Study notes

Influences on the Organisational Culture of a Business

  • Levels: A Level, IB, BTEC Level 3
  • Exam boards: AQA, Edexcel, OCR, IB, Eduqas, WJEC

What factors influence the organisational culture of a business? Here are six factors that are often cited as key influences on culture.

INFLUENCE OF THE FOUNDER

The influence of the founder of Ikea - Ingvar Kamprad - is perhaps one of the best examples of how organisational culture can be shaped by the founder of a business. Whilst a business may eventually grow to become a multinational, its culture is often formed or shaped by those who started it. The founders set the vision and core values of the business they create, which in turn shape how the organisational structure, rewards systems, approach to decision-making and more are determined.

BUSINESS SIZE AND COMPLEXITY

As a business become larger and more complex, then it is perhaps inevitable that its culture is changed too. For example, a small or start-up business is likely to have a more informal approach to "how things are done". By contrast a larger, more complex business is likely to have a more formal approach to how things are done, including methods of communication, rules and procedures etc.

REWARDS

The reward systems used by businesses can often be a significant influence on culture. For example, a business where employees are routinely paid through commission and/or performance-related bonuses might be expected to have a different approach to doing things than a business where employees are only paid a salary. As an example, the financial services industry is often held-up as an example of where rewards systems led to a strong culture of that encouraged excessive risk-taking.

INDUSTRY / MARKET

This is linked to the influence of reward systems, since employee rewards are often based on the nature of the industry or market in which a business operates. Whilst most industries and markets are highly competitive these days, in some there is a different expectation as to how things are done. For example, some industries such as energy and pharmaceuticals are highly regulated, which therefore influences how decisions are made, what controls and checks are in place etc. In some markets, such as the creative industries, culture is shaped by the need to encourage creativity, innovation, team-work etc.

ORGANISATIONAL STRUCTURE

You might ask - which comes first - the organisational structure or the culture? In reality, both influence each other! For example, a culture that is built on strong control from the centre will need different policies and controls compared with one where authority is distributed away from the centre. Similarly a business might develop quite informally into a structure with a flat hierarchy, where the organisation structure simply adapts to reflect the ways that the people in the business find works best.

WORK ENVIRONMENT

There are many classic examples out there of work environments that have been deliberately designed to support the existing and/or desired culture. The famous Googleplex (the corporate headquarters complex of Google) and more recently Apple's new HQ are good examples. However, at a simpler level, the physical environment in which people work together must surely influence the culture at a business, not the least because of the impact on communication. Are functional teams housed in different parts of a building - or even different buildings? Are employees allowed to work remotely? Do staff "hot-desk" or do they have somewhere in the work environment to call their own?

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