CHARACTERISTIC ELEMENTS OF CORPORATE CULTURE AND

LEADERSHIP Submitted by

Tarik Serefli

Study course Business Psychology

FH Riedlingen

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Table of contents

PART A INTRODUCTION ....................................................................................................... 2

1. Objective of this term paper .................................................................................................... 2

2. Structure of the term paper ..................................................................................................... 2

PART B THEORETICAL BASICS............................................................................................ 3

1.0 Organizational and corporate culture ..................................................................................... 3

1.1 Definition ................................................................................................................... 3

1.2 Significance ................................................................................................................ 4

2.0 Leadership ............................................................................................................................. 5

2.1 Definition ..................................................................................................................... 5

2.2 Levels of leadership ...................................................................................................... 6

2.3 Management styles ...................................................................................................... 7

3.0 Corporate culture and leadership ............................................................................................ 7

3.1 Corporate culture management as a leadership issue .................................................... 7

3.2 Management of corporate culture through cooperative leadership style ........................ 9

PART C CONCLUTION ........................................................................................................ 11

1. Conclusion ............................................................................................................................ 11

2. Outlook ................................................................................................................................. 12

REFERENCES ……………………………………………………………………..........................13

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PART A INTRODUCTION

1. Objective of this term paper

The meaning of organizational culture is often used with keywords such as corporate

identity and corporate culture. But what is the meaning of organizational culture? What

are the characteristic elements and how do decision-making processes and leadership in-

fluence it?

This term paper focuses attention on the importance of corporate culture practices

and the influence of leadership to the culture and behavior of its members. On the basis

of scientific literature and learned journals theoretical fundamentals will be explained

and discussed critically. Through the comparison of various theories an appropriate

understanding will be provided in order to understand the close relationship between

corporate culture, leadership and business success.

According to a study published in “Zeitschrift für Führung und Organisation” more than

1,000 executives and experts of organizational development in Germany, Austria and

Switzerland provided information to this topic. The authors verified the results of the

study through interviews with senior managers and organizational experts as well as the

analysis of over 100 projects of the Boston Consulting Group.

The survey „Organization in 2015“ comes to the conclusion that soft factors like coop-

eration competence will become more important and it is even changing from a cultural

to a value adding factor.1

For this reason the emphasis of this paper is set on human related fields of leadership as

it has greater effects to corporate culture than factual references. In consequence, the

cooperative leadership model will be examined in more detail.

2. Structure of the term paper

After the introduction the present work is divided into two parts. Part B deals with the

conceptual basics of corporate culture and its importance for today’s business success.

The next step puts its main focus on the definition of leadership and theories within the

context of certain levels and styles of leadership.

1 Cf. Strack,R./Frensch, R./Bannert, F/Oskar, P.G./Wilfried, K./Sulzberger, M.: 2010,

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Afterwards the fundamental tasks of corporate culture management will be highlighted

and discussed critically.

In the following chapter, the attention is directed on the strengths and weaknesses of

cooperative leadership as it has great influences on the corporate culture in today’s pro-

fessional life. Part C is a summary and reflection of this term paper finalized with own

personal conclusions.

PART B THEORETICAL BASICS

1.0 Organizational and corporate culture

1.1 Definition

Every human being experiences a primary socialization in his childhood and youth, in

order to become familiar with the basic values and norms of his cultural environment.

Socialization reduces the complexity in coexistence by certain rules and is considered

almost automatically without being arranged from the outset. In the early 1980´s socio-

scientific concepts of culture were transferred within organization and company related

fields.2

At that time authors argue that the quality of a company lies in the way of how people

communicate with each other and learn how to feel and act. Nowadays the corporate

culture is firmly established as a key success factor in theory and practice considered as

a soft and comprehensive concept that can lead to hard impacts.3 There is no standard

definition of the term “organizational culture”, but most authors probably agree in this

area with the statements of Geert Hofstede4

“Culture is the collective programming of the human mind that distinguishes the

members of one human group from those of another. Culture in this sense is a system of

collectively held values.”

2 Cf. Schein, E.: 2003, p.44f 3 Cf. Jung, R./Bruck, J./Quarg, S.: 2007, p.108ff 4 Cf. Hofstede, G.: 2009, p.393

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Corporate culture is the entirety of shared values, norms and shared thinking along with

behavioral patterns that shape the decisions, actions and activities of the organization

members.5 It is considerably characterized by the corporate vision and objectives as

well as by the corporate management behavior.6

The organizational culture is holistic because it refers to a whole that is greater than the

sum of its parts. It reflects the history of an organization and is related to fields of

anthropology, e.g. through rituals and symbols. In addition, it is maintained by the

group of people who form the organization and create a specific social structure. The

corporate culture is a soft factor and is difficult to measure and amend.

