The term culture has been used by anthropologists to refer to the customs and rituals that societies develop over the history. It has also been used by some organizational researchers and managers to refer to the climate and practices that organizations build up around the espoused values and credo of an organization. ( Edgar H. Schein,organizational culture and leadership p7).
(Hofstede et al. 1990) define Culture as holistic and that involves a larger group of individuals.
He asserts that Culture is historically related; it is an emergent phenomenon and is conveyed through traditions and customs and that people tend to hold on to their ideas, values and traditions.
Culture is not something inherent but learned and it is human made. It is shared by a group of people.
Culture is build upon interactions between people, who are sharing values and beliefs to produce behavioral norms.
According to Trompenaars (2003: 26) “Culture is necessary for human, it is like a guide. The culture allows to the human to have norms and values… the culture plays an important role in business”.
Culture is learnt and passed on from generation to generation; it belongs to one group in particular and it “influences the behavior of group members in uniform and predictable ways” (Mead 1998, p.4)
A culture is a powerful determinant of group behavior and is setted up by the way employees work and behaves in the work place.
Culture is considered a powerful, enduring and pervasive influence on human behavior through the socialization process within a culture individuals learn the norms and expectations of membership of that society the right and wrong of doing things. (Cartwright and cooper,1992).
The culture concept is not only deep but also wide and complex (Schein, 1992).
The onion diagram:
According to Hofstede (2001) culture appear in numerous levels of depth such as symbols, heroes, rituals, and values.
The first three layers, symbols, heroes, and rituals represent the layers of culture that are visible to outsiders. These are the “practices” of a given culture but their cultural meaning may not be obvious to those who are not a part of that culture hofstede(2001 10:8).
Symbols are words, gestures, pictures and objects that hold a particular meaning only recognizable by people who share the same culture. The words in a language or jargon belong to this category, as do dress, hairstyles. New symbols are easily developed and old ones disappear (Hofstede, 2001).
Heroes are persons, alive or dead, real or imaginary, who possess characteristics which are highly prized in a certain culture, and who serve as models for behavior (Hofstede, 2001).
Rituals are collective activities, technically superfluous in reaching desired ends, but within a culture are considered as socially essential. Rituals are also ways of greeting and paying respects to others, together with social and religious ceremonies for example (Hofstede, 2001).
Symbols, heroes, rituals are considered as practices.
The core of culture is formed by values.
Values are broad tendencies to prefer certain states of affairs over others. Values are feelings with an arrow on it: they have a plus and a minus side (Hofstede, 2001). They deal with evil vs. good, dirty vs. clean, ugly vs. beautiful, abnormal vs. normal, irrational vs. rational, etc (Hofstede, 2001).
Values are one of the first things that children learn unconsciously and implicitly.
Because they were acquired early, many values remain unconscious to those who hold them. as a result, they cannot be discussed nor can they be directly observed by outsiders , They can only be inferred from the way people act under various circumstances (Hofstede, 2001).
Definition of corporate culture:
The concepts of organizational culture and corporate culture can be debated to hold opposing views although the concepts often are used interchangeable in literature.
A plethora of definitions of “corporate culture” exist in the organizational theory literature. Anthropologists have proposed at least 164 different definitions of culture (Howard, 1998).
Although all the theorists believe in the importance of the culture in the organizational studies but Very little consensus exists with regard to a general theory (Sorensen, 2002). There is still no Generally agreed definition of the concept or dominant point of view itself but rather a richer mixture of ideas and approaches.
The study of organizational culture indicate the way people are living and working together.
Nahavandi and Malekzadeh (1998:80) state that culture is the beliefs and assumption shared by members of an organization. The term culture is often used as if companies do have only one culture, but in reality most companies do have more than one set of culture.
Similarly, Krystek (1992) confirms that there are different cultures in different parts of an organization. Alike, Buono & Bowditch (1989) assert that in most big companies, there is more than one unified corporate culture.
In other words, the organizational culture affects practically all aspects of organizational life (Buono 2002; Cartwright & Cooper, 1996).
Barney(1986) define culture as”a complex set of values, beliefs, assumptions, and symbols that define the way in which a firm conducts its business”.
Harrison and Stokes (1992) describe «culture is to an organization what personality is to an individual. It is that distinctive constellation of beliefs, values, work styles and relationships that distinguish one organization from another”.
O’Reilly and Chatman (1996, p.166) define organizational culture as ‘a set of norms and values that are widely shared and strongly held throughout the organization’. Values define what is important and norms define appropriate attitudes and behaviors for organizational members. O’Reilly and Chatman (1996, p.160).
