Corporate Culture: Literature Review Essay
Corporate Culture: Literature Review
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Culture has long been assumed to have an important influence on an individual’s reactions to organisational life (Harris & Mossholder 1996) - Corporate Culture: Literature Review Essay introduction. By the 1990’s, the concept of organisational culture became a ‘household word’ in organisation theory and practice, due largely to the emerging dominance of non-Western economies, notably Japan (Altman & Baruch 1998). Research on corporate culture encompasses a wide variety of different approaches and methods, including case study, culture change, comments, environment, ethics; general concept, and performance. (Brown 1995)
For the past 50 years, researchers in sociology, anthropology, and social psychology have found that culture plays a critical function in a social organisation. Claims that culture is a key to profitability have proliferated in the scholarly as well the popular literature on organisations. Sociologists and social psychologists view culture as a tool for integrating functions of society. They perceive culture as helping organisations adapt to society.
Culture is an abstract concept, not a physical thing; a concept is created in people’s minds, and is also a concept that can be defined and refined (Ott 1989). Corporate cultures differ within the same organisation. Kroeber and Kluckhohn (1952) found more than 100 different definitions of culture from their search of literature. Since the culture is a concept, different definitions of culture may result in different perceptions of corporate culture in people’s minds.
Culture and National Culture
It seems that as our national borders dissolve we assert our cultural boundaries more fiercely. The concept of culture has been central to anthropology since that field’s inception (Hatch 1993, p. 657) During the past two decades, extensive business literature has been developed on the subject. In spite of considerable interest in culture, Smircich (1993, p. 339) has noted that in neither anthropology nor organisational studies is there consensus on the meaning of the concept. After identifying more than 100 definitions of culture, anthropologists Kroeber and Kluckhohn (1952) exposed the diversity around the meaning of culture. After their analyses, they offered the following definition:
Culture consist of patterns, explicit and implicit, of behaviour acquired and transmitted by symbols, constituting the distinctive achievement of human groups, including their embodiment in artifacts: the essential core of culture consists of traditional (i.e., historically derived and selected) ideas and specially their attached values; culture systems may, on the one hand, be considered as products of action, on the other, as conditioning elements of culture action. (p.181)
In 1980, Geert Hofstede presented his dimensions of national culture, based on surveys of 116,000 IBM employees from70 countries. From this now landmark study and the two decades of scholarship that followed, Hofstede (2001, p. 9) defines culture as “the collective programming of the mind that distinguishes the members of one group or category of people from another.” This programming of the mind, which Hofstede argues is developed early in life, contains components of national culture due to societal influence. Due to large sample size, Hofstede was able to identify different dimensions of national culture.
“These studies together identified five independent dimensions on national culture differences, each rooted in a basic problem with which ail societies have to cope, but on which their answer vary” (Hofstede 2001, p. 29). Initially, Hofstede identified four national culture dimensions: Power distance; Collectivism versus individualism; Femininity versus masculinity; Uncertainty avoidance.
Hofstede (1994) credits Michael Harris Bond and The Chinese Culture Connection with identifying what Hofstede recognises as the fifth dimension of culture: that is, long-term versus short-term orientation. This latter dimension was only identified when Hofstede’s research was reconstructed and administered with the extensive involvement of Chinese researchers to deliberately create a non-western bias (Hofstede & Bond 1984). These five dimensions of culture are used by Hofstede (2001) to measure the differences between cultures.
Power distance reflects how a culture deals with people having unequal levels of power or control. The term power distance is derived from research into the emotional distance between subordinates and their supervisors. Hofstede (2001, p. 29) describes power distance as “related to the different solutions to the basic problem of human inequality.” The power distance index (PDI) is a measure of the degree of dependence in relationships (Hofstede 2001). High PDI values indicate a national culture where there is a significant degree of dependence by subordinates on their manager.
According Hofstede (2001, p. 80), inequality in society may transpire in multiple spheres like social status, prestige, wealth, power, and physical or mental characteristics. Power distance is related to how the less powerful expect or accept inequality and how each culture justifies authority using its major values. Submission to power is the earliest formative experience in human life (Wrong, 1980, p. 3).
Hofstede (2001, p. 29) describes the second cultural dimension, uncertainty avoidance, as being related to the level of stress in a society in the face of an unknown future. This stress is a basic problem in societies: How do people in a culture deal with the unpredictable and the ambiguous? High uncertainty avoidance index (UAI) values indicate a national culture in which there is a significant need by its members for predictability, for written and unwritten rules. Hofstede (2001, p. 145) cautions that “uncertainty avoidance should not be confused with risk avoidance.” Uncertainty can be equated to diffuse feelings of anxiety while risk focuses on something specific. The need to avoid uncertainty leads people to seek structure in their organisations, institutions, and relationships, and therefore, to try to avoid unclear situations.
