Why Organizational Culture defines success or failure?

Organization culture plays a key role in the way employees make decisions including the way they think and act. The main drive behind this is the leadership approach. This will have a huge impact on business performance, which will determine whether a company thrives or struggles. Edgar Schein (1985) explains organizational culture as a three-layered structure consisting of Artefacts, Espoused Values and Underlying Assumptions. This article will use real-world examples of Google and Enron’s company culture to explore the role of organizational culture in business success and failure. Schein’s Model of Organizational Culture will be used as the framework for this analysis.

Edgar Schein’s Organizational Culture Triangle

"Edgar Schein’s Organizational Culture Triangle" [Digital Image]. MIT Management Sloan School, accessed 23 February 2025

Schein (1985) proposed that organizational culture operates at three levels:

1. Artifacts – Visible structures and processes, such as dress codes, office layout, and company ceremonies.

2. Espoused Values – The values that an organization says it will follow.

3. Underlying Assumptions – These are the beliefs held by the employees about the organization culture such as how they should collaborate with one another and how to be acknowledged inside it etc.

A cohesive and effective workplace is created when these three levels of culture are aligned. On the other hand, a weak or misaligned culture can lead to misunderstandings, poor decision-making, and, in the worst situations, company failure.

Google: A strong and adaptive culture

Google is frequently used as a case study of a company with a robust, flexible culture that fosters creativity and worker pleasure. The company's culture is based on openness, cooperation, and an emphasis on continuous learning.

• Artifacts: A culture that encourages creativity and invention is fostered by elements such as open office plans, free meals, and flexible work schedules (Heinz, 2024).

• Espoused Values: Google's mission statement, "to organize the world’s information and make it universally accessible and useful", highlight its commitment to innovation and global reach. (Google, 2023)

• Underlying Assumptions: The business promotes an environment that encourages experimentation and taking chances. Initiatives like the well-known "20% time" policy, which permits workers to dedicate one-fifth of their workweek to side projects and has produced ground-breaking technologies like Gmail and Google Maps which demonstrate the success of this (Schmidt & Rosenberg, 2014).

McGregor's Theory Y, which contends that people are inherently driven and function best when granted autonomy, is reflected in Google's employee-focused culture (McGregor, 1960). This strategy has strengthen Google's position as a global leader in technology by promoting high employee engagement, low turnover, and ongoing innovation.

Enron: A Culture of Greed and Deception

Completely opposite to Google, Enron’s toxic corporate culture played a prominent role in its dramatic collapse in 2001. The company, once a “Wall Street golden child”, ultimately collapsed due to widespread accounting fraud and a cutthroat, unethical work environment..

• Artifacts: Enron fostered an aggressive work culture characterized by intense sales pressure, lavish executive bonuses, and a harsh performance evaluation system called “Rank and Yank,” which annually dismissed the lowest-performing 15% of employees (McLean & Elkind, 2003).

• Espoused Values: Enron publicly promoted values such as “Respect, Integrity, Communication, and Excellence” (Enron, 2000). However, in practice, these principles were disregarded, as the company prioritized short-term financial gains over ethical decision-making.

• Underlying Assumptions: Enron’s continuous focus on success, reinforced by a highly competitive and aggressive work culture, pushed employees toward risky financial practices. This ultimately contributed to one of the most notorious corporate scandals in history (Sims & Brinkmann, 2003).

Enron’s corporate environment aligned with McGregor’s Theory X, where leadership operated under the belief that employees lacked motivation and required strict oversight. This fear-driven approach fostered unethical behavior, internal tensions, and ultimately contributed to the company’s collapse.

How Companies can build a strong culture

To create a culture that fosters success rather than failure, organizations should focus on:

• Defining Clear Values – Aligning espoused values with actual behaviors ensures credibility and trust. Schein (2010) emphasizes that an organization’s stated values must be consistently reflected in daily operations to build a strong culture.
• Encouraging Ethical Leadership – Leaders must model ethical behavior and reinforce transparency. Brown & Treviño (2006) highlight that ethical leadership fosters trust, enhances employee morale, and reduces misconduct in organizations.
• Fostering Employee Engagement – Creating a workplace that values employees’ contributions leads to higher motivation and productivity. Research by Kahn (1990) suggests that employees who feel valued and empowered show higher engagement and commitment to organizational goals.
• Adapting to Change – Successful companies embrace continuous learning and adaptability, ensuring their culture evolves with market demands. Kotter (1996) argues that organizations that prioritize adaptability and change management are more resilient and better positioned for long-term success.

How Culture Can Make or Break a Business

The difference between Google and Enron shows how important a company’s culture is to its success or failure. Research shows that companies with a positive culture have happier employees, more innovation, and long-term success (Denison, 1990). In contrast, companies with a negative culture often struggle with high employee turnover, legal problems, and damage to their reputation.

Culture is not just a fancy business term; it is the foundation of a company. It affects how decisions are made, how employees behave, and how well the company performs over time. Google’s culture helped it grow, while Enron’s toxic culture led to its downfall. Companies that focus on building a strong and positive culture are more likely to succeed, while those that ignore it may fail. Investing in culture is not just a choice; it is a key factor in business success.

References

• Denison, D.R. (1990). Corporate Culture and Organizational Effectiveness. New York: John Wiley & Sons.
• Enron (2000). Enron’s Core Values and Code of Ethics. Houston: Enron Corporation.
• Google (2023). Company Mission Statement. Available at: https://about.google [Accessed 20 Feb. 2025].
• Heinz, K. (2024) 'Organizational Culture: Definition and Types'. Built In. Available at: https://builtin.com/company-culture/types-of-organizational-culture [Accessed 23 February 2025]
• McGregor, D. (1960). The Human Side of Enterprise. New York: McGraw-Hill.
• McLean, B., & Elkind, P. (2003). The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron. New York: Portfolio.
• Schmidt, E., & Rosenberg, J. (2014). How Google Works. New York: Grand Central Publishing.
• Schein, E.H. (1985). Organizational Culture and Leadership. San Francisco: Jossey-Bass.
• Sims, R.R., & Brinkmann, J. (2003). ‘Enron Ethics (Or: Culture Matters More than Codes)’, Journal of Business Ethics, 45(3), pp. 243-256.
• Brown, M.E. and Treviño, L.K. (2006) 'Ethical leadership: A review and future directions', The Leadership Quarterly, 17(6), pp. 595-616.
• Kahn, W.A. (1990) 'Psychological conditions of personal engagement and disengagement at work', Academy of Management Journal, 33(4), pp. 692-724.
• Kotter, J.P. (1996) Leading Change. Boston: Harvard Business Review Press.
• Schein, E.H. (2010) Organizational Culture and Leadership. 4th edn. San Francisco: Jossey-Bass.