“In the quest for success, more and more organizations are now understanding the pivotal role that organizational culture plays in employee commitment and continuity”.
Culture represents the beliefs, ideologies, policies and practices of an organization. It gives the employees a sense of direction and also controls the way they behave with each other.
The work culture brings all the employees on a common platform and unites them at the workplace. Organisational culture is the way that things are done in an organisation, the unwritten rules that influence individual and group behaviour.
“Every organization has its own culture. Almost everything that affects an organization’s ability to compete and respond successfully to changes in the external environment – ultimately, the organization’s success or failure – is an aspect of that culture”
Understanding the factors that influence organizational culture is as important as understanding culture itself because this knowledge will help organizations to take swift action in case of an undesirable shift in the workplace culture and also identify factors responsible for the changes.
There are numerous factors that have been identified as influencers of organizational culture, however, one of the most important groups of factors which influences every organization’s culture across the globe are the external environmental factors. This group of factors mainly consists of political, economic, social, technological, legal and environmental factors and is clubbed together with the acronym PESTLE. Discussed below is how these factors impact organizational culture:
Political Factors:
Government policies and agendas can have a positive or negative impact on the organizational culture. A bill passed in the parliament can impact the way the organization operates which in turn impacts the work culture.
For example, the extension of maternity leave from 3 months to 6 months has made it comparatively easier for new mothers to return back to the workforce with relatively less amount of stress when compared to those who had only 3 months of maternity leave. This could lead to more women returning back to work after having a child which impacts the gender ratio, communication style and level of aggressiveness, all of which impacts the organization’s culture.
On a smaller scale, relationship politics may also influence culture. Competing against other organizations for clients or market share can be political in nature and influence the way an organization chooses to operate. Politics on a small or a large scale can change company goals and objectives and the way they choose to work towards them.
Economic Factors:
The economy plays a role in our everyday lives. How much money we make, how much money we spend, wants and needs, competitive pricing, etc. are all factors in financial decisions we make on a daily basis.
Organizations are also heavily influenced by economic factors. A market crash or a recession will directly impact the sales of an organization. When people are no longer able to afford a product or choose to spend their money elsewhere, companies are directly impacted.
How the economy affects the company as well as how it affects the people working there will have an effect on the culture of the company. For example, recession can lead to heavy cost-cutting and layoffs which in turn affects the employee morale leading to a communication barrier between the management and the employees. This could also lead to a slowdown in innovation and increase risk aversion within the organization.
Technological Factors:
Technology is a huge part of today’s workforce. It is constantly evolving, making it challenging at times for companies and their employees to keep up with the change. Over the years, technology has dramatically changed how companies do business and it continues to make waves with every new technological innovation.
Usage of technology has a great influence on organizational culture. For example, usage of software which leads to ease of communication can shrink the communication gap in a global organization and makes it possible for every employee to be in touch with other colleagues, managers or clients. This would, in turn, make the organizational culture more social with easy communication across levels.
However, on the flip side, this could make the culture more individual-oriented, particularly with increasing interaction between human and machine as it reduces face-to-face interaction between humans.
Social Factors:
Public opinion and societal expectations are largely external factors that force companies to reevaluate how they operate. If the public has a negative perception of an organization, it could have a detrimental impact on the company’s bottom line. Society has high expectations for organizations to be socially responsible. Social responsibility incorporates a wide variety of topics including community outreach, diversity promotion, sustainability, and high ethical standards.
Each of these topics needs to be incorporated into a company’s culture in order to be successful. With the scrutiny of the public and instant access to information through technology, companies are well monitored by society.
Companies are also impacted by external changes throughout society, like the impact of the #MeToo movement aimed at eliminating sexual harassment. Numerous firms have seen high-level executives leave the company after credible charges had been levelled. Companies are also responding to gender equality issues by reviewing the salaries of male and female employees to make sure comparable jobs receive comparable pay.
Legal Factors:
We abide by the law and legal restrictions in our day to day life. When we drive, we follow the speed limit to avoid a challan. When we shop, we have to pay a mandated GST. Similarly, we can be refused entry to a hotel if we don’t follow the mandated dress code. These are all small examples of how laws, rules and regulations impact our daily lives and the decisions we make.
While legal factors are outside of our control, they still influence us and creates boundaries in which we need to operate. The same goes for organizations. Companies need to work within the legal boundaries of the country, which in turn affects the culture. Labour laws, Companies Act, Trade Union Acts etc. shapes how the business is done, how people are recruited, and compensated this also influences company culture.
A multinational organization with offices in various countries across the globes will have to be cognizant of the varying local laws in different countries and how they can influence the culture in that specific country.
Environmental Factors:
The dependence of culture on the external environment is a time-honoured phenomenon. The geographical location, weather, climatic condition, environmental offsets etc influence how people work in a particular region which naturally affects the culture. For example, difficult commute to work or extreme weather conditions can lead to more and more people opting for work from home option, which in turn affects the team dynamics and the way we communicate with others.
What we grow, what we eat, what we wear, everything influences our lifestyle and the way we behave. These same factors also influence organizational culture since people define an organization.
To conclude we can say that a thorough awareness and understanding of the external and internal factors are critical for building a culture which fosters both growth and sustainability.