Sadri and Lees (2001, p.853) states that the corporate culture originates from the fact that the individuals inside an organization have different ethnical or social backgrounds. Inside an organization they together build up norms and rules which results in a corporate culture.
Schein (1988, p.9-10) emphasize that in a company where there are only one or a few individuals in the organization they create the organizational culture solitary on their own beliefs. In larger organizations the culture is heavily depending on the originator or the stronger people inside the organization, often people who have worked there for a long time or management.
A quotation from Lee, Kim and Yu (2004, p.340) illustrate the corporate culture, a common expression used for describing a particular work practice inside an organization.
“The way we do things around here”.
The culture does not only consist of one assumption or one belief, the culture is constructed by all the common assumptions and beliefs which the members of the organization have. (Hatch, 1997, p.213 and Schein 1988, p.9-10)
According to Edgar Schein(1992), a noted MIT Professor of Management, researcher and author in the area of organizational culture defines culture in his classic book: organizational culture and a leadership as “a pattern of shared basic assumptions, invented or developed by a given group as it learns to cope with the problems of external adaption and internal integration, that has worked well enough to be considered valid and therefore is taught to new members of the group as the correct way to perceive, think and feel in relation to those problems”.
Furthermore, he define that cultures inside organizations consist of three different levels, assumptions, values and artifacts.
According to (Hatch.1997, p.210) these three levels affect and describe the culture inside an organization:
Artifacts
The artifacts are the tangible things which the organizational members have constructed (Hatch, 1997, p.216).
Artifacts are the visible elements in a culture. It is important to know that although the Artifacts are tangible and can be easily discerned but are hard to understand by people not part of the culture. They are at the outer limit of the culture and therefore easy to misinterpret, as they often are individuals reflections of the assumptions, they do not have to represent the core of the culture (Hatch, 1997, p.217 & Schein, 1988, p.11).
Artifacts can be dress codes, furniture… Through a process of realization, artifacts take on the symbolic meaning of the organization’s values, work climate, work processes, etc.
Espoused values
Espoused values are the second level which affects the organizational culture, it consists of the social principles and goals set by members of the group.
“The values could be represented by the philosophies, democracy, tradition or other principles which the members endorse of or believe in”. (Hatch, 1997, p.214 & Schein 1988 p.9) “Norms are a part of values, and these are the unwritten rules which exist in the organization. The norms express what is expected from the members and how they should behave in certain situations. The values are an extension from the assumptions, and make the culture more alive” (Hatch, 1997, p.216 & Schein 1988, p17)
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Assumptions
Schein (1988, p.9-10) claims” that assumptions are the ground and core of the organizational culture, which could be seen as the beliefs inside an organization. The assumption represents the reality which the members inside the organization accept as true and what they perceive as important. This constructs the “truth” which permeates trough the organization” .They are difficult to discern because they exist at a largely unconscious level.
(Hatch, 1997, p.217) claims that the assumptions affect all the other levels. Members from the organization create values and artifacts which symbolizes the cultural core as they are based on the organizations assumptions.
Smircich (1983) covers the same ground as Schein, but in five stages.
Lees (2003) has adapted the theories from Schein and Smircich and conducted
a model of culture that is especially relevant for mergers and acquisitions (see table 2-1).
Following the viewing of the different definitions of corporate culture, we can sum up that corporate culture is a philosophy or norms that guide an organization’s policy or the climate in which members of that organization act together and work together.
Corporate culture in merger:
Organizational culture is an important aspect in shaping individual’s commitment, productivity, and longevity with the organization (O’Reilly, Chatman & Caldwell, 1991).
An organization’s culture helps to shape and determine the manner of conduct by the members and the practices inside the organization that lead to success. it can be considered as a driver of workforce behavior.
It has a significant impact on the way employee feel, think, act and make decision.
In today’s business world, corporate culture has a high influence and become an important issue in organization because it’s play a vital role in the success and achievement of goals that why it is important not to ignore or neglect it while planning and executing mergers and acquisition .
The concept of corporate culture must be understood in order to allow managers to describe and understand any organization and keep staff company together to achieve its organizational goals and objectives.
An effective corporate culture is a remarkable competitive advantage and the key to organizational effectiveness in M&A. Organizations that strongly align their organizational culture to maintain their business strategies have a tendency to outperform those organizations whose strategy and culture are not aligned.
The corporate culture is perceived when companies merge can be compared to what culture is to an organization what personality is to an individual.
When two dissimilar organizational cultures are brought together typically the case in mergers and acquisitions we can expect only two outcomes: it will produce discomfort and end up with a cultural clash or both cultures will fit each other under the umbrella of one unifying culture.
