Organizational culture refers to a system of shared meaning held by members that distinguishes the organization from other organizations.1 Seven primary characteristics seem to capture the essence of an organization’s culture:2

1. Innovation and risk taking. The degree to which employees are encouraged to be innovative and take risks.

2. Attention to detail. The degree to which employees are expected to exhibit precision, analysis, and attention to detail.

3. Outcome orientation. The degree to which management focuses on results or outcomes rather than on the techniques and processes used to achieve them.

4. People orientation. The degree to which management decisions take into consideration the effect of outcomes on people within the organization.

5. Team orientation. The degree to which work activities are organized around teams rather than individuals.

6. Aggressiveness. The degree to which people are aggressive and competitive rather than easygoing.

7. Stability. The degree to which organizational activities emphasize maintaining the status quo in contrast to growth.

Each of these characteristics exists on a continuum from low to high. Appraising an organization on the strength of each provides a basis for the shared understanding members have about the organization, how things are done in it, and the way they are supposed to behave. Organizational culture shows how employees perceive the characteristics of an organization, not whether they like them—that is, it’s a descriptive term. Research on organizational culture has sought to measure how employees see their organization: Does it encourage teamwork? Does it reward innovation? Does it stifle initiative? In contrast, job satisfaction is an evaluative term: it seeks to measure how employees feel about the organization’s expectations, reward practices, and the like. See Exhibit 16-1 for a contrast of two companies with very different organizational cultures.

Organizational culture represents a perception the organization’s members hold in common. Statements about organizational culture are valid only if individuals with different backgrounds or at different levels in the organization describe the culture in similar terms.3

Within the organization, the dominant culture expresses the core values a majority of members share and that give the organization its distinct personality.4 That’s what allows us to say, for example, that the Zappos culture values customer care and dedication over speed and efficiency, which explains the behavior of Zappos executives and employees.5

In addition to the dominant cultures of each organization, subcultures tend to develop in large organizations in response to common problems or experiences a group of members face in the same department or location. Most large organizations have a dominant culture and numerous subcultures.6 For example, the purchasing department can have a subculture that includes the core values of the dominant culture, such as aggressiveness, plus additional values unique to members of that department, such as risk-taking. If organizations were composed only of subcultures, the dominant organizational culture would be significantly less powerful. It is the “shared meaning” aspect of culture that makes it a potent device for guiding and shaping behavior.

It’s possible to differentiate between strong and weak cultures.7 If most employees (responding to surveys) have the same opinions about the organization’s mission and values, the culture is strong; if opinions vary widely, the culture is weak.

In a strong culture, the organization’s core values are both intensely held and widely shared.8 The more members who accept the core values and the greater their commitment, the stronger the culture and the greater its influence on member behavior. The reason is that a high degree of shared values and intensity create a climate of high behavioral control. Nordstrom employees know in no uncertain terms what is expected of them, for example, and these expectations go a long way toward shaping their behavior.

A strong culture should reduce employee turnover because it demonstrates high agreement about what the organization represents. Such unanimity of purpose builds cohesiveness, loyalty, and organizational commitment. These qualities, in turn, lessen employees’ propensity to leave.9

We’ve seen in this text that high formalization creates predictability, orderliness, and consistency. A strong culture modifies behavior similarly. Therefore, we should view formalization and culture as two different roads to a common destination. The stronger an organization’s culture, the less management needs to be concerned with developing formal rules and regulations to guide employee behavior. Those guides will be internalized in employees when they adopt the organization’s culture.