THE ROLE OF ORGANIZATIONAL CULTURE FOR SUSTAINABLE DEVELOPMENT OF ENTREPRENEURSHIP

Lotārs Dubkēvičs
BA School of Business and Finance, Latvia

Ivars Namatēvs
School of Business Administration Turība, Latvia

Introduction

Development of sustainable entrepreneurship means creating certain management models leading to implementation of  appropriate business strategies and other necessary activities, which would help to ensure the needs of an enterprise itself and its stakeholders. Such a development can be divided into two time-scale dimensions – present and future. One important aspect which should be especially emphasized is sustainability. It should be oriented towards promotion of organization's long-term objectives through human resource management (HRM) and environment development (Business strategy for Sustainable Development 1994).

The question of sustainable development of an organization is directly related to organization’s long term effectiveness.   Wallach (Wallach, 1983) determined two main criteria of effectiveness of an organization:

• results (what);
• how the results are achieved (how).

The long-term enterprise strategy is based on two criteria:

• sustainable profitability;
• strong organizational culture.

An organizational culture has to respond to the question “how” (Wallach 1983).

The purpose of this article is to assess internal effectiveness (based on organization’s self-assessment research) of the  organizational culture of SEB bank, one of the leaders in the commercial banking sector of Latvia. The research has been done with an acceptance and support of the management of SEB bank.

The research has some limitations regarding the need to expand its scope and supplement it with an objective evaluation of effectiveness to be compared with the best practices of the industry.

1. Organizational culture

At   present there are dozens of organizational culture definitions. Most of the authors of the management science define organizational culture as a value system (Schein 1985, 1990; Vanaerde, Jowrnee 2003; Taormina, 2004; Barets 2008).

Schein is the author of the most popular organizational culture definition: an organizational culture is „[…] a pattern of basic assumption – invented, discovered, or developed by a given group as it learns to cope with its problems of external adaptation and internal integration – that has worked well enough to be considered valid and therefore, to be taught to new members as the correct way to perceive, think, and feel in to those problems”(Schein 1985, 9).

The most famous bipolar classifications of an organizational culture are: strong / weak, functional / dysfunctional, efficient / inefficient, positive / negative cultures (Dubkevics 2009).

Deal and Kennedy stated that one of the ineffective features of an organizational culture is the existing subcultures in the organization itself which can be laid to have different views (Deal, Kennedy 1982).

Weak organizational cultures are characterized by a high level of cultural entropy – a proportion of energy wasted on non-productive activities by a group of people (Barets 2008).

Any organizational culture, as it was mentioned before, consists of subcultures. Subcultures are relatively independent systems of values, norms and behavioral stereotypes that exist in a cultural context and are not in a sharp conflict with it (Zepa 1997).

 Schein determines three general subcultures which exist in  every organization:

• subculture of employees (staff subculture);
• subculture of creators (staff subculture);
• management (leadership subculture) (Schein, 1985).

On the one hand, organizations are the mirror images of their leaders (Collins 2001), because leaders are the main players towards creating organization culture, shaping organization aggregativity, effectiveness, and promoting sustainable development (Schein 1985).

On the other hand, short-term and long-term results depend on people's behaviour on both sides of power verticality (Zaleznik  2008).

It determines the basic research criteria for an organizational culture evaluation:

• typological matching degree of an organizational culture at staff and leadership subculture levels;
• degree of approximation between the existing and the preferred organizational culture models in both subcultures;
• degree of approximation of an organizational culture values in both subcultures.

This research is based on assumptions that effective organizational culture is characterized by a high degree of approximation between subcultures at all levels of research criteria.

2. Organizational culture typology theories

Currently there are about one and a half dozen of typological theories for assessment of an organizational culture.

 Quinn and Cameron determine four basic types of organizational culture:

• hierarchy culture;
• market culture;
• clan culture;
• adhocracy culture.

This typology is based on four criteria:

• flexibility and discretion;
• stability and control;
• external focus and differentiation;
• internal focus and integration.

Flexibility and discretion

Figure 1: Compenting Values Framwork (Cameron, Quinn, 1999, p32)

In terms of typology Quinn`s and Cameron`s approaches are very similar to Wallach`s theory (Wallach 1983). Wallach uses the term “cultural dimensions” to emphasize that cultures are not monolithic, but multidimensional subculture phenomena and that we can only talk about the dominants. Wallach determines three main cultural dimensions:

• bureaucratic;
• innovative;
• supportive.

The difference between Wallach's approach and that of the authors of the article is more terminological. The similarity of both theories is reflected in Table 1.

3. Organizational culture research

Example of an organizational culture research design is presented below (Dubkevics, Barbars 2010) which has been realized in 2010.