Strong culture
Robbins, S. P., (1998) defined ‘a strong culture is one that is internally consistent, is widely shared, and makes it clear what it expects and how it wishes people to behave.’ Kaufman, (2002) stated that ‘a positive organizational culture reinforces the core beliefs and behaviors that a leader desires while weakening the values and actions the leader rejects. Peters and Waterman (1982) indicates that ‘a negative culture becomes toxic, poisoning the life of the organization and hindering any future potential for growth
Strong culture exist where employee react to incentive because of their alignment to organizational values. on the contrary, there is a Weak Culture where there is little alignment with organizational values and control must be exercised through extensive procedures and bureaucracy.
Kilmann, Saxton, and Serpa, (1986) defined strong cultures as ‘those where organization members place pressure on other members to adhere to norms.’ Byrne, (2002) indicates that ‘a strong organizational culture will exert more influence on employees than a weak one. If the culture is strong and supports high ethical standards, it should have a very powerful and positive influence on employee behaviour.’
the corporate culture is divided into strong culture and weak culture. Strong culture takes place in organization where staff responds to stimulus because of their alignment to organizational values.
Certainly, strong organizational cultures are those where the core values of the dominant culture are strongly believed by the great majority of organizational members. On the contrary, weak culture exists where there is little alignment with organizational values and where the control must be exercised through extensive procedures and bureaucracy. Strong cultures in which the key values are deeply held and widely shared have a greater influence on employees than the weak cultures. The more employees accept the organization’s key values, the greater is their commitment to those values and the stronger the culture is.
Strong culture vs weak culture
Quantitative analysis has shown that firms with strong cultures outperform firms with weak cultures by facilitating coordination and control, emphasising common goals and increasing employees’ efforts (Kotter and Heskett, 1992; Gordon and DiTomaso, 1992).
a strong culture enhances an organization’s ability to execute its strategy (Tushman and O’Reilly, 1997).
In an organization with strong culture, employees are more prepared to take responsibility and fulfill their mission within the organization with enthusiasm.
Strong organizational culture serves to “provide group members with a way of giving meaning to their daily lives, setting guidelines and rules for how to behave.” ( Schein, 1991, p. 15. )
The types of corporate culture
Four types of organizational culture were proposed by Harrison (1972) and used in Cartwright and Cooper (1992) work.
The Understanding of an organization’s culture permits to identify cultures and classify them by making comparative overview.
The type of corporate culture classify organizations by a set of characteristics that describe how employee interact with each other ;what are incentive and rewarding system that motivated the workers to furnish their commitment and output in order to attain the underlined goals .
Type 1: Power culture.
It is characterized by the concentration of power in the hand of a single or small group of individuals (the president, the founder, a key of manager) .in this type of culture, Culture is autocratic and control is the key element and it is common in small entrepreneurial organizations or family tradition business. Reward systems are often inequitable as they are influenced by personal preferences.
Employees are motivated by feelings and a sense of personal of loyalty towards their boss or owner because Power cultures tend to have inequitable compensation systems and other benefits based on favoritism and loyalty, as well as performance.
Employee demonstrated their loyalty seeking the reward due to out a fear of punishment.
Decisions are centralized around one key individual element and tend to be based on hunches and past successes as on logical way of thinking.
Type 2: Role culture.
Today this type of culture is common in almost organizations.
Culture is highly autocratic and it is based on logic, rationality and search of effectiveness.
There is an obvious division and specialization of Labor and the culture is results-oriented. The procedures and regulations are clearly defined.
Organizations are split into various functions and each person within the function is giving a particular role that has to be executed.
This type of culture tends to be inflexible and slow to change due to the high degree of formalization. This culture can be experienced by employees as impersonal and frustrating.
Type 3: Task/achievement cultures.
Emphasize on the accomplishment of the task and problem solving with success being judged on the achievement. The culture is team-oriented as individuals are gathered around and committed to work in teams for a specific task. The structure is active and flexible depending on the given task . Employees are flexible, creative, and highly autonomous.
Employees are respected for their knowledge and valuable skills rather of their hierarchical seniority.
People tend to be creative and the working environment is generally satisfying.
Type 4: Person/support culture.
It is characterized by egalitarianism. Person cultures are commonly found in charities or nonprofit organizations.
Organizations with a person/support culture have minimal structure and decision making is carried out on a shared collective opinions. The managerial style is supportive and quick to respond to individual needs. Furthermore, information is shared collectively. Decision-making occurs after discussion of all involved members and with their consensus.
Organizational versus National Culture
The purpose of this paper is to examine what is the difference between national and organizational culture and how they are related to each other?
