Intro to Organizational Behavior (OB): Organizational Culture and Change - Creating and Sustaining Culture Founders, Values Selection Socialization Top Management Rewards

Creating and Sustaining Culture: Study Guide

What This Is

Organizational culture is the shared values, beliefs, and norms that shape how employees think, feel, and behave. It matters because culture drives performance, retention, and innovation—companies with strong cultures (e.g., Netflix’s "Freedom & Responsibility") outperform peers by 4x in revenue growth. Culture is built and sustained through founder values, selection, socialization, top management actions, and rewards.

Key Theories & Models

• Schein’s Three Levels of Culture: Artifacts (visible symbols, e.g., Google’s nap pods), Espoused Values (stated principles, e.g., Zappos’ "Deliver WOW"), and Basic Assumptions (unconscious beliefs, e.g., Southwest’s "employees come first"). Implication: To change culture, target basic assumptions—not just surface-level artifacts.

• Attraction-Selection-Attrition (ASA) Framework (Schneider): People are attracted to, selected by, and stay in organizations that fit their personality (e.g., Patagonia’s eco-conscious culture attracts outdoor enthusiasts). Implication: Hiring for cultural fit (not just skills) strengthens culture—but risks homogeneity.

• Socialization Model (Van Maanen & Schein): Newcomers learn culture through collective (group training, e.g., Disney’s "Traditions" program) vs. individual (one-on-one mentoring) and formal (structured onboarding) vs. informal (watercooler chats) processes. Implication: Formal socialization reduces turnover (e.g., Zappos’ 4-week culture immersion).

• Leadership & Culture (Schein): Founders and top managers embed culture through what they pay attention to (e.g., Jeff Bezos’ obsession with customer metrics), react to crises (e.g., Satya Nadella’s shift to "growth mindset" at Microsoft), and allocate rewards (e.g., Netflix’s "Keeper Test": "Would we fight to keep this employee?"). Implication: Leaders’ daily actions—not speeches—shape culture.

• Reward Systems & Culture (Kerr’s "Folly of Rewarding A While Hoping for B"): Misaligned rewards undermine culture (e.g., Wells Fargo’s sales quotas led to fake accounts; contrast with Southwest Airlines’ profit-sharing, which reinforces teamwork). Implication: Rewards must reinforce behaviors (e.g., collaboration), not just outcomes (e.g., individual sales).

• Competing Values Framework (Quinn & Rohrbaugh): Cultures fall into four types: Clan (collaborative, e.g., Zappos), Adhocracy (innovative, e.g., Google X), Market (competitive, e.g., Amazon), and Hierarchy (controlled, e.g., McDonald’s). Implication: No "best" culture—alignment with strategy matters (e.g., Netflix’s Market culture fits its high-performance focus).

• Organizational Identity (Albert & Whetten): Culture is sustained when employees identify with the organization (e.g., Apple’s "Think Different" ethos). Threats to identity (e.g., layoffs) can erode culture. Implication: Communicate why changes align with core values (e.g., Microsoft’s shift to cloud computing framed as "empowering every person").

Step-by-Step Application: How to Build/Sustain Culture

1. Define Core Values (Founder’s Role):
2. Start with the founder’s non-negotiable beliefs (e.g., Reed Hastings’ "Freedom & Responsibility" at Netflix).

3. Action: Hold workshops to distill 3–5 values (e.g., Patagonia’s "Build the best product, cause no unnecessary harm").

4. Hire for Culture Add (Selection):

5. Use behavioral interviews (e.g., "Tell me about a time you took initiative" for Netflix’s culture) and culture-fit assessments (e.g., Zappos’ "Would you hang out with this person?").

6. Avoid: Hiring clones—seek diversity in values, not demographics.

7. Onboard for Immersion (Socialization):

8. Combine formal (e.g., Southwest’s "New Hire Orientation") and informal (e.g., mentorship) socialization.

9. Example: Google’s "Noogler" program includes peer buddies and 20% time to explore projects.

10. Model Culture from the Top (Leadership):

11. Leaders must embody values (e.g., Satya Nadella’s humility at Microsoft) and reinforce them in decisions (e.g., firing a high performer who violates values).