Respondents

The survey included the questionnaires of 84 respondents. The majority (76%) were  female and the rest (24%) male respondents. All the respondents were personal adults of the bank aged from 23 to 62. The majority of the respondents were to be laid in the age group from 31 to 45, (45%). All the respondents who participated in the research were subdivided into two groups – staff and management. The outcome of the research was presented for each group separately. The  majority (69%) of all respondents represented the management – mainly, medium level managers, while (31%) respondents represented the staff of the bank.

Measures

1. The main instrument to be used for measuring the organizational culture was the Organizational Culture Assessment Instrument (OCAI) by  Cameron and Quinn. The questionnaire helped to determine the dominant organizational culture type, degree of approximation of the existing and preferred culture, as well as effectiveness of the organizational culture model.
2. The organizational culture was also measured by using  Wallach (Wallach, 1983) 24-item Organizational Culture Index (OCI), which profiles culture into three dimensions – bureaucratic, innovative and supportive. Using a four-point scale (1 = Does not describe my organization, to 4 = Describes my organization most of the time), respondents were asked to assess how well the adjectives describe their company. OCI was used as a retest method for OCAI. This instrument allows determining the dominating existing cultural type.

Results

The responses obtained from the management and staff were summarized to find out the average response rate in accordance with OCAI for the existing and preferred culture profiles. The existing and preferred culture results are shown in the competing values framework radar graph. Each line represents 5 points. The maximum points to be reached are 35. First, the graf shows the culture profile for staff divided by existing (line) and preferred (dot line), see Fig. 2.

Figure 2: Culture profile 1 under staff by OCAI

The staff prefers the hierarchy culture which, according to the questionnaire, is currently the existing culture type in the bank. Hierarchy culture is characterized as a very formalized and structured working place for employees. Besides, there are written procedures that govern what employees have to do. Such formal rules and policies can keep an organization and its staff together. The long term target for such an organization is stability and performance. Stability has to be one of the most important parts of banking business. Employees also appreciate the security of their employment and predictability of such an organization type.

The research done shows that the hierarchy culture is still dominating as an existing organizational type,as well as the  preferred organizational culture. Although the staff pointed out that preferred organizational culture should be more balanced among all the other organizational culture types.

Next, the same analysis has been done for management, see Fig. 3.

Figure 3: Culture profile 2 under management by OCAI

Management has showed an ever-growing interest rate in transforming from a hierarchy culture, which is currently stated as the main, to a clan culture. Both a hierarchy culture and a clan culture are focused on internal environment maintenance. While the hierarchy culture is a very formalized and structured working place, which specifies the need for stability and control, clan culture displays a very friendly working place, where employees share their behaviour by themselves. It is like an extended family where leaders are considered to be mentors or even parents. The clan culture organization type is held together by loyalty and traditions. This type of the organizations emphasizes the importance of  premium and teamwork, participation and consensus.

The next step was comparing the existing evaluation of culture preferences by staff (line) and management (dot line), see Figure 4

Figure 4: Culture profile 3 under existing staff and management by OCAI

The analysis of the existing organizational culture shows that both – staff and management, replicate the hierarchy culture as a dominating organizational culture type, searching maximum level (35 points) from both staff and management point of view.

There is a difference regarding  the second dominating culture type within the organization which was characterised by the management as  clan culture, while the staff preferred market culture.

The analysis confirmed that the staff, as well as management, first of all believe and accept that the organization is based on stability, formal rules and policies. Mismatch between the staff and management opinions became more apparent when the management stated that organization is a family of loyal and self motivated employees, while the staff saw it more as a group of competitive and goal oriented employees with tough and demanding leaders on top of it.

The last graph shows the results when comparing the preferred staff (line) and preferred management (dot line) position on evaluation of an organizational culture, see Fig. 5.

Figure 5: Culture profile 4 under preferred staff and management by OCAI

There is a mismatch regarding the preferred culture between the staff and management. The staff has preferred hierarchy culture while the management has marked clan culture. It shows that staff has accepted hierarchy as an existing dominating organizational culture type and most suitable for the organization in question. From the management perspective clan culture should dominate in the preferred organizational culture. The management would like to be see the organization as more employee oriented and based more on trust instead of exhibiting pure control functions.

Conclusions

1. With a sufficient degree of certainty the authors of the article can state that the dominant organizational culture type is hierarchical and market (Quinn, Cameron), or bureaucratic organizational culture dimension (Wallach); within the framework of Wallach's research methodology the discussion provokes a relatively high level of supportive organization culture dimension.
2. The organizational culture in question is typologically diverse. It has strong innovative culture elements which in the near and distant future can serve as an important factor for sustainable development.
3. The organizational culture (HRM environment) can be considered to be effective as the degree of approximation of the existing and preferred culture at both (staff and management) subculture levels is high. In the context of the research done, the authors can conclude that an effective organizational culture promotes sustainable development of the organization. 

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