Abstract
SMEs are now becoming increasingly important in almost every economy. It has been noted that the SMEs that employ less than 250 make over 99% of the European companies. Particularly in Greece, SMEs make up to 90% of all businesses. They also account for over 52% of the total turnover and employ up to 60% in the private sector. SMEs have similarly been identified as an important component of economic growth in terms of job creation as well as wealth creation. Thus, given that SMEs are being impacted by organizational culture, this study gauges the contribution of organizational culture to the development of SMEs and its general impacts, especially in the context of Greece economy.
Furthermore, from the extensive research on corporate culture, the challenges and barriers facing Greek SMEs managers wishing to change an existing organizational culture are identified. Emended in this research is the fact that people enter into organizations carrying cultures of the surrounding communities that also influence the existing corporate cultures. Therefore, the Greek SME managers are tasked with learning the societal cultures, especially when most of the firms have internationalized their operations.
Introduction
The term organizational culture is regularly being discussed in workplaces. The discussion is in such a way that its meaning is presupposed. However, culture has been observed as one of the aspects of the organization that is essential in achieving high levels of effectiveness. Though defining organizational culture may be an easy task, it is marred with controversies about what constitutes an organization culture, whether organization culture can adequately be described, effectively be managed, and what kind of management strategies are more likely to succeed (Smircich, 1983). More like the wider context of national culture, organization culture is seen as a set of norms, principles, beliefs, and behavior that gives the organization its identity (Madu, 2011).
This paper explores the relationship between the small and medium-sized enterprises’ (SMEs) organizational culture and its impacts in the context of Greece. The study of the organizational culture of Greek SMEs and its impact is significant. In this paper, the existing literature will be used to examine the correlation between the SMEs organization culture and their performance, the organization strategy, development, cultural change, and deployment.
The contextual framework of the Greek SMEs
Looney (2004) noted that the Greek SMEs have essential roles to play in the wider economy, including supplying raw materials to multinational enterprises while simultaneously selling their products or services. Greek SMEs have relatively contributed to job creation at a low cost compared to larger firms and multinationals. For instance, SMEs within the ICT industry have created the highest number of jobs. The job market in this particular industry is still booming (Looney, 2004). Currently, Greek SMEs make almost 90% of all businesses. However, their contribution to the country’s GDP is only 30%.
One of the difficulties that affect these SMEs internally is a lack of marketing skills by managers, employers, and company owners (Stevenson & Jerillo, 1990). This factor is, in fact, a symptom of Greece SMEs and the enterprising wider culture. Researches indicate that SMEs managers and employers have limited or little formal training on marketing and distribution of commodities (Stevenson & Jerillo, 1990).
As a result, a lack of this expertise contributes to the failure of benefitting from important available opportunities. Greek SMEs have limited capacity to trade locally even with neighboring states as owners do not have enough training to be in a position to instigate more potential and lucrative international trade. Thus, they are not considered to be potential trading partners by their peers on the international front, and this limits their international link (Carter & Jones-Evans, 2006).
Literature review
Whereas some studies have indicated that the organizational culture within the Greece SMEs changes, others have suggested otherwise (Twati & Gammack, 2006). Nonetheless, the evolution of organizational culture has been studied over time. White (1959) has theorized the changes and stability of the organizational cultures, especially in the European context. Hofstede (1980) asserted that the organizational culture is the values, beliefs, behaviors, and attitudes that symbolize the organizational working environment, objectives, mission, and vision. Others like Sackmann (1992) see organizational culture as a set of beliefs, ideologies, shared core values, basic assumptions as well as essential understanding within the organization.
The definition of organizational culture can be more explicit to include artifacts, for instance, norms and practices of the organization (DeLong & Fahey, 2000). Krumbholz and Maiden (2000) also added symbols, language, rituals, ceremonies, and myths. With regards to the Greek organization culture, Twati and Gammack (2006) hinted that the organizational culture in Greece is holistically and traditionally decided and socially built.
