Organizational culture as a competitive advantage is one of the biggest success and change determining factors. Like the human body functions with the help of different organs, an organization has functions upon the basis of different processes, structures, and cultures. Although the human body’s functioning hasn’t changed much in the past few decades, organizations have undergone a massive change due to the onset of globalization, diversity, technology, and political interference. Recently researchers identified that organizations that worked on improving their organizational culture actually provide them a competitive advantage over other competitions, and this was marked as the crucial factor for success.
Jay B. Barney, who is an organizational psychologist and professor in strategic management with a decade of work in the research-based theory of competitive advantage, sees competitive advantage as an organization’s effectiveness in using its resources to provide better services to their consumers when compared to their competitors.
He identified the two types of competitive advantage. The first type is a temporary competitive advantage, which is easy to replicate. Hence, the profits of an organization with this edge also attract competition, and the competition limits their duration of competitive advantage. The second type of advantage, sustainable competitive advantage, on the other hand, is often marked by unique features that competitors are not able to imitate being the source of advantage. Therefore, an organization always needs to go for a sustainable competitive advantage to build an advantage that lasts longer and is sustainable.
Barney’s research identifies the following three specific resources that build organizational culture as a competitive advantage:
- Physical capital: It includes the organization’s physical resources like space of work, equipment that facilitates work, and finances used to produce the services of the organization.
- Organizational capital: It includes the resources that govern the organization smoothly such as the organization’s structure, planning, coordinating, human resource management system, etc.
- Human capital: It includes organizational resources with respect to the employees of the organization, such as employees’ skills, judgment, intelligence, history, relationships, collaboration, trust and organizational culture, and human policies.
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This is one of the most crucial factors of competitive advantage in today’s world as the physical and organizational capital can be replicated by others, leading to temporary advantage, but the efforts to improve human capital can be made unique that can lead to a sustainable competitive edge.
So, what can organizations do to achieve this uniqueness and competitive edge? This question was answered by the research conducted by Zheng Shen and his colleagues, where they presented four dimensions of organizational culture that lead to organizational effectiveness:
Adaptability is the degree to which an organization’s employees have the ability to change their behavior, structures, and systems in order to survive and come on top in uncertain situations.
To achieve this, organizations can invite their top Managers to work in teams aiming to identify the major organizational barriers that hinder adaptability and to propose solutions to eliminate the existing barriers.
Other than this, management can use recruitment to improve adaptability by hiring employees with a healthy “can-do” attitude as well as ensuring a culture fit between them and the organization.
Consistency refers to the extent to which the consistent beliefs, values, and expectations of the employees remain consistent in difficult times. For example, a team working or socially loafing on a really hard assignment can determine if the organization has that competitive edge or not.
This change requires cooperation as well as developing the skills and competencies of the staff. Hence, organizations should from time to time provide training that caters to this consistency.
- Active Involvement:
Active involvement is about the level of participation of the organization’s employees in discussions and decision-making processes. To build this, higher management needs to engage all employees in the change or decision making process. Opening up these communication channels can help everyone (employees, managers, and external consultants) in the process of strategy formulation of how to deal with new changes or demands of the market. Brainstorming sessions and open-door policy are two effective methods to boost this communication.
- Shared Mission:
Having a feeling of shared mission within the employees helps them to associate themselves with the organization’s purpose. This can be built by having the organization’s missions that also resonate within the employees such as community-driven projects.
Thus, the competitive advantage of the organization depends upon different abilities of the organization, and how the management works upon those abilities to build value and uniqueness will create a competitive advantage for the organization and employees.