“What is appropriate in one national setting is wholly offensive in another. What is rational in one national setting is wholly irrational in another. And, corporate culture never trumps national culture.” Dr. Geert Hofstede
In this part, we focus an insight regarding the cultural aspect of mergers and Acquisitions and to identify the role and the differences between national cultures and corporate culture.
Due to the globalization and international trade, many mergers and acquisitions are now crossborder, which imply to give a lot of attention to national cultures that differ from country to another.
After an M&A transaction, many acquired companies experience many cultural issues possibly because their employees do not like the acquiring company’s way of doing thing.
Lees (2003) claim that corporate culture is seen as a subculture of the national culture with visible points of distinctiveness and large parts of invisible similarities. Therefore, the organizational culture is divided into the organizational climate (as superficial part) and the national culture (the deep culture part).
National culture can be noticed in human interactions and organizations, whereas corporate culture can be related to the environment of business organizations.
The common values, customs, practices and behaviors of people groups differ widely between countries; therefore employees bring their cultural inheritance inside the company.
All this components that exist outside the company, in the national culture, exist also inside the company as well.
Additionally, in cross borders M&A the culture of the company reveal people’s values and beliefs, which found its basis in the national culture.
Organizations are small and tiny entity with a distinct structure including a set of basic norms, values and assumptions, which are reflected in a variety of patterns of actions by employee and subcultures of the wide national culture.
There are different subcultures in one culture. According to Lees (2003), the best manner to make a difference between national and organizational culture is through sorting out organizational culture as subculture of national culture.
Researchers often consider organizational culture as the micro context and national culture as the macro-context in which employees operate.
In the same way, Hofstede et al. (1990) state that organizational cultures should be distinguished from national cultures; others assert that national culture must be consider along with corporate culture (Scott and Meyer, 1994; Sagiv and Schwartz, 2007; Dickson et al., 2000). The prevailing judgment in researches has been leaded by cross-national comparison based on the hypothesis that ‘culture’ is principally equivalent to ‘nation’.
The observations of Nancy Adler (1983 International Dimensions of Organizational Behavior) drive out the myth that organizational culture can Moderate or even erase the influence of national culture; a faith often found within large global corporations and concluded that national culture outweighs organizational culture.
(Lees, 2003:269) affirm: “To really understand the organizational culture in a foreign target, acquirers first need to Understand the national culture” .
According Dr. Geert Hofstede, there are differences between national and organizational cultures.
-The national culture is related to our deeply held values regarding and change slowly over the course of generations.
-in contrast, Organizational culture is comprised of broad guidelines which are rooted in organizational practices learned on the job.
The difference between national and organizational cultures is that the differences between national cultures are mainly found in the values of the different cultures, whereas differences between corporate cultures are mainly found in the practices between different companies. (Hofstede, 1991)
Some authors as Hellriegel & Slocum (1993), and Schein (1999) state that corporate culture is “a system of shared values and beliefs” that are common to the members of an organization. Hofstede (1997) argues that the core of organizational culture is not values, which he attributes to national culture, but “shared perceptions of daily practices” because an organization is not a nation.
The main difference between organizational and national cultures is the role that manifestation of culture, presented in the “onion‟ diagram as practices, play in each level (Hofstede, 1997) because Values are acquired early in the life, from family, school, surrounding environment. Practices are learned later, when already as an adult people start working (Hofstede, 1997).
In the process of merger and acquisition, what is often disregarded and underestimate is that the differences between cultures may create managerial challenges for the new entity mingling employee from different cultures.
For example in the merger, people from different cultural backgrounds and national cultures can be socialized into the culture of the merged company, and therefore follow the corporate culture, but if the corporate values are contradictory and counter the national cultural values, employees will be resisting the company’s corporate culture.
Since the corporate culture is argued to be deeply embedded in the organization’s history and in the behaviour of the employees, corporate culture creates difficulties when implementing change in M&A (Lees, 2003). Melewar and Wooldridge (2001) argue that corporate culture cannot be easily manipulated. Laurent (1986, in Weber et al., 1996), on the other hand, argues that it is possible to change artefacts and values and beliefs, but it is not possible to affect the underlying assumptions because they are derived from one’s national culture.
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However, researchers have demonstrated that organizational and national cultures are different constructs with distinct contents and influences (e.g., Bartunek, 1984; Hofstede et al., 1990; Sackmann, 1992; Chatman and Jehn, 1994; Numic, 2008).
(Hofstede et al., 1990) found evidence for this in a study conducted across 20 Danish and Dutch organisational units ,His research showed that organizational cultures differ mainly at the levels of symbols, heroes and rituals.
This stream of literature recommends distinguishing between national culture and organizational culture.