Moreover, Krumbholz and Maiden (2000) indicated that the organizational culture of Greece SMEs involves beliefs, values, and behaviors that exist at various levels. Culture thus becomes apparent with a variety of characteristics of the life of an organization. Hofstede (1980) summarizes the organizational culture as the set of shared values, assumptions, practices, and beliefs that guide and shape the attitudes and behaviors of the members of the organization. This is also applicable in the context of Greek small and medium enterprises.
Twati and Gammack (2006) also indicated that Greek SMEs’ organizational cultures are both task and people-oriented. Those SMEs that adopt the people-oriented culture apply the wider decision-making structure. This would further direct them to adopt the flat organization structure that has the attribute of low power distance. Conversely, organizations that are task-oriented are more likely to apply the centralized decision-making process.
This will result in the hierarchical organization structure with a characteristic of a high power distance structure. These organizations are likely to adopt and implement new technologies, which are essential for the growth and development of the organization (Twati & Gammack, 2006). The reason is that new technologies will be accepted and implemented if it helps the organizations accomplish their tasks more quickly and efficiently.
In contrast, those organizations that are people-oriented will take a longer time to adopt new technologies or cultural change. The disagreement may even exist in the evolution of new technologies. Alvesson (2002) asserted that most Greek SMEs have more traditionalist culture other than being technology-oriented culture. Those that are culturally change-oriented are more likely to cope up well both domestically and in the global arena. However, the traditionalists are more conservative. That is why most of their managers, employees, and owners lack the necessary skills to drive them forward (Alvesson, 2002).
Other organizational cultural attributes such as beliefs, language, leadership, employee management, and recruitment are all controlled by the broader belief in the Greek tradition of doing business. Even though the traditionalist organizational culture still persists within the majority of the Greece SMEs, many are now comfortably adapting to cultural changes. The SMEs that pursue this channel have contributed to the increased employment rates (Ireland et al., 2001).
Analysis of the findings
Social and cultural environment
The Greek SMEs’ organizational culture and the general social and cultural environments can be considered to interlock in that people enter SMEs from surrounding societies and bring their culture and social life with them. Therefore, the changing social and cultural environment influences the Greek SMEs’ corporate culture and is a big challenge to managers endeavoring to change the culture. Forces in the Greek SMEs’ environment are those that affect changes in how people live and work. Mohanty and Rath (2012) think that SMEs managers must be responsive to those changes that take place in the surrounding societies as they affect all aspects of corporate culture, yet new managers will have little knowledge about those changes.
For instance, new Greek SMEs leaders are tasked with the development of corporate ethics and well-being in order to initiate change. Sims (2009) considers the Greek SMEs’ corporate ethics as one element of corporate culture that is hard to change, as ethics are defined differently by individual SMEs. No wonder huge ethical scandals such as Enron and Hewlett-Packard have plagued hundreds of United States firms.
Unethical behaviors, which are part of some organizational culture, damage the SMEs’ reputation and cost such enterprises the goodwill of employees and customers. Moreover, the losses could lead to financial and economic damage to the firms. The Greek SMEs managers who wish to change such a culture are required to establish an ethical code that defines acceptable behaviors and develop a framework of rewards and punishments to implement ethical codes.
However, to some Greek SMEs, social or ethical responsibility means doing any action provided that it is legal. In such a culture, developing a code of ethics that helps an SME to protect its reputation and ensure the goodwill of employees and customers is hard for managers. As Sims (2009) notes, the challenge is to build an organizational culture where members oppose the temptation to act in ethical manners that promote individual interests at the cost of an SME or promote the interest of the SME at the cost of the society. Indeed, many Greek SMEs executives have been unable to take effective measures when confronted with an ethical scandal.
This is not only the case with the Greek SMEs, but Citigroup is also an example of a firm that suffered dearly from a scandal, and the executives could only choose corporate silence in order to maintain the reputation of the company (York, Gumbus & Lilley, 2008).
