6.1 Organizational Foundation
Why do we exist?
What is a Mission Statement?
The mission statement describes the purpose of your organization—the reason for its existence. It tells the reader what the organization is committed to doing. It can be very concise, like the one from Mary Kay Inc. (the cosmetics company): “To enrich the lives of women around the world.” Or it can be as detailed as the one from Harley-Davidson: “We fulfill dreams inspired by the many roads of the world by providing extraordinary motorcycles and customer experiences. We fuel the passion for freedom in our customers to express their own individuality.”
Throughout this chapter, the company Notes-4-You will be used as an example. Notes-4-You is an India-based company that specializes in the sale and distribution of handwritten notes for a variety of educational subjects. Notes are sold to the company by previous students and help current students to gain a deeper understanding of the subject matter. For the purpose of this exercise, imagine that you are the entrepreneur that founded Notes-4-You and are in the early stages of building the company. This chapter will lead you through many of the important decisions that need to be made when building an organization.
A mission statement for Notes-4-You could be the following: “To provide high-quality class notes to college students.” On the other hand, you could prepare a more detailed statement that explains what the company is committed to doing, who its customers are, what its focus is, what goods or services it provides, and how it serves its customers.
What are Core Values?
Whether or not your company has defined a mission, it is important to identify what your organization stands for in terms of its values and the principles that will guide its actions. The small set of guiding principles that you identify as crucial to your company are known as core values—fundamental beliefs about what’s important and what is and isn’t appropriate in conducting company activities. Core values affect the overall planning processes and operations. At Volvo, three values— safety, quality, and environmental care—define the firm’s “approach to product development, design and production.” Core values should also guide the behaviour of every individual in the organization. At Coca-Cola, for instance, the values of leadership, collaboration, integrity, accountability, passion, diversity and quality tell employees exactly what behaviours are acceptable. Companies communicate core values to employees and hold them accountable for putting them into practice by linking their values to performance evaluations and compensation.
In choosing core values for Notes-4-You, you’re determined to be unique. After some thought, you settle on teamwork, trust, and dependability. Why these three? As you plan your business, you realize that it will need a workforce that functions as a team, trusts each other, and can be depended on to satisfy customers. In building your workforce, you’ll seek employees who’ll embrace these values.
What Is Organizational Culture?
Organizational culture refers to a system of shared assumptions, values, and beliefs that show employees what is appropriate and inappropriate behaviour (Chatman & Eunyoung, 2003; Kerr & Slocum Jr., 2005). These values have a strong influence on employee behaviour as well as organizational performance. In fact, the term organizational culture was made popular in the 1980s when Peters and Waterman’s best-selling book In Search of Excellence made the argument that company success could be attributed to an organizational culture that was decisive, customer-oriented, empowering, and people-oriented. Ideally, a company’s core values should be reflected through the organizational culture.
Culture is by and large invisible to individuals. Even though it affects all employee behaviours, thinking, and behavioural patterns, individuals tend to become more aware of their organization’s culture when they have the opportunity to compare it to other organizations. If you have worked in multiple organizations, you can attest to this. Maybe the first organization you worked for was a place where employees dressed formally. It was completely inappropriate to question your boss in a meeting; such behaviours would only be acceptable in private. It was important to check your e-mail at night as well as during weekends or else you would face questions on Monday about where you were and whether you were sick. Contrast this company to a second organization where employees dress more casually. You are encouraged to raise issues and question your boss or peers, even in front of clients. It is more important not to maintain impressions but to arrive at the best solution to any problem. It is widely known that family life is very important, so it is acceptable to leave work a bit early to go to a family event. Additionally, you are not expected to do work at night or over the weekends unless there is a deadline. These two hypothetical organizations illustrate that organizations have different cultures, and culture dictates what is right and what is acceptable behaviour, as well as what is wrong and unacceptable.
Why Does Organizational Culture Matter?
An organization’s culture may be one of its strongest assets, as well as its biggest liability. In fact, it has been argued that organizations that have a rare and hard-to-imitate organizational culture benefit from it as a competitive advantage (Barney, 1986). In a survey conducted by the management consulting firm Bain & Company in 2007, worldwide business leaders identified corporate culture as important as corporate strategy for business success (Why culture can mean life or death, 2007). This comes as no surprise to many leaders of successful businesses, who are quick to attribute their company’s success to their organization’s culture.
Culture, or shared values within the organization, may be related to increased performance. Researchers found a relationship between organizational cultures and company performance, with respect to success indicators such as revenues, sales volume, market share, and stock prices (Kotter & Heskett, 1992; Marcoulides & Heck, 1993). At the same time, it is important to have a culture that fits with the demands of the company’s environment. To the extent shared values are proper for the company in question, company performance may benefit from culture (Arogyaswamy & Byles, 1987). For example, if a company is in the high-tech industry, having a culture that encourages innovativeness and adaptability will support its performance. However, if a company in the same industry has a culture characterized by stability, high respect for tradition, and a strong preference for upholding rules and procedures, the company may suffer as a result of its culture. In other words, just as having the “right” culture may be a competitive advantage for an organization, having the “wrong” culture may lead to performance difficulties, may be responsible for organizational failure, and may act as a barrier preventing the company from changing and taking risks.
In addition to having implications for organizational performance, organizational culture is an effective control mechanism for dictating employee behaviour. Culture is in fact a more powerful way of controlling and managing employee behaviours than organizational rules and regulations. When problems are unique, rules tend to be less helpful. Instead, creating a culture of customer service achieves the same result by encouraging employees to think like customers, knowing that the company priorities, in this case, are clear: Keeping the customer happy is preferable to other concerns such as saving the cost of a refund.