What is culture and why is it important?

August 12, 2011

If asked, could you describe the culture of your company? You should, because as management professor and leadership consultant Angelo Kinicki says, culture is important to employee behavior and company performance. Listen to part one of our series on company culture. This podcast is brought to you by the Business To Go -- knowledge and skills you can put to work today in your business and career. (2:29)

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Hi, I’m Angelo Kinicki. I hold the Weatherup/Overby Chair in Leadership at the W. P. Carey School of Business, and I’m going to talk to you briefly about what culture is and why it’s important. Organizational culture is defined as the shared beliefs and values that people have about work. It operates as the social glue, and the way that we understand an organization’s culture is to look at it as existing on three different layers.

One layer is what we call artifacts, and that’s the layers you can see. If you look around in your offices, and you see the pictures on the walls, that will give you an idea of your artifacts. For example, I did some work with one client, and they had a lot of pictures of products as opposed to people. That tells you that they’re more interested in products than they are people.

A second layer of organizational culture is the espoused values, and those are the values that management espouses. If you want to tell your employees that you’re a customer-focused organization, then obviously you should have values about customers.

The final layer of organization culture is what we call assumptions or underlying beliefs. This is the hidden part of culture. It’s the things that we all think about our work environments that strongly drive our behavior.

Again, if I say that you want to have a culture that is customer focused, then you have to have people believing that, in fact, customers are important; and maybe the customers are even more important than employees and shareholders.

Why is culture important? It’s important again because it creates the bandwidth which guides employee behavior and also because research shows that organizational culture is significantly related to a host of important measures of organizational effectiveness. In fact, some colleagues and I just completed a study, and we found by summarizing research over 25 years that organizational culture was related to employee attitudes like job satisfaction and organizational commitment. Other types of culture were related to innovation and quality of products and services. Then what’s called a market culture was significantly associated with various measures of financial performance.