All those people who deal with the organization are also part of the corporate culture,

including customers, suppliers, labor organizations, neighbors, government agencies

and the press.7

1.2 Significance

The corporate culture is the totality of shared values, norms, thoughts and behavioral

patterns that shape the decisions, actions and activities of its organization members.

Employees who identify themselves with the cultural guidelines are motivated by rea-

sons of well participation and interaction with chief executives as well as sense of to-

getherness with the ideals of the company.8

The perception of social security leads to more commitment, motivation and team spirit.

Through the self-coordination of the culture the formal demands for regulation and con-

trol can be restricted. This results in faster decision-making processes and lower coordi-

nation costs. By providing a common language to all members of stuff the communica-

tion efficiency will be increased. Specific cultural guidelines lead to more stable busi-

ness operations. As a final result the culture can be associated with positive characteris-

tics in terms of public and corporate relation, e.g. image issues.9

5 Cf. Heinen, E./Dill, O.: 1990, p.17 6 Cf. Steinmann, H./Schreyögg, G.: 2005, p.606ff 7 Cf. Hofstede, G.: 2009, p.393 8 Cf. Heinen, E./Dill, O.: 1990, p.17 9 Cf. Mayrhofer, W./Meyer, M.: 2004, p.1029

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2.0 Leadership

2.1 Definition Leadership is a process of social influence. It is the impact of humans to other humans

in order to induce a specific activity or a particular behavior. Leadership is defined as a

regulation or control of the organization and the behavior of its members.10

Leadership is associated with the following characteristics:

Target reference

The leader is urged to adjust the behavior of the employee on a specific objective.

Influence without reference target, i.e. the meaning of leadership has no significance.

Motivation of stuff

With the help of certain management tools and communication strategies the leadership

empowers the motivation and potentials of the employees.

Interaction

The influence of leadership is characterized with interactive relationships to the

activities and the behavior of employees. The management process is based on mutual

social influence.

Asymmetric relationships

The leaders influence has greater impact on the employees as the other way round.

Directness of the relationship

The influence between leaders and the employees should be conducted directly and

cannot be mediated successfully by a third party.

Informational Communication

The open transmission of information is an essential characteristic of leadership.11

10 Neuberger, O.: 2002, p.2ff 11 Cf. Jung R./Bruck, J./Quarg, S.: 2007, p.182f

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2.2 Levels of leadership Management includes all functions and negotiations for successful planning, target ori-

ented design and control of a company. The responsibilities of management can be

divided into administrational levels that precise the scope of the objectives.

In the literature, the following administrational levels of action are displayed:

The normative management includes superior and comprehensive decisions based on

the values of the company´s leadership.

The central task of management is the normative definition of a company´s self-image.

This self-concept is determined by objectives, values, principles, norms, behaviors and

rules in order to ensure the companies viability. For this purpose the company needs its

own strong personality and identity. The core task of the normative management is to

shape the relationships between corporate environment and business. The normative

leadership has for this reason a comprehensive impact to all activities of a company.

The clear formulation of mission statements and objectives as well as corporate culture

displays a crucial part of the normative aspects of leadership.

The normative personnel management has also a major influence on the corporate

identity and characterizes the philosophy of leadership. It represents the ethical, moral

and social attitudes and values towards employees. The personnel policy should be

consistent with the corporate culture that would otherwise lead to resistance and

conflicts among employees.

The strategic management derives from the idea of normative standards and develops

new and existing potentials on the market. These strategies are formulated, selected and

implemented with the help of certain analytic methods, systems and management tools

and builds the framework in which the operational activities are performed.

The operative management coordinates the ongoing activities and ensures the

implementation of strategies in the day to day businesses.

The operational management deals with the planning, management and control of the

ongoing activities of a company to take advantage of the existing potentials for success

as efficiently as possible.12

12 Cf. Dillerup, R./Stoi, R.: 2007, p.35 et seq.

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2.3 Management styles

The leadership style continuum of Tannenbaum / Schmidt (1958) differentiates the

styles of leadership within a continuum of seven ideal-typical behaviors and the chance

of employees to take part in decision-making processes.

The typology is based on a purely authoritarian style of leadership from different inter-

mediate steps up to democratic style of leadership.

Authoritarian: The supervisor decides without involvement of staff and self-contained.

Patriarchal: The boss tries to convince the employees before he/she decides.

