Essay: Corporate Culture And Organizational Performance

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The Relationship Between Corporate Culture And Organizational Performance


In today's increasing competitive conditions, reaching desired organizational performance and efficiency level became a top priority for the top management of organization's seeking sustainable operations and growth. Because of the increasing importance of this subject, many researchers examined and studied the factors influencing organizational performance. Considering organizational culture as one of the major factors, the influence of the types of corporate/organizational culture on organizational performance is studied. The effect of organizational environment on the strategy that enable achieving organizational level can play a substantial role on the relationship between corporate/organizational culture and organizational performance. The individual influence of the organizational founders and top management on the efficiency strategies is\ observed in terms of their values. In this study, the relationship between organizational culture and organizational performance and the effect of stability and/or variability of internal and external environment on this relation are considered, in addition to the values of self-direction, and power that top management have. The findings show that organizational culture types are linked to organizational performance and efficiency. The stability or variability of internal and external organizational environment and the top management values play's a moderating role on this relationship.


The term culture is described as the set of customs, values, beliefs and behaviors commonly held by a society. Corporate/ organizational culture was used to describe the economic performance successes of Japanese firms over American firms by motivating workers who were devoted to a common set of values and beliefs. One of the most important reasons that explain the interest in organizational culture is the assumption that some corporate cultures lead to an increase in organizational financial performance. Peters and Waterman (1982) argued that effective organizations have certain cultural characters of excellence. Ouchi (1981) proved a positive relationship between corporate culture and performance.
Even though the literature on corporate culture and its relationship with organizational performance is rich and diverse, there are only a few studies that actually examined the nature of this relationship. Organization culture, in regard to its impact on various situational variables within the framework of organization, is a common research subject in management which has never decreased its research area popularity. Corporate culture has been found as a main factor to be studied through in organizational life along with its positive impact on the success of the organizational performance. In the literature, the researches explaining the relation of corporate culture and organizational efficiency are questioning the relations hypothesized with diverse meanings of organizational efficiency in different corporate culture types. Identification of new moderating variables empowering this relation between organization culture and organizational efficiency could affect the tested relations considerably.
In this research, the relation between organizational performance with corporate culture has been investigated as well as the steady or variable organizational environment and the empowering influence of the founders/ decision-maker's values on this relationship.

The relationship between Corporate Culture and Organizational Performance

This study aims at examining the relationship between corporate culture, and its influence on organizational performance. In this paper, the relation between both subjects shall be studied and a conclusion with the findings will be presented.

Corporate culture is a very important topic of research as many studies have attempted to analyze the relationship between corporate culture and organizational performance. This study is an attempt to develop a clear understanding on corporate culture, its features as well as its impact on the organizational performance

Corporate culture in regards to organizational performance has become a very important study matter in last few years. Culture is considered as something to do with the People and unique quality and style of organization. We will clarify in this study the connection between corporate culture and organizational performance; In addition, it will explain the different kinds of corporate culture and their impact on the performance of an organization.

What are the parameters of an organizational corporate culture that drives successful and sustained organizational performance?

1.6.1 Independent Variable: Corporate Culture
1.6.2 Dependent Variable: Organizational Performance
1.6.3 Moderating Variables: Environmental Stability/ Variability Founder's Values (Self Direction, Power, Inspiration)

Corporate culture has influence on organizational performance and efficiency.
Therefore, the culture types of clan, adhocracy, hierarchy, and market affect the organizational performance.
The stability or variability of the organization environment in an internal and external context have an effect on the relationship between organizational culture and organizational efficiency.
The values of founders and top management such as power, self-direction have a direct impact on the relationship between the corporate culture and organizational performance.










Many researches were conducted to explore the relationship between organizational culture and performance. It was argued by Kandula (2006) that a strong culture is a key to good performance. Same strategies can yield different results based on the culture of the organization it is implemented in, even if those organizations are in the same industry and location. Employees' effectiveness and functionality tend to appear in a positive and strong culture; even average employees can outperform competent ones based on the culture propensity to motivate employees. Consequently, it can be argued strongly that performance management is directly affected by the type and effectiveness of an organizational culture. Murphy and Cleveland (1995) believe that understanding of performance management relies on the understanding of culture. Magee (2002) contends that without considering the impact of organizational culture, organizational performs such as performance management could be counterproductive because the two are interdependent and change in one will impact the other. The following hypothesis were based on the previous research in that area.