12. Tool: Use 360-degree feedback to assess alignment.

13. Align Rewards with Values:

14. Tie bonuses to behaviors (e.g., Salesforce’s "1-1-1 Model" rewards volunteerism) and peer recognition (e.g., HubSpot’s "Culture Awards").

15. Warning: Avoid rewarding individualism in a team culture (e.g., Wells Fargo’s sales quotas).

16. Measure and Adapt:

17. Use culture audits (e.g., Denison Organizational Culture Survey) and exit interviews to track alignment.
18. Example: Netflix’s "Culture Memo" is updated annually based on feedback.

Common Misconceptions

• Misconception: "Culture is just perks (e.g., free food, ping-pong tables)." Correction: Perks are artifacts—real culture is about values (e.g., Google’s perks support its "psychological safety" value, not the other way around).

• Misconception: "Strong culture = high performance." Correction: Aligned culture drives performance (e.g., Enron’s "cutthroat" culture was strong but toxic). Weak cultures (e.g., bureaucratic) or misaligned ones (e.g., Blockbuster’s "store-first" culture vs. streaming) fail.

• Misconception: "Culture is static—once set, it doesn’t change." Correction: Culture evolves with leadership (e.g., Microsoft’s shift from "know-it-all" to "learn-it-all") and external shocks (e.g., Zoom’s culture adapting to remote work).

• Misconception: "Hiring for culture fit means hiring people like us." Correction: Culture add (diverse perspectives that enhance values) > culture fit (homogeneity). Example: Airbnb’s "Belong Anywhere" values diversity.

• Misconception: "Rewards only need to be financial." Correction: Non-financial rewards (e.g., Netflix’s "unlimited vacation") can reinforce culture more effectively than bonuses.

Exam / Case Interview Tips

1. Question Pattern: "How would you diagnose a culture problem?"
2. Answer: Use Schein’s Three Levels (artifacts-values-assumptions) and Denison’s Culture Survey (mission, adaptability, involvement, consistency).

3. Example: If employees say "We value teamwork" (espoused) but bonuses are individual (artifact), the assumption is "individual performance matters more."

4. Tricky Distinction: "Culture vs. Climate"

5. Culture: Deep, stable values (e.g., Southwest’s "LUV").
6. Climate: Temporary perceptions (e.g., "Our team is stressed this quarter").

7. Trap: Climate can change quickly; culture requires long-term effort.

8. Case Interview Hack: "How would you change a toxic culture?"

9. Framework:

   1. Assess (interviews, surveys).
   2. Align (new leadership, e.g., Satya Nadella at Microsoft).
   3. Socialize (new onboarding, e.g., Zappos’ culture book).
   4. Reward (tie bonuses to new behaviors).

10. Question: "Why do mergers often fail due to culture?"

11. Answer: ASA Framework—employees from different cultures attrit (e.g., AOL-Time Warner merger failed due to clashing "old media" vs. "tech" values).

Quick Practice Scenario

Scenario: A tech startup’s founder values "radical transparency" (e.g., open salaries, brutal feedback). After hiring 50 employees, morale drops—employees complain about "public shaming" during meetings. Using Schein’s Three Levels, what’s the issue, and how would you fix it?

Answer: The artifact (open feedback) clashes with the basic assumption (feedback = support, not punishment). Fix: Redefine "transparency" to include psychological safety (e.g., Google’s "Project Aristotle" found safety predicts team success) and train managers in constructive feedback (e.g., Netflix’s "4A Feedback").

Last-Minute Cram Sheet

1. Schein’s 3 Levels: Artifacts (visible), Espoused Values (stated), Basic Assumptions (unconscious).
2. ASA Framework: Attraction-Selection-Attrition shapes culture.
3. Socialization: Collective vs. individual, formal vs. informal.
4. Leadership Embeds Culture: What leaders pay attention to, react to, and reward.
5. Kerr’s Folly: Rewarding A while hoping for B (e.g., sales quotas-fake accounts).
6. Competing Values: Clan (collab), Adhocracy (innovate), Market (compete), Hierarchy (control).
7. Culture-Climate: Culture = deep values; climate = temporary mood.
8. "Strong culture"-"good culture" (e.g., Enron’s toxic strength).
9. Hire for culture add, not culture fit (avoid homogeneity).
10. Netflix’s "Keeper Test": "Would we fight to keep this employee?" (rewards alignment).