Why is organizational structure and culture important?

What is organizational culture and how to develop it in your company

Is organizational culture an element of business that spontaneously manifests, or is it something that can be nurtured?

April 28, 2022, 10:16 AM | By:

Why You Should Care

The degree of hierarchy can impact the creation and development of organizational culture.

But it's not homogenous: HR needs to understand which type of cultural change best fits their businesses.

PwC suggests that organizations with distinctive cultures have better business outcomes such as an increase in revenue (48%), 80% more employee satisfaction, and critically, 89% are more likely to have high customer satisfaction.

The study from i4cp, ‘Culture Renovation: A Blueprint for Action,’ concluded that only 15% of their global respondents had successfully shifted to an organizational culture.

The Achievers report concludes that nearly half (48%) of respondents believe organizational culture has suffered since the pandemic.

The Katzenbach Center, the institute for culture, leadership, and teaming at Strategy& – PwC’s strategy consulting group that considers global business culture each year, defines organizational culture as: ‘the self-sustaining patterns of behavior that determine how things are done.’

An organizational culture within a business can often be seen as intangible when in fact, via performance management programs, focused business leadership, and a strategic planning that understands why organizational culture is essential, all enterprises – no matter their size – can create an organizational culture that will lead to better business processes and positive commercial outcomes.

Organizational culture is also the product of human interaction. How things are accomplished across a business is influenced by the enterprise’s core values and how their attitude and behavior drive the functional orientation of the business.

In some cases, the desired culture within a business and the existing culture can be far apart. Looking at the culture within other companies and aspiring to achieve their working environments will mean cultural changes must occur, which can be challenging. Here, HR can take the lead as they have close working relationships with staff and hear their company’s leaders’ views and values, which can often influence the organizational culture that needs to be created.

David Liddle, CEO of the TCM Group and president of the Institute of Organizational Dynamics (IOD), also argues that how fair working environments will also massively shape the kind of organizational culture formed.

“Culture is viewed by many through the prism of justice that is how they and others are treated when things go wrong and how they are rewarded and how resources are distributed when things are going well,” he says. “Employees measure their workplace culture against subjective but powerful principles of fairness, justice, inclusivity, and sustainability.

“These values, when enshrined in the company culture by leaders and others provide a powerful antecedent to high performance and productivity.”

The culture created within a business will have core values that HR is often tasked with communicating to employees and commercial partners. Kate Hesk, CPO at mental fitness start-up, Cognomie, reveals to UNLEASH what she thinks are the characteristics of organizational culture:

“There’s no single definition of organizational culture, which is why it’s such a moveable feast for so many organizations. Really, it’s world-making. What are the pillars holding the organization together? The values, the behaviours, the processes, the language, the story – that when all threaded together, create a singular and distinct eco-system that is immediately identifiable to your organization? If I’m working with an organization on culture-shaping, we always start with purpose. Culture will inevitably fall out of that.”

Can organizational culture spontaneously manifest? If HR creates the right environment, understands the culture that business leaders want to make, and has a clearly defined strategy to seed the growth of organizational culture, a shift in behavior across their businesses will take place, which can lead to cultural changes.

How to develop an organizational culture in your company

The practical outcomes of fostering a strong organizational culture are manifold. For example, PwC suggests that organizations with distinctive cultures have better business outcomes such as an increase in revenue (48%), 80% more employee satisfaction, and critically, 89% are more likely to have high customer satisfaction.

Cultural intelligence of managers is also important. The human component to their skills and how these can foster in others a sense of belonging and membership are the core values HR can use to develop cultural changes across the business.

Business leaders can often mistakenly believe that their values and the culture they think they create across their companies are appreciated and supported by all. In many cases, this is not the case. Employees can feel disconnected from their leadership and do not subscribe to business owners’ cultural values, and leaders try to communicate via HR. Here, looking inward to ask the difficult questions about why these values are not shared company-wide will lead businesses to understand better their culture and how every person in the company is a vital component to manifesting that culture for customers and partners.

How enterprises are organized tends to be hierarchical. The degree of hierarchy can profoundly impact the creation and development of organizational culture. Many businesses that have made cultural changes have also changed how their firms are organized. A flatter or collaborative hierarchy is often a significant trait of companies with strong organizational cultures. And the shift to mass remote working also impacts business cohesion and, therefore, organizational culture.

“Removing the physical workspace from the conversation presents an opportunity for HR professionals to focus on what matters to their people,” Sean O’Meara, a public relations and user experience consultant, tells UNLEASH. “In our book Remote Workplace Culture we explored the conflict between what leaders said their people wanted, such as ‘fun’ offices, lots of freebies, office perks, and flexible time off, and what the employees actually wanted when examining their revealed preference.”

O’Meara concluded: “Employees want to be able integrate their personal life into their work life, not balance it. They want to be able to customize their work environment, which is why so many of them are happier at home. They want autonomy and to be able to work when they are most effective. HR needs to be advocating for employees so they can get as many of these things as possible.”

How to create an effective organizational structure in your business

Talk is cheap, but actions often speak louder than words regarding organizational culture. And organizational change is hard. For example, the study from i4cp, ‘Culture Renovation: A Blueprint for Action,’ concluded that only 15% of their global respondents had successfully shifted to an organizational culture.

For HR, the role in creating and managing organizational culture is pivotal. Once core values have been defined, what kind of culture is a good fit for their enterprises?

