1st International Conference on Quality and Innovation in Engineering and Management

17th 19th of March, Cluj-Napoca, Romania

A COMPARATIVE ANALYSIS ON ORGANIZATIONAL CULTURE IN SMES AND BIG COMPANIES

Adriana,Tidor1 and Liviu, Morar2
Technical University of Cluj-Napoca, adriana.tidor@muri.utcluj.ro Technical University of Cluj-Napoca, liviu.morar@staff.utcluj.ro

ABSTRACT: Organizational culture represents an essential mean in which one can influence the results of an enterprise. The studies in literature are mostly focused on the influence of organizational culture on big firms and multinationals. The analysis regarding organizational culture in small and medium enterprises(SMEs) is less present. The purpose of this research is to analyze comparatively the influence of organizational culture in the two types of enterprises mentioned above. In this analysis the specific characteristics of the enterprises will be considered. The conclusions bring the idea that even in SMEs the organizational culture can be an important factor in improving the performance of the enterprise.

1. INTRODUCTION
The purpose of this paper is to evidence the possibility of using the concept of organizational culture in small and medium enterprises (SMEs) as an instrument of efficiency in this type of enterprises. To evaluate if organizational culture represents a mean of raising the efficiency the paper presents a comparative analysis of this concept between big companies and SMEs. Organizational culture consists of a set of values, semnifications, behaviors and organizational practices. It is the main grid in the interpretation of organizational reality. An organization's culture influences all other components, including the organization viewed as a whole. The concept of culture is also related to a number of indicators on how to act and the performances to be achieved. The interest in organizational culture emerged in the late 1970s as result of a series of challenges facing Western management practitioners and theorists at the time. These have been said to include the following: A general decline in religious belief. This can be linked to the longstanding claim that modern society is alienating. Westerners, it seemed, therefore began to look to work as a source of identity. Organizational culture became seen as a way for them to find answers to questions like Who am I? as well as What is my job for?, What is my organization for? and so on. The expansion of highly technical work and the growth of service industries. These developments meant that workers required more skills and expertise (and therefore could not be managed using the traditional authoritarian approach) but also needed to behave in customer-pleasing ways. The emerging New Right politics also emphasized individualism and workers were becoming more educated and demanding more autonomy as a result. Again, culture here can be understood as a way to give employees more day-to-day discretion or freedom the idea being that there is no need for strict rules and/or management surveillance if workers already have the correct values, such as the customer is always right.

The limitations of a mechanical, Theory X approach to managing people. The management science approach, which dominated theory and practice during the 1960s and 1970s, had become discredited because employees could not in fact be managed purely through objective and mathematical analysis of organizational operations. This led to a renewed focus on the soft, human elements of organizations. The culture literature represents part of this backlash in its emphasis on what Peters and Waterman (1982, p. 11), as we shall see later, call the intractable, irrational, intuitive, informal organization. Innovative production methods. Techniques like justin-time were making organizational operations more efficient. But this required increased flexibility and therefore greater commitment from workers. Given that culture supposedly provides a reservoir of meaning for the individual worker and also enhances a sense of collectivity among workers, a strong set of shared cultural values should enhance their commitment. The Japanese miracle. The emergence of Japan following the Second World War as a world economic power was seen to have something to do with the cultural values informing Japanese management techniques. Globalization the breaking down of economic, political, cultural and technological barriers between countries meant that the West was paying more attention to other countries. And if Japan could create such dramatic success through underpinning its economic activities with a strong value system, why couldnt this also work elsewhere?

Culture is a multi-dimensional concept that can be applied to firms, industries or nations. A review of existing literature yields an array of definitions of culture. Smircich (1983) mentions that the concept of culture has been borrowed from anthropology, where there are more than 160 different definitions (Kroeber and Kluckhohn, 1952). By far one of the most widely accepted definitions is proposed by Schein , who defines organizational culture as a pattern of shared basic assumptions that the group learned as it solved 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 you perceive, think, and

feel in relation to those problems. A number of researchers investigated the relationship between organizational culture and company success, performance and competitiveness and organizational effectiveness [2],[3].

