely brought together

  • These individuals have significant levels of power to determine their own decision-making procedures and often work autonomously

  • Organisations with person cultures are very common in professional services such as accounting and law

Evaluation of person culture

Influences on organisational culture

1. The business’s leadership

• Leaders shape values and attitudes through their own behaviour

  • An autocratic leader might create a power culture, whereas a democratic leader might encourage a task or person culture

    • E.g. Richard Branson’s relaxed, creative leadership style created a person-centred culture at Virgin

2. The performance of the business

• Strong performance may strengthen the current culture, as it’s associated with positive results

• Poor performance can force a business to re-evaluate and change its culture to improve results

3. Its history

• Long-standing traditions and ways of working can deeply embed particular cultures

• Historical successes and failures significantly shape attitudes and beliefs in the workplace

  • E.g. Companies like John Lewis have long-standing employee ownership cultures due to their historical belief in staff involvement

4. Ownership form of the business

• Different types of ownership (sole trader, partnership, private/public limited, cooperatives) influence the culture

  • Large public limited companies often develop more formal role cultures; small owner-run firms may adopt a power culture.

  • Cooperatives tend to have collaborative, democratic cultures

5. Societal influences

• Businesses often mirror or react to wider societal values and expectations, such as sustainability, equality or work-life balance

  • Shifts in society's values, such as environmental awareness, can push businesses towards more ethical or environmentally conscious cultures

    • E.g. Rising societal concerns over climate change have encouraged many businesses, such as Patagonia, to embed sustainability into their core culture