Importance of Organizational Culture in Strategic Management
Culture plays an important part in our society. It refers to beliefs and codes of practice that
makes a community what it is. It also plays the same role in organizations. A strong
organizational culture will provide stability to an organization as it has significant influence on
the attitudes and behaviors of organization’s members. Most of company’s top managers have a
strong awareness that the culture of a company is crucial to everything they do and plays
irreplaceable part in their success. However, not many companies can admit that they can
describe their culture and fully understand how important it is in the success of their businesses.
There are various explanations and elements to define organizational culture. For some, it
means top management beliefs and values about how they should manage the organization and
conduct the business. For some, it is an evolutionary process relating to people that creates
unique characters for the organization. However, in general, organizational culture has been
defined as the pattern of fundamental assumptions or beliefs that a specific group has developed
through learning to deal with its problems of internal assimilation and external adaptation, and
that have been approved to work effectively, and therefore it can be taught to new members as
the correct way to perceive, feel and behave in relation to those problems.
The Importance of Organizational Culture in Strategic Management
Considering the importance of organizational culture and its impacts in strategic management
is very essential. As organizational culture and strategies are both social processes, many
strategists argue that culture and strategies are connected. Cultural dimension plays a vital role in
all aspects of an organization. It is so impacting that it can determine the success and failure of
an organization. In leadership concept, organizational culture has been identified as one the
important components that strategic leaders can use to develop dynamic organization. Culture
reflects the way in which people in an organization set objectives, manage their resources and
perform their tasks. Culture also affects people behavior unconsciously. Even in those
organizations where the ideal of organizational culture do not receive much explicit attention,
how people think, feel, value, believe and behave in a company are generally influenced by
ideas, beliefs and perception of a cultural nature. Organizational leaders achieve success by
constantly sending clear signals about their priorities, beliefs and values. Once culture is
established and accepted, they become a strong management tool for leaders to communicate and
energize their members with beliefs and values to do their jobs in a strategy supportive manner.
When leaders succeed in promotion ethical culture in the organization, they will also become
successful in organizational growth and consequently are competitive to their rivals. Therefore, it
is very important to develop a strong culture in the organization as well as strategies that are
suitable to the culture in order to be strengthened by it. If a particular strategy does not match
with the organization culture, it could be almost impossible to accomplish expected outcome
from the planned strategy.
Organizational Culture, Vision and Mission in Strategic Management
One of the perspective to look at how organizational culture supports strategic management
is through its influence on organization’s missions and visions. Missions and visions play an
important part in company’s strategic management. A written mission statement is one of the
most common way that managements use to communicate with their staffs about strategic
direction. Generally, missions and visions state the company’s purpose and values which
provides ideals and direction for the company as it interacts with the marketplace. This will not
only give a sense of purpose to internal and external stakeholders but also help them in resource
allocation decisions which is very for carrying out company’s strategy management. However, in
order to have an effective missions and visions, managements need to connect them to
organizational culture. In fact, one of the way to see an organization’s culture through its
reflection in core values. Core values are the set of belief or ideology by which an organization
operates. They are the foundation of organizational culture. In this fast paced era when
everything is changing, core values are still constant. The organization may develop new
strategies, policies or even significantly restructure; however, the fundamental identity of the
company still remains intact. These values are the essential, foundation principles that will guide
the organization’s vision, mission and strategies as well as define and differentiating the
organization from its competitors. They create a foundation of attitudes and practices that every
members have to agree to follow in order to support the vision and long term success of the
organization. They also provide reference points and goals which allows organization to shape
and strengthen its business. As internalized perception and beliefs can motivate staff’s
performance to exceptional levels, an effective strategic leaders need to understand and develop
their intended implemented strategies that are suitable to organizational culture in order to pursue
the vision of organization’s leaders. Until organization decides what those cultural values are,
and how they will interact with each other, it’s very difficult to do anything else, whether setting
goals, establishing measurements, solving problems or even making decision effectively.
