Organizational culture is the essence of what is important to the organization. For itself, it stipulates and proscribes undertakings, and it defines the “dos and don’ts” that oversee the behavior of its members.
An organization’s culture serves at least seven important functions:
- Specifies what is of principal importance to the organization, the standards against which its successes and failures should be gaged.
- Determines how the organization’s resources are to be used, and to what ends.
- Establishes what the organization and its members can expect from each other.
- Makes some methods of controlling behavior within the organization legitimate and makes others illegitimate—specifically, it defines where power lies within the organization and how it is to be used.
- Selects the behaviors in which members should or should not engage and prescribes how these are to be rewarded and punished.
- Sets the tone for how members should treat each other and how they should treat nonmembers: competitively, collaboratively, honestly, distantly, or hostilely.
- Instructs organizational members about how to handle the external environment: aggressively, exploitatively, responsibly, or proactively.