Advice: The leader informs employees about the decisions he/she proposes. Employees

have the opportunity to express their opinion and put forward their suggestions before

the supervisor concludes the final decision.

Informative: Answers from employees are allowed before it comes to a decision. The

leader is urged to achieve the acceptance of his/her own decisions.

Cooperatively: Once the supervisor has illustrated the problem, the employees develop

alternative solutions before the leader selects the most favorable ideas.

Participatory: The leader illustrates the problem and determines the scope in which the

group can autonomously find new solutions.

Democratic: The supervisor adopts the jointly developed solution of all team members.

According to Tannenbaum / Schmidt none of the seven styles of leadership can be pre-

ferred. A successful leadership is determined by certain situations and from the behavior

of the group members. A successful manager needs to assess the different factors and

adjust his/her leadership behavior of the given situation properly.13

3.0 Corporate culture and leadership

3.1 Corporate culture management as a leadership issue

The following chapter summarizes the main steps that are necessary to manage a

corporate culture and to deal with it in daily business. In a critical discussion the

13 Cf. Tannenbaum, R./Schmidt, W.H.: 1958, p.95 et seq.

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responsibilities of leadership management and concomitant factors such as

organizational strategy, process design as well as the right personnel selection and

promotion will be highlighted shortly and discussed critically.

The theory of Professor Witte Eberhardt declares that successful innovation in organiza-

tions require the concerted action of two different promoters. The “charismatic leader”

and the assistance of the “functional expert”.14

The functional expert should create a correct diagnosis on the current state of the

corporate culture in order to provide a deeper understanding in the area of operations.

However, it is risky to assume that every aspect of the current cultural structure of the

organization can be altered and amended. Organizations can be perceived in a different

way depending from which perspective they are observed. Internal or external

perspectives lead to different conclusions and not every intangible asset is measurable

in an objective manner.

Furthermore the cultural diagnosis should be part of the organizational strategy

realized and pushed forward by the charismatic leader. In this context following

questions are crucial:

- What are the strengths and weaknesses of the current corporate culture?

- Is it possible to use the strengths more effectively and avoid the weaknesses?

- Is it possible to stay competitive with the contemporary culture?

- Is a desired change of corporate culture economically feasible?

- What steps are to be implemented in order to realize the changes that are outlined?

Although culture is a soft attribute, its modification requires tough measures. Structural

changes can mean the closing and establishment of new departments, merging or

separation of activities, the displacement of employees or teams or the implementation

of new procedures and the removal of old ways of communication. Processes can be

modified in order to meet customer satisfaction or delivery time. Working teams, as part

of the corporate culture develop very stable ways of interaction that are difficult to

change. Therefore structural changes would mean that all human relations must be

reorganized.

14 Cf. Witte, E.: 1977, p.47 et seq.

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Personnel changes lead to new recruitment and further education policies. The human

resource manager has the function to select the candidates who fit best in the current

corporate culture. The further education within the personnel change is of utmost

importance. It will only lead to successful results if the structural improvements are

stable enough and the commitment of all employees for educational trainings is taken

voluntarily.

In attempt to change the corporate culture the attention is often focused on new symbols

which are clearly visible through new logos, uniforms, slogans and images as part of the

corporate identity. But symbols represent the most superficial elements of culture. If the

new icons do not represent the profound understanding and meaning of the corporate

culture they will not provide the intended success.

A cultural change in an organization requires great patience and persistent attention

from the leadership. The current culture of the company should be frequently compared

with past diagnoses in order to initiate monitoring process and further improvements.15

3.1 Management of corporate culture through cooperative leadership style

Cooperation competency will become much more significant in the future due to the

complexity and dynamics of changing markets. These developments require more than

ever frequent changes in the course of the strategy. Topics like cross-unit cooperation,

information and knowledge management or networks and virtual organizations enable

companies to join forces and act effectively. The ability of a company to work with

powerful measures in order to encourage the cooperation will be a crucial factor for the

business success.16

The increasing educational level and the better living conditions of employees in the

advanced industrial societies require more participation and self-determined conclusions

in creative industries.

15 Cf. Hofstede, G.: 2006, p. 431 et seq.

16 Cf. Strack, R./Frensch, R./Bannert, F/Oskar, P.G./Wilfried, K.: 2010 p.121-125

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The speed of scientific and technological developments and the increasing complexity

of dynamic markets as well as fast interactions between companies and environment en-

tail more collaborative leadership models that lead to more successful performance and

creative outputs. 17

The value of trust is the basis of efficient cooperation and has strong influences to the

corporate culture and the behavior of its staff members. The leadership, as an important

role model for all employees, has to enable close and trustful relationships that are

directed cooperatively in order to achieve all the desired positive results.

