Question

Define ‘Corporate Culture’. What influence does Corporate Culture have on strategy development and implementation providing examples (real or made up) to illustrate? Why is an organization’s culture a key factor in strategic management?

Answer 1

Corporate culture refers to the beliefs and behaviors that determine how a company's employee and management interact and handle outside business transactions. Often, corporate culture is implied, not expressly defined, and develops organically over time from the cumulative traits of the people the company hires. A company's culture will be reflected in its dress code, business hours, office setup,employee benefits, turnover, hiring decisions, treatment of clients, client satisfaction and every other aspect of operations.

Because the corporate culture is a driving force in how the company does business, it has an impact on developing business strategy.

Risk

The corporate culture dictates how much risk an organization is willing to take when it comes to research and development, client interaction, investing in equipment and any other activity that involves risk. If the corporate culture is one that promotes environmental responsibility, that will impact the risks that the company will take when developing new products.

Employee Retention

When the company develops a policy of withholding information from employees, that can start to develop a culture of distrust among the staff. The ability to retain employees can be weakened when the promises made by the company in regards to company growth and employee opportunity are compromised by a lack of trust.

Incentive Pay

Incentive pay is something that employers use to improve productivity and maintain employee morale. But incentive programs need to be monitored and administered carefully to avoid creating a culture of expectation. If an incentive pay program is set up to reward employees that do not perform, that creates a dangerous culture precedent. For example, a profit-sharing program where every employee gets a bonus check regardless of performance will diminish the motivating effect of the program and cause employees to expect the bonus without having to perform even at baseline expectations. By instituting a system of checks that forces employee to reach certain performance levels before being able to take part in an incentive program, you help to create a culture of performance expectations. This makes the investment of a profit-sharing program viable and makes it into a motivational tool.