Finally, National culture can be seen as one of the most Influential factors that determine organizational phenomena. The company corporate culture reflects to a large extent the national culture of which the company is part (Schneider and Barsoux, 2003).
Hence, The differences between corporate and national cultures can lead to cultural clashes .
National culture:
Merger and acquisition join two companies reflecting two different national cultures.
Many differences can be established between national cultures because those cultures are shaped by common experiences, beliefs and organizations, national values and orientations
In M&A, national culture is more apparent to strangers because local people are not conscious of their own culture And employees are not willing to change their ways of doing things.
That’s why it’s essential for the acquiring company to understand the national culture of its target because it will be helpful during the acquisition while the acquirer have to plan the integration as well as shaping the corporate culture together (Schneider and Barsoux, 2003).
The culture of a nation where a company is set up influence many business variables For example differences in the organizational structure and coordination, career and reward system.
People carry their cultures, ways of thinking and behaving, with them into the work place (Hofstede, 1997). The ways in which a firm typically deals with aspects of organizing its business activities vary significantly in different countries and these variations have been shown to be in direct association with national cultural distance between organizations in different countries (Hofstede, 1997).
Kogut and Singh (1988) define national cultural distance as the degree to which cultural norms in one country are different from those in another country. A landmark in the research of national culture, and cultural differences, is Hofstede’s (1980) work on comparative culture, where he conducted a field survey of over 116 000 IBM employees across 40 countries.
Hofstede’s theory on national cultures
Hofstede (1980:21) defines culture as “collective programming of the mind which distinguishes the members of one human group from another” and proposes that cultural differences between nations can be described and differentiated along five dimensions.
Hofstede (2001) created a model through a study in 50 countries, which depicts five dimensions of cultures. This model emphasizes power distance, uncertainty, avoidance, masculinity and individualism.
(Salter, Lewis&Valdes2004, Phatak et al 2005, Gerhart&Fang 2005,Ardichvili&Kuchinke 2002)
Power Distance
The first dimension relates to the degree of equality/inequality between people in the society.
Power distance is defined as “the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally” (Hofstede, 2005, p46). Hofstede (1997) argues however,
that Power and inequality are extremely fundamental facts of any society and anybody with some international experience will be aware that ‘all societies are unequal, but some are more unequal than others’. Some countries differ in the way it handles inequality.
In the power distance index (PDI) a high score suggests that there is a large power distance between subordinates and bosses in organizations.
A low score, on the other hand, indicates small power distance and that there
is a limited dependence of subordinates on bosses (Hofstede, 1997).In lower power distance the superiors are more approachable while in higher power distance there is a emotional distance between subordinates an d bosses.
Individualism versus Collectivism
The second dimension focuses on the degree to which a society reinforces individual or collective achievement and interpersonal relationships.
Individualism is in societies in which the ties between individuals are loose it refers to the extent to which “everyone is expected to look after himself and his immediate family”. Collectivism, is the degree to which individuals are integrated into groups refers to the group “societies in which people from birth and onwards are integrated into strong, cohesive ingroups, which throughout people’s lifetime continue to protect the in exchange for unquestioned loyalty” (Hofstede, 1997:51).
As an example management in an individualistic society is the management of individuals. If incentives for example are given these should be linked to an individual’s performance, not to the group as in a collectivistic society (Hofstede,1997).
Masculinity-Femininity
This dimension regards the degree of importance of relationships versus tasks(op citp.119).
Hofstede (1997:82-83) argues that masculinity “pertains to societies in which social gender roles are clearly distinct” and femininity “pertains to societies in which social gender roles overlap.”
In masculine societies’, recognition, advancement and a challenging work are the factors Hofstede (1980) finds to be the most important. Whereas having a good working relationship with your superior, cooperation, employment security and to live in a desirable area are the most important factors for feminist societies (Hofstede, 1980).
This dimension pertains to the degree societies reinforce, or do not reinforce, the traditional masculine work role model of male achievement, control, and power.
A high Masculinity score indicates that a country experiences a higher degree of gender differentiation. In such cultures, males tend to dominate a significant portion of the society and power structure.
A low Masculinity score means a society has a lower level of differentiation and inequity between genders. In these cultures, females are treated equally to males in all aspects of the society.
Uncertainty Avoidance
The fourth dimension Hofstede (1980) investigated concerns the tolerance of ambiguity in different societies. He refers to it as uncertainty avoidance which can be defined as “the extent to which the members of a culture feel threatened by uncertain or unknown situations” (Hofstede, 2005p.167). One of the key differences between weak and strong uncertainty avoidance is the establishments of law and rules, where cultures with weak uncertainty avoidance have few and general la
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