Individuals arrive at organizations with different motivations, experiences, and values. These natural individual differences tend to direct behavior in numerous, often divergent directions. If an organization is to direct behavior toward the accomplishment of a strategic mission, and is to present itself to stakeholders as a unified form, mechanisms must be created for reducing this variability among individuals and focusing employee efforts on the accomplishment of strategic goals. While organizations may develop a relatively homogeneous culture , unique and divergent sub-cultures may evolve for separate departments or sub-groups within the organization. Key ingredients of an organization are: a) the purpose (objective) of the organization is to produce a good or service; b) division of labor, the essence of each organization is the human endeavor, breaking the work into small components that serve the goal to be met by individuals and groups, through this organization mobilizes all people work to achieve the common goal of the organization ; c) hierarchy of authority: the authority is entitled to control other people, managers have authority over their subordinates. Researchers have demonstrated an appreciation for the function of culture as social glue. According to Smircich (1983), culture conveys to employees a sense of identity, facilitates the generation of commitment to something larger than the self, and enhances social system stability, as well as guiding and shaping behavior. Culture emerges at many levels to solve problems posed by life situations and generates learned ways of coping with experiences (Gregory, 1983; Krefting & Frost, 1985)[11]. The first and most obvious difference between small and big companies is the number of employees. This translates in a more simple structure for the small and medium enterprises. This factor also can bring some disadvantages to SMEs like less specialization or in some cases the absence of the manager (the owner fills the manager position). According to Berg and Harral (1998) certain resources, especially personnel, generally are not as available in smaller organizations. Also, overlapping responsibilities or assignments are uncommon because each person has defined activity areas or turf. Smaller firms maintain a more limited scope in terms of products or services, processes, customer base, geographic market and technology. Another difference between SMEs and big companies is the involvement and role of the management. The involvement of the management is more powerfull in SMEs because the relationship between the manager and the employees is more relaxed and less informal so the decisions reach their recipient more easy. The involvement of the manager is leading a small firm is more profound than in a big company because a management mistake in a small firm can be fatal.

Figure 1. The components of the organizational culture after Geert Hofstede[4]. Cultures where employees goals are aligned to the organizations goals are often thought of as succesful cultures. Denison reffers to effective organizations as having corporate cultures which consists of four factors: involvement, consistency, adapability and mission. In Denisons model involvement refers to having responsibility, being involved in decision making and thus being committed to their work. Consistency implies that values and expectation are aligned within the organizations. Adaptability infers that the organization is able to adapt its behaviour, structures and systems when there is need to. Finally, trough the final dimensiopn of mission, Denison refers to the existence of a shared definition of organizational purpose. Denison concludes that the most desirable organizational cultures integrate these four values of involvement, consistency, adaptability and mission[7].

2. THE DIFFERENCE BETWEEN SMALL AND BIG COMPANIES

Organizations are human collectivities (groups) constituted deliberate to achieve certain goals. The tendency of people to work in groups is natural they are having a social behaviour. In most cases, no task can be fullfield by a single individual. Beside the well known classification of enterprises lately appears the need of new one: the old companies, present in the country before 1990, the new companies that were founded after 1990.

In this classification some deepening is needed for the case treated. The big companies can be old or cand be new. The new ones can be national, multinational, holding type. Also the small and medium enterprises can be old and the new type can be a firm that separated from a big company or a new founded enterprise.

Figure 2 there are illustrated the major problems faced by SMEs in the last years.

Although the great diversity and complexity, however, one can identify two distinct types of organizational culture in Romania today - bureaucratic culture and entrepreneurial culture, supporting the hypothesis that these two categories are the extremes of a continuum with a wide range of expression. Bureaucratic culture is typical of state-owned companies, companies undergoing privatization, the former state companies during privatization, autonomous administrations, institutions of health, education and state employers, public institutions, military institutions. This can be characterized as still strong inertia, targeted to the inside system and highly involved in political life. Entrepreneurial culture, ongoing training is typical for private companies set up after 1989[8]. Analysis and organizational culture change are processes that can have a major impact on the functionality and performance of a company. Understanding the characteristics of organizational culture and how these can be modified so as to ensure a greater congruence between the elements of company culture, needs and aspirations of employees and the company's objectives is a prerequisite for a successful manager. Organizational culture is a continuous process of change as a necessary adaptation to the internal environment and external enviroment.Condition - created by suppliers, consumers and especially business competitors is a continuous and rapidly changing environment. Requirements of the internal environment to stimulate employee involvement and require a change in line with the same urgency. To correlate the interests of employers and employees at all levels and efficiency results, we require all power recovery at the organizational level and structure appropriate to obtain the synergistic effect[1]. The small traditional enterprise usually does not have a long term strategy, small opening market and the processes of production for goods and services and the development line are passed from father to son. The new type of SMEs apply a new age technology, search new markets, create products better adapted to their destination, higher quality products along with a higher rated service especially conserning fiability, rezistence and finishing. Modern SMEs can produce more complex products because of the specializations of the employees or by their competences and experience. The main characteristic of this modern small and medium enterprises is that they dony have nothing in common with the old ones. They try to do things different leaving aside old conceptions and bureaucracy. Small cooperative bussinesses still survive but the rather changing enviroment makes them go from day to day[12]. There is some evidence in the literature to suggest that there might be cultural differences between large and small organizations. For example, SMEs are considered to have greater flexibility, an abseance of bureacracy, less rigidity in decision-making, and can respond more quickly to the changes in the enviroment. However, this late years, with all the economic world crisis demonstrated that SMEs are also vulnerable because of the lack of resources and that within each company must be found the sparkle to make things go on. SMEs benefit from having less formal structures which means that employees have more deep personal contact than in large organizations[6]. Although there are valuable contributions, there exists a lack of significant study of organizational culture in SMEs[10]. In Romania , as in other countries along with large enterprises co-exist small and medium businesses.

