Organizations build a sense of identity through tradition, history, and structure. This identity is kept alive through the organization’s culture: its rituals, beliefs, legends, values, meanings, norms, and language. Corporate culture determines how “things are done around here.” Culture provides a shared view of what an organization is (the intangibles) and what it has (the tangibles). It is the “story” of the organization: a narrative reinforced through idiosyncratic languages and business-specific symbols. In the 1940s, human relations experts began to consider organizations from a cultural point of view, drawing inspiration from earlier sociological and anthropological work associated with groups and societies. However, the term “organizational culture” only became part of the business lexicon in the early 1980s, following the publication of Culture’s Consequences by the Dutch cultural psychologist and management expert Geert Hofstede.
Looking closely at organizational structure for the first time, Hofstede observed that it is shaped by and overlaps with societal culture. He identified five dimensions of culture that influence business behavior: power distance, individualism vs. collectivism, uncertainty avoidance, masculinity vs. femininity, and long- vs. short-term orientation.
Five cultural dimensions
The first of Hofstede’s dimensions— power distance— refers to the distance in authority between manager and subordinates. Business cultures that have a high power distance tend to be rule-driven and hierarchical (everyone “knows their place”). In Russia, for example, employees have little access to executives (power distance is high). Conversely, in low power-distance cultures, such as many companies in Australia, decision making is distributed more evenly throughout the organization.Anthropologists have long theorized that collectivist cultures control members through external societal pressure (shame), whereas individualistic cultures control their members more through internal pressure (guilt).
In his second dimension, Hofstede proposed that this tendency toward collectivism or individualism can be most clearly seen in the difference between Asian and US companies. When problem-solving, US businesses tend to look to the individual for a solution, whereas Asian companies prefer to pose the problem to a group.
Masculinity and femininity, Hofstede’s third cultural dimension, are viewed differently from one organization to another. Some place great emphasis on masculine traits (such as status, assertiveness, and advancement), while others accord feminine traits (such as humanism, cooperation, collegiality, and nurturance) greater value. Italian organizations, for example, tend to have assertive, competitive cultures.
The fourth of Hofstede’s dimensions is known as uncertainty avoidance. This is the extent to which workers feel threatened by ambiguous situations. The more uncomfortable people are with “not knowing” how to react in a certain scenario, the more rules and policies the company will need to introduce to reduce that uncertainty. Companies with a low degree of uncertainty avoidance are likely to thrive in more uncertain and ambiguous situations. British organizations, for example, are considered fairly at ease with unstructured and unpredictable situations.
Hofstede’s fifth dimension, long vs. short-term orientation, is the extent to which organizations privilege the short-term (profit) over the long-term (value generation). Japanese businesses, for example, think very much in the long-term: Toyota Motor Corporation has a 100-year business plan.