Global and economic environment
The global business environment is changing drastically, thus requiring new approaches to business (Brakman, 2006). For most SMEs, the focus is to create a culture that might improve competitive advantages and eventually profitability in a threatening economic environment. Therefore, the organizational cultures of the Greek SMEs that are witnessed today have nothing to do with the traditional emphasis on aligning corporate cultures with national cultures. In fact, Greek firms, including small-to-medium enterprises (SME), are internationalizing their operations in the search for business opportunities (Schuler, 2000).
As a matter of fact, today’s Greek SME managers are challenged by a myriad of factors stemming from the changing global environment. First, as noted earlier, cultural differences influence corporate culture in different countries. The SMEs management functions directed to corporate culture become more complex as a Greek SME’s activities expand internationally and coordination of organizational and decision-making issues becomes significantly difficult (Moran, Harris & Moran, 2010). The Greek SMEs managers fight in vain to create corporate cultures that balance between the needs of the foreign markets and the impact of the cultural disparities on important organizational issues such as evaluation, compensation packages, and promotion policies.
Second, the understanding of global differences is a challenge to new Greek SME managers in appreciating the changing global environment. There are issues related to understanding corporate behavior in diverse global settings. Corporate culture becomes especially complicated at the global level since the desires, attitudes, and values of employees differ across countries (Moran, Harris & Moran, 2010). The issues of coordinating activities to match the organizational environment become more complicated as Greek SMEs expand internationally. In addition, most Greek SMEs are located in a specific region because this permits them to increase efficiency, but in this manner, it also affects their corporate culture (Scheffknecht, 2011).
Technology environment
One element of organizational culture that the Greek SMEs have focused on is innovation. Almost every SME creates a culture that might make the employees more creative. The most significant driver to innovation is information technology (IT) and its integration in the Greek SMEs’ business operations. In as much as IT is a component of organizational culture and it is deemed important to the Greek SMEs activities, it poses a major challenge to the current SMEs managers (Schuler, 2000). In fact, the Greek SMEs have no other alternative but to involve IT when changing the organizational culture.
In order to promote organizational learning and create knowledge, they must use IT to define, acquire, arrange, organize, input, manipulate, transmit and store information. Organizational learning as a component of the Greek SMEs corporate culture can only occur if the employees can manage knowledge and information to attain a better understanding of the need to change.
Regarding technology, Scheffknecht (2011) shed light on organizational culture and its adoption. According to them, the Greek SMEs are increasingly operating in uncertain, decentralized, and networked environments, where the adoption of IT has become essential to organizational change. Indeed, organizational cultures institutionary shape the way in which the Greek SMEs choose to use technology. The researchers also showed that there are environmental factors that influence the SMEs employee’s willingness to adopt new technology. When the organizational culture is supportive, the probability of adoption is substantially higher.
Employees, who work in the Greek SMEs where work is well organized, normally have their opinions considered and they are well informed about the relevant issues in the firm. Hence, they are likely to be more willing to adopt new technologies.
Organizational culture as a critical success factor to the Greek SMEs
Universal corporates tend to agree that performance and culture emanate to be involvedly interlinked. Nonetheless, the correlation between them materializes to be very complex to the extent that even the executives do not find it too obvious to assertively act on such an imperative business element. According to Ogbonna (1992), most research projects that try to ascertain the furtive ideal behind some Greek SMEs overtime superior performance in comparison to the less successful contemporary firms which operate in similar industries have found the same results. Much emphasis has been based on the fact that successful Greek SMEs have softer business aspects, including management philosophy, beliefs, and values (Ogbonna, 1992). All these explain the underlying disparities amid the less successful and more successful SMEs.
Culture includes the commonly shared values that act as binding forces amidst them. Thus, by observing a successfully operating Greek SME, we see that its culture is embedded in an ethical, professional, friendly, and hardworking atmosphere that describes the overall behaviors of people (Quinn & Rohrbaugh, 1983). This implies that organizational culture definitively influences each priority that an SME sets. Culture generally relates to the underlying organizational value system, which lays much emphasis on control, empowerment, strong alliances, cost reduction, innovation, and customer focus. Such cultural attributes act in response to numerous business stimuli, which ensures the SME’s success and increases performance (Carter & Jones-Evans, 2006).