Figure 2. The major problems faced by SMEs in 2008 and 2009[www.cnipmmr.ro] The small firms are known for their flexibility related to the changes of the enviroment. But not so many firms react well in case of enviroment change. A good example could be the recent economic crisis that had a negative impact on SMEs and lots of firms where faced with bankrupcy. In many cases small companies survive by working for the big companies as suppliers or subcontractors. The SMEs operate in a more restricted marketplace, only in their own county , the cases of SMEs working for export is rare. This is in many cases the privilege of big companies. There are many difficulties also in entering a market sector. Most SMEs realize annual plans and policies, only a few elaborate strategy within 3-5 years and over 30% of SMEs in Romania do not enterpise planning activities. These figures show that companies do not look to the future only from day to day, do not think in perpective thats why all this problems in this time of crisis because of lack of vision and effective concern for the future. In support of this statement it would be good to notice that searching for SMEs targets for the next two years more than half of the companies main goal is keeping the company afloat and avoid bankruptcy[9].

3. PARTICULARITIES OF ORGANIZATIONAL CULTURE IN SMALL AND BIG COMPANIES

The particularities of the organizational culture in each of this company types will be treated considering the differences stated before. In Romania the term organizational culture is relatively new. Few companies have participated in studies to see the presence and effectiveness within the organization. Managers do not seem to be preoccupied with organizational culture, and some considered that the performance is not affected by it. Despite 50 years of forced industrialization, people still retain their rustic conservative essence, which is based on fundamental assumptions and beliefs manifested in legends, myths, heroes, superstitions and symbols of more than 2,000 years old. These are people who have learned to accept their fate, but desperate to make sense of their fate, they are ready to fight and be reborn from their own ashes, to build a new world. These are the deepest Romanian values and beliefs that they bring to organizations and, more recently, the European Union.

The problem is especially important for such companies as the management mistakes may have a more significant impact than in large enterprises due to the characteristics of small and medium enterprises (limits of the resources, market position). Poor decisions have often emphasized the negative effect due to a vulnerability to this type of enterprise, especially in the early stages of the life cycle. Using a modern management, tailored to the specific type of business that constitutes the essential condition for its successful creation and development. In circumstances in which management is less professional company can survive, but there are serious restrictions on its growth path[5]. Through this characteristics conclusions lead to the question: why in small and medium enterprises is not well known and implemented organizational culture? Why it is less exploited? Organizational culture could be a cheap and easy way to make things work better. Organizational culture can take the company to greater performance, to expanding the market and to customer confidence. SMEs must look into the future not preffer the current state. The culture must focus on results, competition and achievements. Strong cultures are associated with homogeneity of effort, clear focus and higher performance in changing environments. At big enterprises there are no visible problems concerning organizational culture: there are development plans, the management has allocated sufficient funds for developing or changing culture if necessary to be sure that the company remains competitive and can surpass any enviroment change. The dimensions considered for the analysis of the organizational culture in enterprises were : values, rituals, heroes, symbols, structure, systems and competencies. The main features that difference SMEs from big companies, discussed above, are the foundation for the interpretation of the dimensions of the organizational culture. In SMEs is easier to transmit the values and the mission of the organization to the employees because of the simpler structure and the more close relations between leaders and employees. The hero in SMEs is the founder, the owner , the entrepreneur, the person that had the idea of the business. This is not different in big companies, but in small business such as family firms the name of the hero is better known. The structure was already discussed as a factor to differentiate the two type of firms and studying it as a dimension of organizational culture could bring no new information. Lately SMEs learned to promote their symbols, so that in this area in few years between big companies and succesfull SMEs there would be no differences. The problem continues to exist in old type SMEs that still live in the past and that ignore the advantages of organizational culture. But this firms will have to think twice because the future will not forgive them. The competencies of the employees are more specialized in big companies. In small companies employees have many roles and have to do many things at once because no one else will do their job. This is again because of the number of employees and the lack of resources for employing specialized persons or invest in employees training. The flexibility of SMEs could be a major advantage in case of changing the organizational culture. Generally speaking the organizational culture change is a process that could take 10-15 years but in small firms the process might be easier to apply because of the structure and number of employees.

4. CONCLUSIONS
The methodology for this article was a theoretical analysis whose results I want in the near future to apply to the SMEs in the Cluj county. This is a work in progress. The studies are made for my thesis with the title Organizational culture in small and medium enterprises. The researches base on a questionnaire survey aiming at the organizational culture and the problems specific for this type of firms. I did also elaborated an interview for the manager/owner of the firm that has the purpose of deepening the informations about the firm and trying to understand the culture and its importance in the life of the organization. This way I want to obtain a cultural profile for each of the firms I will study and discover if there are similarities in the desire to make a model of management of the organizational culture so that any firm can link the organizational culture to performance following some simple steps.

5. ACKNOWLEDGEMENTS
This paper was supported by the project "Doctoral studies in engineering sciences for developing the knowledge based society-SIDOC contract no. POSDRU/88/1.5/S/60078, project co-funded from European Social Fund through Sectorial Operational Program Human Resources 2007-2013.

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