Hypothesis (1):
Corporate culture affects organizational performance and consequently enhance and improve the organizational efficiency.

Hypothesis (2):
Different culture types such as clan, adhocracy, hierarchy, and market have different impact on organizational performance.

Hypothesis (3):
Stability and /or variability of organizational environment from internal and external views have an effect on the relationship between corporate culture and organizational performance.

Hypothesis (4):
The values of an organization's founders or top management (self- direction, inspiration, and power) affect the relationship between corporate culture and organizational performance.



Culture is a model of customs, beliefs, values and attitudes which affects organizational performance. The meaning of the corporate/organizational culture exists in many forms. Different explanation and description and meaning of 'organization culture' has been clarified in many ways. Kilmann, (1985) explained and described the organizational culture as a common attitude, belief, value, assumption, principle, hope, behavior and norm that link the organization together. Robbins described it as common views believed by the members of an organization and a system of common implication.

Yet it was argued by George & Jones (2002) that it is Informal combination of values, norms that manage the way people and groups within the organization interact between each other and with others outside the organization.

The shape of shared beliefs and values that help individuals understand organizational objectives and thus provide them with norms for conduct in the organization. Corporate culture is considered a strategic advantage for the organization; it upturns the adaptability and fit between an organization and its environment. Corporate members continuously interpret aspects of their work environment, as well as the ways in which they are enacted, from the culture of the organization. Among the most important indicators of culture are customs, norms, habits of thinking and adopted values. Culture is one of the aspects that can alter the performance of any organization. It is not always rigid, yet it can be manipulated and changed by the leadership style and corporate members.

In the literature tackling culture, several corporate/organizational culture types and related measures such as Schein, Schwartz, Hofstede, O'Reilly are identified.

3.2.1 The Competing Values Framework

The Competing Values Framework (CVF) is considered one of the most important and widely used models in the area of corporate and organizational culture research. Such model has emerged from a set of empirical studies on organizational effectiveness, Quinn and Cameron (1983) have established an organizational culture framework built upon a theoretical model named the "Competing Values Framework." This framework depends on two dimensions of effectiveness. The first dimension of the framework refers to either an organization which has a major internal and / or external focus. The second dimension displays the conflict between an organization's attempt to flexibility and change or stability and control.
The Competing Values Framework has derived its name because the principles it relies on conflicting messages. In other words, organizations should be flexible and adapting to change, yet in the meantime, they should be stable and controlled
The framework also depends on six organizational culture dimensions and four dominant culture types (i.e., Clan, Adhocracy, Market, and Hierarchy).

3.2.2 Corporate culture types and their Implications: THE CLAN CULTURE:
The clan culture is a type of culture that is full of shared common values and goals. it is an environment of collectivity and shared help, with a stress on employee empowerment and evolvement. In such culture type, corporate culture that advocates the feeling of 'family' strongly exists. Teamwork is emphasized and leader's role is as a guide. The organization's focus is to keep its stability, loyalty, bond and participation. Such measures are considered in setting the drivers of success. THE ADHOCRACY CULTURE:
The adhocracy culture is similar to a short-term organization, which is terminated whenever the organizational tasks are accomplished, and reloaded promptly whenever new tasks arise. Adhocracy is an organizational culture that provides more chance for individuals to progress in their own way, as long as they are maintaining the parameters of the organization goals and objectives. Leaders are considered entrepreneurs who are focused on innovation and finding new opportunities. Organization's focus is to catch opportunities as much as it can be from the external environment. Individuals shall be considered successful personnel if they can generate and improve new concepts and enhance innovations. THE MARKET CULTURE:
The market culture emphasizes on the communications with the external environment instead of on the internal management. The organizational objective is to gain profits through market competition. Market culture is a type of culture that focus on the efficiency in achieving goals. Competition is a common practice among individuals and a main motivation driver, which in return create a sense of rigidity in personal relationship among organization's members. Measures of success are built upon target achievements, which are usually identified from activities that connect the organization with external parties. THE HIERARCHY CULTURE:
The hierarchy culture has a clear corporate structure, standard procedures, strict control, and clear duties and responsibilities. This culture can be easily recognized through the very strong and strict rule, system and procedures. Stability inside the organization is a major direction which must be sustained through a set of fixed and strict rules. Measures of success are based on how much the individuals can do correctly their tasks based on the procedures as well as their ability to maintain the stability in the system.


