Creating a Healthy Organizational Culture

By Ranjit Singh Malhi, Ph.D.


Various research findings underscore the significance of organizational culture. First, there is a positive correlation between an organization’s culture and long-term financial performance. Second, mergers frequently fail due to incompatible cultures. Third, organizational culture is significantly correlated with employee behaviour and attitude.1

What is Organizational Culture?

Organizational culture is basically a set of shared values and beliefs which interact with an organization’s people, structure and systems to produce behavioural norms. It is the “social glue” that binds an organization’s members together.

Values are principles held in high regard such as customer satisfaction, employee autonomy and innovation. Beliefs are assumptions about what is true, such as quality work will be rewarded and promotions are based on merit. Norms are standards of expected behaviour or established ways of doing things which are developed on the job. Norms flow largely from values. Examples of norms are disagreeing tactfully, sharing information, and helping one another (teamwork).

A healthy corporate culture is one that is appropriate to the success of the organization in its operating environment and the well-being of organizational members. 

Importance of Organizational Culture

  • Enables the attainment of strategic goals when there is a “fit” between culture and strategies.
  • Facilitates decision-making by reducing disagreements about which premises should prevail since there is greater sharing of beliefs and values.
  • Increases employee commitment and loyalty because of their sense of pride and emotional attachment to certain core values.
  • Facilitates communications since the employees speak a “common language” and shared values provide cues to help interpret messages.
  • Promotes internal cooperation when core values encompass mutual trust and “family” feeling.
  • Saves times as it spells out how people are to behave most of the time.
  • Provides meaning and purpose to work.

Main Cultural Attributes of Excellent Organizations

  • Customer satisfaction is priority one.
  • Doing the right things right the first time.
  • Open and honest communication.
  • Creative and fact-based problem solving.
  • Continuous improvement as a way of life.
  • Rewards and promotions based on merit.
  • Openness to change.
  • Teamwork throughout the organization.
  • Participative management.
  • Employee empowerment.

How Leaders Embed and Transmit Culture

  • What leaders pay attention to, measure, and control.
  • Leader reactions to critical incidents and organizational crises.
  • Deliberate role modelling, teaching and coaching by leaders.
  • Criteria for allocation of rewards and status.
  • Criteria for recruitment, selection, promotion, retirement, and excommunication.
  • The organization’s design and structure.
  • Organizational systems and procedures.
  • Design of physical space, facades, and buildings.
  • Stories, legends, myths, and parables about important events and people.
  • Formal statements of organizational philosophy, creed, and charters.2

Changing Organizational Culture

Organizational culture can be changed as evident by successful turnarounds of Chrysler by Lee Iacocca and Jaguar Cars by John Egan in the 1980s. Both of them created a new culture to match the change in strategies. Nevertheless, changing organizational culture is a difficult and time-consuming process, especially in the case of a “strong” culture where the values are deeply entrenched. 

Steps in Changing Organizational Culture

  1. Assess the characteristics of the existing culture.
  2. Determine the desired culture.
  3. Communicate the desired culture to all organizational members.
  4. Leaders put into operation new culture in the behaviour.
  5. Conduct appropriate training at all levels to imbibe new culture.
  6. Reinforce the desired behaviour through recognition and reward systems.
  7. Continually evaluate, monitor and assess to maintain the desired culture.

Five Essential Conditions for Successful Cultural Transformation

  1. A relevant focus. Cultural change efforts must focus on clearly defined results and aligned with organizational mission, goals and strategy.
  2. Top management’s commitment and active involvement.
  3. Comprehensive involvement. According to W. Mathew Juechter, Caroline Fisher and Randall J. Alford, employees at all levels have to be engaged, have to be involved, and have to take ownership of the cultural change.4
  4. Facilitate employee shift to new culture. Provide appropriate training and other support which permits employees to embrace the new culture.
  5. Reward desired behaviours. Establish a reward system that reinforces those behaviours that support the new organizational values.


1. See Robert Kreitner and Angelo Kinicki, Organizational Behavior, 4th ed. (New York: McGraw-Hill, 1998), p. 66. 
2. Source: Edgar A. Schein, Organizational Culture and Leadership (San Francisco; Jossey-Bass, 1985), pp. 223-243. 
3  Arthur A. Thomson, Jr. and A. J Strickland III, Strategic Management: Concepts and Cases, 11th ed. (Singapore: McGraw-Hill Book Co., 1999), p. 351. 
4. See W. Mathew Juechter, Caroline Fisher and Randall J. Alforg, “Five Conditions for High-Performance Cultures”, Training and Development, May 1998, p. 66. 

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