Greek SMEs that have shaped cultures always appear to be triumphant. SMEs’ culture-building often instigates with the valued tenets of conduct that the founders established. These usually form the basis upon which people develop their daily operational views. Various behavioral blueprints and qualities build up derived from what privileged SMEs directors at dissimilar ranks support. Given that leaders are goal-oriented, they will only encourage an organizational culture that is goal aligned (Martin & Siehl, 1983).
That is, behavioral patterns that are typical to an SME seem to have their foundation on solutions that might have previously worked for that particular SME. When culture derives from repeated success, then a Greek SME will be aware of the set ways upon which work should be carried out. Through organizational culture, the Greek SMEs learn their past success strategies and use the same to succeed in the current competitive environment (Martin & Siehl, 1983).
In each and every Greece SME, culture is seen to have some power over the organization’s performance. For instance, organizational culture enables individuals and groups to clearly comprehend the alignment of goals, mission as well as objectives. This serves as a source of motivation given that the pooled values make the SMEs employees feel good about their firm and, as a result, sincerely commit their potentials and capabilities towards realizing the set objectives (Willmott, 1993).
Thus, strong organizational culture serves as an inherent motivator that enhances employees’ productivity hence, increase in Greek SMEs’ performance. Strong organizational cultures have performance attributes such as team working, learning attitude, decisiveness, and empowerment (Willmott, 1993). At this stage, organizational culture appears as an actual motivating basis for advanced SMEs performance as well as a clear-cut competitive advantage resource which is really not easy for marketplace challengers to reproduce.
Even though the bottom line of Greek SMEs is driven by performance, the work environment where organizational performance takes place is shaped by culture. However, culture seems to develop in some SMEs by default, while in others, it develops in a tangible, intentional, and conscious way. Greek SMEs that fall in the latter category tend to be properly positioned for competitive advantage (Gregory, 1983).
This is because they have well-designed work environments which permit individuals the liberty to constantly outclass the market competitors by doing their level best. Thus, corporate culture appears to be critical for the Greek SMEs’ performance since it ideally shapes the work environment where performance takes place. When an SME fails to pay attention to corporate culture, there is the possibility that the level of sustainability and profitability will be undermined (Madu, 2011).
When SMEs’ values, practices, and behaviors are aligned with the set goals, individuals will always have a grasp of those organizational values and experience them daily. In this respect, solutions and answers will be found to any impeding performance barriers (Madu, 2011).
Conclusion
The components and the perceived roles of organizational culture for the success or failure of Greek SMEs still remain a matter of debate. In fact, organizational culture is still perceived as a deep social system whereby all organizational actions and strategies anchor. The organizational culture of Greek SMEs is understood as that aspect of the total organization system which can be maneuvered using the organization surface structure like the rewards. Despite the ensuing debate on the impacts of organizational culture on Greek SMEs, it is clear that the desired cultural maintenance or change determines the SMEs’ outcomes and competitive advantage.
When the organizational culture is changed or maintained, it means changing or maintaining the SMEs’ corporate philosophy, values, and images that tell action. This new approach to understanding corporate life must be passed into the process of management. Nevertheless, it is difficult to implement or maintain cultural change because of the challenges posed by changes in global, technological, social, and cultural environments.
Areas for further research
Workforce diversity is a big challenge to the Greek SMEs managers wishing to change an existing organizational culture. In as much as a Greek SME is legally and socially committed, it must include employees from different diverse environments. However, some SMEs are not sensitive to the diversity issue, while others have overemphasized the issue. Given that such belief makes it difficult for the SMEs managers to change the culture as it requires the commitment of the manager and employees, this research area has not been properly investigated and requires further research to be carried out.
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