Organizational effectiveness is one the most critical success factors of an organization in any economy. It is measured by the level and organization can achieve its goals. Robert and Rohrbaugh, (1983). The organizational effectiveness is also defined as the degree the organization achieves the objectives. The subject of organizational effectiveness emphasizes on system control, management of information and goal setting, (Quinn. 1988), (Desion, Haaland and Goelzer, 2004). Measuring of organizational effectiveness is a very critical step in the organizational development. (Honda and Adas, 1996), (Lee and Tseng, 2005). In order to have an effective organization, business leaders should work on engaging their employees in executing the company strategy. Many studies have shown that organizational culture has a direct effect on employees' satisfaction, efficiency, commitment and cooperation, decision-making etc. (Langan-Fox and Philomena Tan, 1997), (O'Reillly, 1991).

3.3.1 Organizational Effectiveness Models

From the various perspectives about organizations' nature, their characteristics and dimensions, and their key effectiveness measures, multiple models of organizational effectiveness have been created.
The relationship between CVF and the models of Organizational Effectiveness is developed with the following efficiency models illustrated below: THE HUMAN RELATIONS MODEL:
In this model, contribution, dialogue and openness are considered the means to increase morale and achieve commitment. THE INTERNAL PROCESS MODEL:
In this model internal procedures such as measurements, documentation and management of information is considered the means to achieve stability, control and continuity. THE OPEN SYSTEMS MODEL:
In this model vision, innovation and adaptation are linked and considered as a direction to external respect, support, achievement and development. THE RATIONAL GOAL MODEL:
In this model direction and goals are considered the way for gaining profit and productivity (Martz, 2008).
The validity of these four dimensions was also experienced by Quinn and Spreitzer. (Quinn and Spetizer, 1991).
The study of these four models proposes that the competing values framework (CVF) is the most feasible model for measuring organizational effectiveness.



Figure 2. The Competing Values Framework of Organizational Effectiveness


Steers, (1975) and Zammuto, (1982), found that the most important subject in the organizational culture theory is the measurement of effectiveness. For linking organizational culture, Ouchi, (1980), studied and identified the characteristics to determine the organizational effectiveness. Quinn and Rohrbaugh (1983), studied that relationship between organizational culture and effectiveness by developing the competing value framework. Kotter and Heskett, (1992), studied the link between strength of culture and its impact on organizational effectiveness. And it was found by Ostroff and Schmitt (1993), that the organizational effectiveness is directly impacted by the organizational culture. Juechter, Fisher and Alford (1998), completed the study and found that the organizational culture deeply controls the organizational effectiveness. Thibodeaux and Favela (1995), examined various methods to determine if a relationship exists between strategic management process and organization effectiveness such as, planning, objectives, flexibility, information management, communication, willingness, and found significant relationships. Rohrbaugh (1983), Quinn and Rohbaugh (1983), and Quinn (1988), found that organizations are experiencing conflicts among organizational effectiveness aspects continuum, for instance, all organizations have a need for stability as well as a flexibility; a need for control as well as a need of freedom, a need for rational formal structures and non-rational informal relations. In accordance with the studies shown above, the corporate / organizational culture has a positive direct influence on organizational performance and effectiveness, accordingly the relationship between corporate culture and organizational effectiveness shall be considered.
In explaining the theory that illustrates the relationship between culture and performance, four main cultural behaviors are studied, involvement, consistency, adaptability and mission.
Dension and Mishra (1995) has laid the foundation of such theory by examining those four traits and linking them to organizational effectiveness as follows:

This trait is basically about empowering employees, developing human capabilities at all levels of the organization and building organizations around teams (Becker, 1964; Lawler, 1996; Likert, 1961). A sense of belonging to the organization is usually developed, feeling that employees are a part of the organization. Top management, managers, and employees in different levels feel they are part of the decision making process and that they can influence their work. Their work are directly related to the organizational goals (Katzenberg, 1993; Spreitzer, 1995).
Organizational cultures have to be consistent and coherent. Culture is well coordinated and integrated. Behavior is derived from the core values and principles of the organization (Davenport, 1993; Saffold, 1988). Mutual agreement can always be attained between leaders and followers even in the presence of conflicting views (Block, 1991). Such consistency is the main source of stability and internal integration (Senge, 1990).
Adaptable organizations are those flexible to responding to their cultures, take risk and learn from their mistakes. They create value and experience when creating change (Nadler, 1998; Senge, 1990). Systems are continuously changes to improve organizations capabilities. However, well integrated are the most difficult to change and this trait is the most challenging to attain.
Having a clear mission is what characterizes successful organizations. Organization shall have a clear and defined purpose and direction. Defining organizational goals and strategic objectives and visualizing the vision of how organizations shall look in the future is a critical success direction (Mintzberg, 1987; 1994; Ohmae, 1982; Hamel & Prahalad, 1994). Underlying changes in mission shall instantly change aspects of the organizational culture.

However, and despite the attention that is given in the academic and business studies to organizational culture over the past decades, this area continues to be an area that requires further researches in order to be comprehended and further utilized.


Values are defined and known as long-term goals and objectives guiding ethics and principles in people's lives (Rokeah, 1973), (Schwartz, 1992). Values are assumed either as explicit or implicit prescription of the 'wishes that effect persons' means (Kluckhohn, 1951). Schwartz (1992), assumed that values are certain settings that people gained, and they are also the prevailing solid scene, and can be the ruling standard in a series of behavioral patterns (Ma, X., 2009). Moderating Role of Organization's Top Management Values

Individuals with diverse values tend to emphasize different results and are driven to achieve different objectives ( Berson and Dyir, 2005). The impact of values prevalent in that they affect the most fundamental ways in which people perceive their environments (Meglino and Ravlin, 1998). Corporate / Organizational culture represents a dynamic, active, perception by which main members of the organization, such as founders, executives, create shared meaning ( Morgan, 1997), (Berson and Dvir, 2008). CEO / Organizational founder values influence the organizational culture as factors that affect the decision making, management style and the behavior models in the organization. Leaders have also a vital role in determining and directing organizational culture (Schein, 1992). While founders have the original role in establishing an organization's culture, succeeding top management and executives influence the future culture change (Davis, S.M., 1984), Kerr and Slocum, 2005).
Leadership is one of the major driving forces for improving firm performance. Leaders and other executives, determine the development, and utilization of the organization resources, the transformation of these resources into valuable products and services. It supports organizations in achieving their objectives efficiently by linking job performance with a clear rewarding system and by ensuring the availability of the necessary resources needed by employees to do their job properly and efficiently. Mainly transformational leaders build a strategic vision and communicate that vision by walking the talk and acting steadily, and build obligation towards the organization's vision (Avolio, B.J., 1999), (McShane and Von Glinow, 2000).
Different researches and studies have reported affirmative relationships between transformational leadership and results at the individual and firm levels consequently, the behavior and attitude of the leader affects and has a strong influence on shaping the organizational values (Zhu, W., Chew, I., and Spangler, 2005). Haakonsan (2008) investigated and analyzed how misalignments between the leadership style and organizational environment affect the organization performance, According to the results he found that any misalignment may result in negative performance consequences. Peterson, (2003) studied and analyzed how the CEO's behavior affects top management team dynamics, such as rigidity, leader control, power centralization, legalism, cohesiveness, and the performance efficiency related to 'income growth.' Kauer (2007) investigated and studied the link between some personality such as flexibility, motivation of achievement, and other personality factors with organizational effectiveness criteria. Personality measures appeared to have a clearer and direct impact on decision promptness. The effect of self-evaluation on innovative direction is stronger in dynamic environments because uncertainty biases top executives to rely more severely upon their own frame of reference, which gives them greater choice in shaping strategic directions. Evidence indicates that individuals with a greater self-evaluation tend to follow objectives that are internally matching with their personal interests, values, and aspirations (Judge and Bono, 2005). Because top management with higher core self-evaluation are more confident that they can master their environment and surroundings and that the implementation of their knowledge and their capabilities will result in positive results, they should be more oriented to notice the positive possibility of entrepreneurial opportunities (Chatterjee and Hambrick, 2007). Research also found that CEOs with lower core self-evaluation are more seemly to have less confidence in their ability to influence and control the environment when confronted with ambiguous challenges and have a greater propensity to avoid risk (Hiller and Hambrick, 2005), (Uimuek, Heavay and Veiga, 2010). Related to previous studies about the consistent approach the values that can shape the leadership as the power, inspiration and self 'direction can have a major effect on organizational efficiency and strong direct effect on culture- efficiency relationship. Moderating Role of Environment

