Most culture theorists focus on one or two of the terms in the Culture Equation(TM) as the key elements that define what organizational culture is, but few systematically consider all four terms and their interdependency on one another. For example, Edgar Schein focuses primarily on tacit beliefs and assumptions (ROI) and the context in which they happen (COI); David Hanna focuses primarily on observable work habits and practices to explain how the organization’s culture really works, e.g. the interaction between POI and COI as producing an organization’s Current Results; and John Kotter and James Heskett focus on linking Current Results to the level of flexibility in the POI as found in Theory I: Strong Cultures, Theory II: Strategically Appropriate Cultures, and Theory III: Adaptive Cultures.
The Culture Equation(TM) can be applied to all organizations, of any size, in any industry, in any country, regardless of their governance structure (for-profit, non-profit, government), the products and/or services produced, number locations, and corporate life-cycle phase. Organizational culture can be analyzed from two very different, but interdependent perspectives which are reflective of the Individual-Collective Paradox(TM), e.g. organizations are collective, cultural entities that are led, managed, and changed one person at a time:
- Bottoms-Up Analysis
- Tops-Down Analysis
A tops-down analysis
Looks at culture from the perspective of collective-shared patterns of POI, COI, and ROI that powerfully shape the actions and interactions of managers and staff. From this perspective, culture has emergent properties that take the form of patterns, structures, and processes that are not directly reducible to the actions, interactions, and personalities of individual managers and staff members, although managers and key personnel (culture carriers) have a more powerful effect on creating, reinforcing, and maintaining cultural norms.
A bottoms-up analysis
Looks at culture from the perspective of the building blocks of culture in groups of 2s, 3s, and 4s, with the primary issues being: a) the fact that over 85% of the sources of performance problems and conflict in work-groups come from outside the work-group in the organization’s structures, systems, and culture. From this perspective, the actions, interactions, and personalities of individual managers and staff members cannot be “added up” to equal collective-cultural norms, although managers and key personnel (culture carriers) have a more powerful effect on creating, reinforcing and maintaining the elements of culture.
If a work-group or organization is more or less successful at producing revenue and meeting the challenges of the business environment, the pattern represented by the terms in the Culture Equation(TM) goes on autopilot and becomes, the way it’s done around here. Over time, an organization’s specific configuration of the Culture Equation(TM) reaches a state of equilibrium and solidifies within the context of a business environment that exerts definable forces on the company. As David Hanna puts it, All organizations are perfectly designed to get the results they get! For better or worse, the system finds a way of balancing its operation to attain certain results. When new employees are hired they are forced to compare their own ways of seeing the world from former jobs with what goes on in this organization and try to make sense of these ways of working. Seasoned employees have internalized the organization’s ways of seeing and working long-ago, so they are on autopilot and powerfully shape the decisions they make. Employees that don’t (or can’t) internalize this organization’s way of seeing and ways of working as codified in the Culture Equation(TM) don’t normally stay in an organization.
Whether a leader is the founder of a new company or a top line or middle manager in a well-established company, one of their most important tasks is to create, manage, and (if necessary) to destroy organizational culture in order to get the desired results for the organization or work-group. The precise definition of culture presented in the Culture Equation(TM) and the embedding mechanisms described above give leaders and managers a powerful set of tools for doing this.