The cultural dimension of individualism versus collectivism deals with the problem of identity and reflects how a national culture handles the power of the group over the individual. Hofstede (2001, p. 29) describes “Individualism versus Collectivism (as) related to the integration of individuals into primary groups.” As Triandis (2002, p. 16) observes, in collectivistic cultures, “they are more likely to give priority to the goals of their in group than to their personal goals.” High individualism (EDV) values indicate a national culture in which there is a significant degree of individualism tolerated or even encouraged. This dimension of national culture can be looked at from two poles defined by Hofstede (2001, p. 225).
Individualism stands for a society in which the ties between individuals are loose: Everyone is expected to look after him/herself and her/his immediate family only. Collectivism stands for a society in which people from birth onwards are integrated into strong, cohesive in-groups, which throughout people’s lifetime continue to protect them in exchange for unquestioning loyalty.
Hampden-Turner and Trompenaars (2000) addressed the same concept labelling them individualism and communitarianism. The decisive contrast between individualism and communitarianism, according to Hampden-Turner and Trompenaars (2000, p. 69), is “the extent to which the individual is self-made and the extent to which the wider system is responsible for personal success.”
Masculinity and Femininity
The basic problem in the fourth dimension centres on gender roles as a cultural differentiator. Hofstede (2001, p. 29) describes the masculinity versus femininity dimension as “related to the division of emotional roles between men and women.” It has been found that, in all countries in the world, a more differentiated role distribution between men and women corresponds with a more demanding society in which there is more emphasis on achievement than on quality of life. Hofstede (2001, p. 297) defines the roles as follows:
Masculinity stands for a society in which social gender roles are clearly distinct: Men are supposed to be assertive, tough, and focused on material success; women are supposed to be more modest, tender, and concerned with the quality of life. Femininity pertains to societies in which social gender roles overlap: Both men and women are supposed to be modest, tender, and concerned with the quality of life.
High masculinity (MAS) values indicate a national culture in which there are significant distinctions between gender roles. These cultures also stress fairness, competition, and performance. The manager in a masculine culture will seek to resolve conflicts by fighting them out, whereas the manager in a feminine culture will seek conflict resolution through compromise and negotiation (Hofstede 1994).
Long-Term Versus Short-Term Orientation
The fifth dimension of national culture identified by Hofstede (2001, p. 29) is “Long Term and Short Term orientation, which is related to the choice of focus for people’s efforts: the future or the present.” This new dimension was identified through the Chinese Value Survey developed by Michael Harris Bond in Hong Kong. According to Hofstede (2001) long- and short-term orientation appears to be based on principles suggested in the teachings of Confucius. The following are the four key Confucian principles as described by Hofstede (2001):
1. The stability of society is based on unequal relationships between people.
2. The family is the prototype of all social organisations.
3. Virtuous behaviour towards others consists of not treating others as one would not like to be treated.
4. Virtue with regards to one’s task in life consists of trying to acquire skills and education, working hard, not spending more than necessary, and being patient, and persevering.
Hofstede (2001) defines long-term versus short-term orientation as follows:
Long Term Orientation stands for the fostering of virtues oriented towards future rewards, in particular, perseverance and thrift. Its opposite pole, Short Term Orientation, stands for the fostering of virtues related to the past and present, in particular, respect for tradition, preservation of “face” and fulfilling of social obligations, (p. 359)
High long-term orientation (LTO) indicates a national culture where there is a significant sense of the future.
The 1980s brought revitalisation to the organisational/corporate culture concept. During those years, several books on organisational culture appeared on the U.S. best seller’s list. Books like Theory Z by Ouchi (1981), The Art of Japanese Management by Athos and Pascale (1981), Corporate Cultures by Deal and Kennedy (1982), and In Search of Excellence by Peters and Waterman (1982) tried to account for the success of Japanese companies through the concept of culture. As Deal and Kennedy (1982) hypothesised, “A major reason the Japanese have been so successful, we think, is their continuing ability to maintain a very strong and cohesive culture throughout the entire country…. Japan, Inc., is actually an expansion of the corporate culture idea on a national scale” (p. 5).