In any dynamic environment there is always rapid change and discontinuity in competition, demand, technology, or regulation and due to these changes the gathered information is often either inaccurate or outdated (Eisenhardt and Bourgeous, 1988).
In this framework, because cause-effect relationships are generally unknown, the result is uncertainty in decision making and gives founders and CEOs greater choice and freedom of action (Uimuek, Heavay and Veiga, 2010). Once the culture is shaped, founders and top management, and key leaders are responsible for managing the development of the organization's basic rules and for adjusting and modifying the culture in order to keep up with the rapid change in the environmental demands (Schein, 1992), (Agle, 1999), (Wally and Boam, 1994). Given the general propensity of individuals to insert their vision and interpretations and personalities into their judgments and decisions when challenged with unclear situations (Mischel, 1977) it would be expected that this tendency to be mostly strong among higher core self-evaluation top management working in dynamic environments.
On the other hand and when the environment is constant and stable, the influence of top management core self-evaluation on individuals entrepreneurial direction is less noticeable (Uimuek, Heavay and Veiga, 2010). It has been found that the more the organizational environment is stable and steady the more the leadership characteristics occurs such as managerial, transformational, political and ethical leadership ( Urluogro, 2009). Therefore, stability or inconsistency of organizational environment can enhance the rise of strategic and operational changes. And it has an important contribution as a moderated variable affecting the relationship between corporate/ organizational culture and organizational efficiency.


Organizational culture contains the values, beliefs, behaviors and norms that link the members of an organization. Similar to all other cultures organizational culture matures over a long period of time with the contribution of the members. Through studying and analyzing the culture of an organization, we are able to come up with various conclusions.
These include conclusions about the culture resistance, and communication and leadership styles. These conclusions can be helpful for top management and executives to encourage better organizational cultures which consequently improve the organization effectiveness and performance.
An organization's performance can be understood from the organization's culture.
The corporate/organizational culture can be defined as the shared attitudes from the founders, managers, employees and shareholders.
The organizational culture exposes the leadership styles of those leading and managing the organization. It has been observed in this research that the self-direction feature of founders , CEO and top Managers in the organization is related to inspiration and power. The managers with the higher self-direction personality could be referred to as being more dominant in this sense.
The individuals with higher self-direction and enthusiasm pay relatively a less importance to the quality in the organizational efficiency criteria. Both clan culture and the adhocracy culture have been found as negatively related to the organizational environment factor which highlights and emphasizes organizational structure, work in organization, and external competition.
In Market culture it has been found that consistency is considered with high importance for the employees working in such culture. This implements significance to the organizational policies and procedures as well as human resources practices, which guarantee employees to be market oriented and to identify themselves with the organization for this. It has been pointed out that it is necessary to give relatively less importance to the stability control in order to get better productivity.
The strategies and policies have been preferred to grow the organization rather than working on activities towards attain employee's loyalty.
It has been noticed that market cultures to have an impact on planning-goal setting and human resources development indicators; and the adhocracy cultures to have an impact on information management and communication are among the expected outcomes.
Self-direction managers found to be more influential in the clan culture on establishing planning and goal setting, while the inspiration character of the manager has the same impact in market cultures. In order for the clan culture to reach a desired efficiency level it has to accompany with organizational environment factor with its significant effect emphasizing the external competitiveness, work in organization and other organizational arrangements factors which is not considered as part of this culture.
Organizational environment factors (internal and external) in relations among various culture types and organizational efficiency dimensions, are found as considerably influential. And the main impact is the organizational environment factor which emphasizes the determined work and organizational measures.
Accurate and exact analysis of organization culture, including, determination of strategy, politics, and human resource practices in accordance with corporate/organizational culture will enable the organization to reach the wanted organizational performance and efficiency on the condition depending on the stability or variability of internal and external environment.

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