According to traditional organizational culture theory, there are four main types of business culture: Hierarchy, Clan, Market, and Adhocracy. Today, these have been fragmented into many new types of organizational cultures, such as learning, caring, purpose, and enjoyment cultures. HR need to understand which type of cultural change best fits their businesses.

The TCM Group’s David Liddle commented: “Culture and justice are becoming the defining features of the modern HR function. HR needs to integrate a new model of organizational culture which is fair, just, inclusive, sustainable, and high performing – a transformational culture. In so doing, HR will act as powerful culture catalysts – enabling their organizations to flourish in the cultural challenges of the 21st century.”

With Matt Ephgrave, MD at Just Eat for Business, explained to UNLEASH how his company approaches organizational culture and the degree of hierarchy within the business: “At Just Eat for Business, we introduced Just Eat Pay – an offering allowing staff working from home or in the office to continue to receive the same lunchtime food and treats. This way, we’ve found that workers feel of equal importance, accessing the same benefits and food options. Essentially, providing the same offerings both online and in-person is key – ensuring that no party feels favored over the other.”

Ephgrave went on: “An HR’s responsibility is to ensure that the company culture is sustainable for the long term. Therefore, I have regular check-ins with the HR team to best understand where I can help support and execute their plans. By consistently communicating with the team and your employees, you can go a long way in supporting and maintaining your business’s culture.”

And Brad Taylor, Director of Consulting at Advanced Workplace Associates, says defining who will manage the organizational culture within the business is critical:

“Very few organizations we work with have anyone responsible for ‘culture’. It’s nobody’s day job. You would imagine that the CHRO would be responsible for cultural development and evolution, but this is certainly not the case for most organizations we work with. Instead, they tend to be more focussed on more operational activities, hiring and firing, protecting the organization, legalities, and L&D.”

Has the pandemic changed how we define organizational culture and how this is managed, maintained, expanded, and nurtured? The Achievers report that considers how engagement and retention have changed and how the so-called ‘Great Resignation‘ is impacting recruitment concludes that nearly half (48%) of respondents believe organizational culture has suffered since the start of the pandemic, with only just over half (52%) stating they stayed in their jobs because they felt valued and supported.

The report concludes: “Work-life balance is reported as the number-one reason to stay in a role, followed by recognition and manager relationships. People stay because they feel meaningfully supported and valued. Creating this type of culture is a protective factor in the midst of ongoing crisis.”

How to manage and develop that organizational culture

Understanding organizational cultural theory is essential to managing and evolving the culture within any business. David Liddle offered this approach:

“Creating cultural flow (a positive convergence between climate and culture) can help to bring disparate and disconnected departments and divisions together and encourage the actions and behaviors the business wants to see in a healthy organization, where this ‘flow’ exists between culture and climate, the two feed into and feed off each other. They work in harmony, like a golden thread running through the entire organization.

In practice, this means:

• The purpose and values are fully integrated into the organization’s strategy.
• They are enacted through the behaviors of the organization’s CEO and senior leaders.
• The values and purpose are the foundation of the organization’s policies, processes, and procedures. These procedures help shift the mindset from retributive (blame, shame, punishment) to transformational (compassion, collaboration, connection) across the workforce.
• This mindset defines the climate in teams and the behaviors of managers and employees, which are directly aligned to the organization’s strategic objectives, purpose, and needs.

Organizational culture is fluid. Internal changes and external factors can impact how a business’s culture will develop. HR must constantly check core values, performance management programs, and how these are changing to ensure the defined culture of their enterprises can evolve with these changes yet maintain the business’s identity.

“By joining company boards or becoming part of senior leadership teams, HR and ‘People and Culture’ professionals will have greater opportunity to steer and develop an effective organizational structure,” says Chris Goulding, Managing Director of specialist HR and Finance & Accountancy recruitment firm, Wade Macdonald.

“This could include dissolving hierarchal barriers or ensuring that diversity and inclusion considerations are embedded into hiring strategies and therefore translated into more diverse organizational structures.

“In these positions, HR also has a better chance of influencing how leaders manage their staff, for instance putting greater emphasis on outputs and completion of tasks than simply hours worked, or the pattern of those hours.”

Advanced Workplace Associates’ Brad Taylor, explained to UNLEASH: “Our own culture is very open and friendly, and our on-line ‘rule’ is that we have our cameras on all the time and that people can interrupt in a meeting just as they would if we were in a real face to face meeting. So, when we encounter clients where the norm is to keep cameras off and put their ‘virtual’ hands up before they speak it is viewed by our team as being different and sometimes disrespectful.”

Moving forward into the post-pandemic business environment, organizational culture will again challenge us to adapt to new ways of working. How can a business’s culture evolve with remote mass working, for example? Is competitive advantage now defined as how enterprises present their culture to customers and commercial partners? And how must companies ensure their culture is inclusive, diverse, and supportive of everyone that its culture touches?

PwC concludes: “If organizations are to navigate the challenges ahead, their chances will be greatly improved if they can first identify and prioritize their strategic goals, then understand which traits and behaviours support those goals, and then activate and begin to evolve their culture by using key organizational levers, or enablers.”

With Advanced Workplace Associates, Brad Taylor advises: “Organizations need cultures in which people can trust and can be trusted and understand how to manage the perception of trustworthiness that others have of them. HR need to be in the thick of this, working with the senior leadership to determine the culture behaviour and skills needed to make the business successful; and working with them to make it happen. Someone need to be responsible for culture. If not the CHRO, then who?”

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