Institutionalization: A Forerunner of Culture

The idea of viewing organizations as cultures – where there is a system of shared meaning among members – is a relatively recent phenomenon. Until the mid-1980s organizations were, for the most part, simply thought of as rational means by which to coordinate and control a group of people. They had vertical levels, department authority relationships and so forth. They have personalities too, just like individuals. They can be rigid or flexible unfriendly or supportive innovative or conservative. General Electric offices and people are different from the offices and people at General Mills. Harvard and MIT are in the same business – education – and separated only by the width of the Charles River, but each has a unique feeling and character beyond its structural characteristics. Organizational theorists now acknowledge this by recognizing the important role that culture plays in the lives of organizations members. Interestingly though the origin of culture as an independent variable affecting an employee’s attitude and behavior can be traced back more than 50 years ago to the notion of institutionalization.

When an organization becomes institutionalized, it takes on a life of its own, apart from its founders or any of its members. Ross Perot created Electronics Data Systems (EDS) in the early 1960s, but he left in 1987 to find a new company Perot Systems. EDS has continued to thrive despite the departure of its founder. Sony, Gillette, McDonald’s and Disney are examples of organizations that have existed beyond the life founder or any one member.

In addition, when an organization becomes institutionalized, it becomes valued for itself, not merely for the goods or services it produces, it acquirers immortality. If its original goals are no longer relevant, it doesn’t do out of business. Rather, it redefines itself. A classic example is the March of Dimes. It was originally created to fund the battle against polio. When polio was essentially eradicated in the 1950s, the March of Dimes didn’t close down. It merely redefined its objectives as funding research for reducing birth defects and lowering infant mortality.

Institutionalization operates to produce common understandings among members about what is appropriate and, fundamentally meaningful behavior. So when an organization takes on institutional permanence, acceptable modes of behavior become largely self-evident to its members. As we’ll see, this is essentially the same thing that organizational culture does. So an understanding of what makes up an organization’s culture and how it is created sustained and learned will enhance our ability to explain and predict the behavior of people at work.

A number of years back, an executive was asked what he thought organizational culture meant. He gave essentially the same answer that a Supreme Court Justice once gave in attempting to define pornography : I can’t define it, but I know it when I see it. This executive’s approach to defining organizational culture isn’t acceptable for our purposes. We need a basic definition to provide a point of departure for our quest to better understand the phenomenon. In this section, we propose a specific definition ad review several peripheral issues that revolve around definition.

A Definition:

There seems to be wide agreement that organizational culture refers to a system of shared meaning held by members that distinguishes the organization from other organizations. This system of shared meanings is, on closer examination a set of key characteristics that the organization values. The research suggests that there are seven primary characteristics that, in aggregate capture the essence of an organization’s culture.

1. Innovation and risk taking: The degree to which employees are encouraged to be innovative and take risks.
2. Attention to detail: The degree to which employees are executed to exhibit precision analysis and attention to detail.
3. Outcome orientation: The degree to which management focuses on results or outcomes rather than on the techniques and processes used to achieve those outcomes.
4. People orientation: The degree to which management decisions take into consideration the effect of outcomes on people within the organization.
5. Team orientation: The degree to which work activities are organized around teams rather than individuals
6. Aggressiveness: The degree which people are aggressive and competitive rather than easy going.
7. Stability: The degree to which organizational activities emphasize maintaining the status quo in contrast to growth.