The Business Book

106

1940s, human relations experts

began to consider organizations from

a cultural point of view, drawing

inspiration from earlier sociological

and anthropological work associated

with groups and societies. However,

the term “organizational culture”

only became part of the business

lexicon in the early 1980s, following

the publication of Culture’s

Consequences by the Dutch cultural

psychologist and management

expert Geert Hofstede.

Looking closely at organizational

structure for the first time, Hofstede

observed that it is shaped by and

O

rganizations build a
sense of identity through
tradition, history, and
structure. This identity is kept alive
through the organization’s culture:
its rituals, beliefs, legends, values,
meanings, norms, and language.
Corporate culture determines how
“things are done around here.”
Culture provides a shared view
of what an organization is (the
intangibles) and what it has (the
tangibles). It is the “story” of the
organization: a narrative reinforced
through idiosyncratic languages and
business-specific symbols. In the

overlaps with societal culture. He

identified five dimensions of culture

that influence business behavior:

power distance, individualism vs.

collectivism, uncertainty avoidance,

masculinity vs. femininity, and long-

vs. short-term orientation.

Five cultural dimensions

The first of Hofstede’s dimensions—

power distance—refers to the

distance in authority between

manager and subordinates. Business

cultures that have a high power

distance tend to be rule-driven and

hierarchical (everyone “knows their

ORGANIZATIONAL CULTURE

IN CONTEXT

FOCUS

Organizational structure

KEY DATES

1980 Geert Hofstede draws

attention to the importance of

organizational culture in his

book Culture’s Consequences.

1982 US business consultants

Terrence Deal and Allan

Kennedy argue that culture is

the single most important

factor in determining success.

1992 Harvard professor John

Kotter claims that in an 11-year

period, organizations with rich

cultures see net income growth

of 756 per cent, compared to

one per cent in those with

less-defined cultures.

2002 Watson Wyatt develops

the Human Capital Index,

demonstrating the economic

value of business cultures

that maintain good practice

in human resources.

Culture is

subject to

variation.

Culture is a significant determinant

of organizational success or failure.

Culture is

exemplified by a

company’s

language,

routines,

and rituals.

Culture impacts every aspect

of business behavior.

Culture is “the way we do things

around here.”

Organizations

are collections

of different

cultures.