The most fundamental feature of a cooperative leadership is that it enhances the

interaction between leaders and employees and improves interpersonal human

relationships. They are characterized by the following crucial factors:

An interactive leadership requires a constant exchange of information about labor

organization and preparation as well as between control processes, management and

employees. Decisions are decentralized with less delegated arrangements and more

mental scope for the employees.

The cooperative leadership is characterized by efficient planning and control activities

that are provided through intense communication. In this framework the manager is

progressive, target-oriented and involves all team members in the decision-making

process.

The problem-solving processes are discussed through intensive and mutual interaction.

But it is also possible to build symmetrical effected relationships where the decision is

ultimately made by executives.

In comparison to other leadership styles the collaborative leadership has the most

demanding requirements with regard to social skills. The managers as well as the team

members are characterized by open-mindedness, tolerance and willingness to learn.

Authoritarian decisions are replaced by cooperative leadership methods and negotiation

processes in order to recognize and eliminate existing conflicts more effectively.

Due to the broaden scope for decision-making, team members are able to propose their

own solutions and grant more discharge to the leadership.

Further key elements of cooperative leadership are regular coaching, counseling

assessments and employee interviews. Herewith the participants get the opportunity for

self-reflection regarding their job performance and social relationship.18

17 Cf. Jung R./Bruck, J./Quarg, S.: 2007, p.245 18 Cf. Wunderer R.: 2009, S. 269 et seq.

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Although the cooperative style of leadership is a socially and culturally desirable

management principle, nevertheless the leadership faces the following obstacles:

In scientific theory the understanding of cooperative leadership is ambiguous and the

transfer into practice is difficult to realize. For this reason there are large gaps between

the arrangements of the leadership and the actual shown behavior of the employees.

The successful implementation of a cooperative leadership depends on the particular

situation which is changing constantly. There is no clear definition of situations and

patterns of behavior that can generally be adopted for the executives.19

PART C CONCLUSION

1. Conclusion Initially, this term paper dealt with the conceptual basics of corporate culture and the

importance for today’s business success. In this chapter it can be summarized that cre-

ating a strong corporate culture is crucial to ensure more meaningful social interaction

within a company. It also deserves mentioning that soft emotional values of corporate

culture significantly leads to better social relationships, employee satisfaction as well as

competitive advantage and more business success.

The next step puts its main focus on the definition of leadership and theories within the

context of certain levels and styles of leadership. The normative management includes

more superior and comprehensive decisions with great impact to strategic and operative

levels. It is therefore significant that the top management communicates the standard for

corporate culture at the beginning of its considerations clearly understandable for all

stakeholders.

The leadership style continuum of Tannenbaum / Schmidt (1958) differentiates the

styles of leadership within a continuum of seven ideal-typical behaviors and the chance

of employees to take part in decision-making processes. In modern business the imple-

mentation and combination of informational, cooperative, participatory and democratic

styles of leadership will become more successful and lead to more acceptance in inno-

vative organizations.

Moreover the fundamental tasks of corporate culture management have been explained

and discussed critically to understand the relationships between the right selection of

19 Cf. Jung R./Bruck, J./Quarg, S.: 2007, p.245

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leadership, the organizational strategy, human resource management and personal de-

velopment as well as corporate identity. In order to develop and control a corporate cul-

ture every single step should be realized throughout all business units.

In the last chapter, the attention was directed on the strengths and weaknesses of coop-

erative leadership as it has great influence on the corporate culture in today’s profes-

sional life. On the one hand it has been outlined that the cooperative leadership has the

most sophisticated requirements with regard to social skills. On the other hand it meets

the expectations of well-educated employees and the demands of global operating

innovative industries the most. Providing a cooperative working environment, where

controversial opinions serve the medium for more creativity, some of the fundamental

elements of corporate culture will be set.

2. Outlook The corporate culture is created and modified by strong leadership and cooperation

through main decision makers. Consequently, it is of utmost importance that the top

management is aware of its responsibility as a role model and provides an integrated

corporate culture through clear statements based on the value of trust and cooperation.

However, in many businesses and corporations there are still one-sided visions and

guidelines conceived by the top management that do not provide the intended results.

Corporate culture must therefore be seen as a social phenomenon that involves all em-

ployees, business partners and other stakeholders to unfold the positive potentials of

corporate culture in a comprehensive manner.

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