One example about how organizational culture can support company’s vision and mission is
Facebook. Facebook mission is described as ‘a cutting edge technology that constantly taking on
new challenges in the worlds of milliseconds and terabyte. Their vision for the company is to
create a fast changing and innovative company. They do not aim for perfection that requires a
long time in order to launch the product but they weigh heavily on being able to make and ship
products quickly, get customer’s feedback and continue to innovate it. In order to encourage
creativity and innovation within the company, Facebook’s culture created by Zuckerberg is a
relaxed, unstructured and open culture. Employees can come and go as they please, with no
standard work schedules which results in more employee freedom. If employees need to chill
out, they can play video or table-top games. Collaboration and teamwork are encouraged to be in
an informal communication and atmosphere. They also constantly encourage people to keeping
things fresh, innovative and interesting, to be bold in experimenting new ideas, without any
meddling from above. All of these have fostered for a fun-loving, casual and creative working
environment which makes their staffs satisfied while achieving their goal to be a rapid innovative
technology company.
Organizational Culture as Competitive Advantage in Strategic Management
Another reason that makes culture become a determinant of business success or failure is due
to its contribution in organization’s competitive advantage. Creating and sustaining competitive
advantage in a particular industry is always the major concern in organization’s strategic
management. This is because competitive advantage will help the organization to differentiate
itself from its competitors while strengthening its position in the market place. Culture can
contribute positively to the competitive advantage of companies. It can be a great tool for
organization to increase their level of performance which makes it become more competitive in
market place. Culture is the underlying attitudes and beliefs that can strongly influence
individual and group behavior. When members in an organization share the same beliefs and
values, they can understand what kind of attitudes they expect themselves and other people to
show in working place as well as how they need to behave and react in particular situation in
order cooperate well with each other. As they understand what the company is trying to
accomplish, it will motivate them to work for a higher purpose which in turn helps to set an
organization apart from the competition. Managements can also use organizational culture as an
effective tool to dictate, control and manage employee behaviors in their strategic management.
In fact, this is a more powerful way of managing employee than company’s rules and
regulations. Leaders in the company can use culture to influence, educate and shape their staff’s
mindset and attitude to gain their support in following the company’s plan and procedure while
reducing resistance in the organization. Having a strong, positive and strategy-supportive culture
will affect the energy, enthusiasm, working habits and operating practices of employees which
will not only booster the efficiency and effectiveness in the department but also attract many
people to work in the organization while reducing their staff turnover, hiring and training cost
which results in yielding a competitive advantage.
Not only contribute to company’s competitive advantage, organizational culture also sustains
the company’s competitive advantage. As a company starts to experience the superior financial
performance, its competitors will also starts to seek to copy what they believe is the source of
competitive advantage that generates the success of the company. After examining the
relationship between culture and superior financial performance, culture is the factor that can
help companies to generate sustained competitive advantage. A strong and valuable
organizational culture is one of the most sustainable competitive advantages a company can
have. This is because a valuable and rare cultures is very difficult to imitate. Giving enough time
and money, competitors can duplicate almost everything what an has done. They can hire away
some of the company’s best people. They can reverse engineer the company’s processes.
However, when it comes to organizational culture, they can’t duplicate the organization’s
culture. It is very hard for people to define culture clearly, especially in respect of its contribution
to value of company’s product and service. Another reason for this is that culture is usually
related to historical aspects of company development as well as to the vision, beliefs and
inspiration from particular strategic leaders. Organizational culture is the uniqueness and the
identity of an organization that will differentiate the company from its competitors. If companies
know how to make use of culture in their strategic management, it will be a powerful tool for
them to sustain their competitiveness and consistence in the market while helping them to
achieve success in their strategy implementation. Even when rivals try to apply the firm’s
cultural attributes, there will be no guarantee that they can produce the same culture or obtain
superior financial performance just like what the company has achieved.
A good example to illustrate this point is Zappos company. Knowing that customers
nowadays not only focus on good products but they also demand excellent service from the
outlets, Zappos’s strategic plan is to build a long term brand that not just about shoes, clothing or
online retailing but to be about the best customer service and the best customer experience. To be
able to achieve this goal, Zappos believes that organizational culture is the only answer. They
believe that if they can get the culture right, most of other stuffs such as great customer service,
or passionate employees, or building great long term brand will naturally happen on its own. In
order to make employees to deliver an excellent service, instead of just using rules and
procedures like other companies to educate staffs, the managements in here have shaped their
staff’s mindset and attitude by using culture to transmit their message to their staffs. Zappos have
created a culture that encourages employees to “wow” each other by being yourself, as crazy or
weird as possible, showing your care and love for other people, and just having fun in the
workplace. As the employees start to be wowed by their colleagues, they will automatically want
to do the same thing for other people, especially for their customers. This culture not only makes
employees to be happy in their workplace but it also encourages staffs to be creative and
enthusiastic in wowing their customers which results in increase in their repeated customers and
their sale performance. This culture is something unique that people usually do not find in other
companies which makes it attractive to their staffs as well as to other people to work in Zappos.
It becomes a competitive advantage of Zappos which cannot be copied by other competitors. It
makes Zappos become more competitive and differentiate themselves from their rivals in the
market place.
Organizational Culture and Strategic Decision Making
Another perspective for managements to consider about the importance of organizational
culture in strategic management is its impact on their strategic decision making. As it has been
mentioned above, culture is the organization ‘s identity, values, beliefs that influences how
people, from managements to employees, behave in the organization. Therefore, organizational
culture is the heart of all strategy creation and implementation. Organizational culture provides
the framework for the organization, which affects nearly all the organizational activities, from
the execution of strategy to the acceptance and implementation of new processes. For
managements, culture affects their behavior unconsciously. It affects the choice, incidence and
application of the modes of strategy creation, which reflects the values and preferences of the
strategic leader. Managements do thing in particular ways because it is implicitly expected
behavior influenced by organizational culture. Culture also influences the selection of people for
particular jobs, which results in affecting the way in which tasks are carried out and decisions are
made. In addition, it influences the ability of a leader to deliver his or her ideal and vision to
other members of the organization as well as gaining their support and commitment when it
comes to applying new strategy in the organization. In order to have a successful strategy
implementation, it requires the right attitude, approach and commitment from employees which
can only be influenced by culture. When a strategy match with company’s culture, the culture
will become a valuable ally in strategy implementation and execution. When it is not a part of the
change strategy, management will usually find it difficult to implement the strategy successfully
as well as achieving their target. It may be a wiser choice for managements to select a business
or strategy that will fit their company’s organizational culture well in order to shift the firm
toward a new strategy instead of accomplishing cultural change, which can be very difficult to
achieve. Therefore, it is very important to identify the existing cultural dimensions of the
organization in order to achieve successful strategy implementation. Organizational culture can
be a powerful source to support company’s strategy but at the same time, it can also become a
great barrier to leaders if they do not consider it carefully. By understanding the elements of
organizational culture and its impact on people’s behavior, strategic leaders will be better
equipped to make wise decision in making and implementing strategies to their organization.
One example about how culture influences strategic decision is Walmart. In Walmart, their
philosophy is to offer customers a lower price than they can get in anywhere else. Its culture is
based on low cost end of every transaction in order to make profit, not from the pricing end.
With the principle of saving is important as pricing, the plan has always been to drive costs out
of the system in the stores, from the manufacturers’ profit margins, and from merchandise
brokers and other middlemen, all in the service of driving down prices at the retail level, in order
for Walmart to sell more, increasing the amount of business with the vendor. In order to keep
their expense low, Walmart limits its store locations to rural communities with a maximum
population of 10,000. This will not only hold down real estate costs but also protect the company
from heavy competition in metropolitan areas. They also try to find healthy suppliers that can
provide timely deliveries at low prices. Managements in here also constantly check their
competitors price to make sure that Walmart offer the best drive. All of these strategic decisions
support the main principle and target which is saving costs as much as possible in order to offer
lowest prices in the market.