Clearly, culture is perceived as one of the reasons for the success of Japanese companies. However, the statement also gives the impression that the understanding of cultural layers was not that well developed. Particularly, by contrasting the prior statement with Hatch’s remarks (1997), “The most unified understanding of organisational culture comes from the idea that organisations are manifestations of a larger cultural system” (p. 669). The notion that organisational culture is a manifestation of a larger system is also observed by Gordon (1991): “Corporate cultures, consisting of widely shared assumptions and values, are, in part, molded by the requirements of the industry in which they operate” (p. 410).
Organisation socialisation unfolds over a period of time, but typically the learning of organisational culture occurs during adulthood. Indeed, Hofstede (2001) observed that “by the age of 10, most of the child’s basic values have been programmed into Ms or her mind. Organisational practices, on the other hand, are learned through socialisation at the work place, which most people enter as adults—that is, with the bulk of their values firmly in place” (p. 394). Their values are already in place because the learning place of those values is the family. Hofstede (2001) illustrates that, at the national level, cultural differences reside mostly in values and less in practices. At the organisational level, however, cultural differences reside mostly in practices.
When a person enters the workplace, he or she adds onto their cultural layers, so to speak, although it is perhaps more accurate to say that layers of culture become cumulative within a person or organisation. When observed at the macro level, distinct levels of aggregation represent cultural layers themselves. There are innumerable cultural layers that are legitimate to study. For example, Van Maanen and Barley (1985) contributed to the notion of levels by defining subculture. The focus of this study, however, is at the national and organisational levels. This focus has led to the utilisation of the organisation culture definition offered by Hofstede (2001): “The collective programming of the mind that distinguishes the members of one organisation from another” (p. 391). This definition is in concert with the definition of national culture, also defined by Hofstede, presented previously.
Defining Corporate Culture
Corporate Culture is a characteristic of the organisation, not of individuals; however, the measure of organisational culture is emanates from individuals. Often cited as the source for the term “corporate culture,” Silverzweig and Allen (1976) began a string of research that has continued to evolve the definition of corporate culture. Related to the nature of human group behaviours, the concept has been promoted in the areas of anthropology, sociology, organisational and social psychology—all leading to varying perspectives on cultures (Schein, 1990). Each definition was well suited to the area of interest that drove its investigation initially (see Table 1).
Table 1. Various Definitions of Corporate Culture
A pattern of expectations shared by members of the organisation. These beliefs and expectations shape the behaviour of individuals and groups in the organisation.
Schwartz and Davis (1981)
Symbols, ceremonies, and myths that communicate the organisation’s specific values and beliefs to all employees.
The way things are done around here.
Deal and Kennedy (1982)
Shared patterns of meaning that hold together an organisation.
Martin and Siehl (1983)
Shared set of important understandings that members of a community share in common.
An understanding by employees as to how things are done.
Those patterns of shared assumptions that an organisation has created, discovered, or learned in order to cope with problems of external adaptation and internal integration.
A corporation’s unseen structure.
Camerer and Vepsalainen (1988)
Shared understandings about an organisation
and its problems, goals, and values.
Schein’s (1985) definition of organisational culture, accepted by many researchers is “A pattern of basic assumptions-invented, discovered or developed by a given group as it learns to cope with 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 to perceive, think and feel in relation to those problems” (p. 9). Corporate culture is a set of shared values/assumptions believed by all the organisational members to be valid for solving problems. Also, culture must be shared and learned. Schein (1990) also describes corporate culture as the values and behaviours that create success and are taught to newcomers.
Hofstede (1994, p.262) defined culture as “the collective programming of the mind which distinguishes the members of one organisation from another. This study uses Schein’s (1985) culture definition to define corporate culture. Hofstede et al. (1990) examined 20 companies in Denmark and the Netherlands, and identified six characteristics of corporate culture. They are: (1) holistic, (2) historically determined, (3) related to anthropological concepts, (4) socially constructed, (5) soft, and (6) difficult to change. They indicated that the six factors should be useful in identifying the main concepts of corporate culture in a variety of situations.
Based on the above definitions developed over the past 20 years, it is clear that corporate culture embodies, and is a significant determinant of, beliefs, values, attitudes, and behaviour in organisations (Buono et al. 1985). Identifying the basic values and underlying assumptions in an organisation can thus be regarded as corporate culture study (Schein 1999). Based on the separately developed culture definition, the past research studied culture through relatively observable phenomena, such as a formal structures and responsibilities, informal behavioural patterns, and symbolic artifacts, such as rituals. Other studies focus on the values, meanings, and interpretations that underlie the more easily observable phenomena. Still others seek fundamental, pre-conscious assumptions (Schein, 1985), hidden symbolic meanings, or other aspects of deep interpretations.
Corporate culture is a key ingredient in a successful company (Cameron & Quinn, 1999). Most organisational scholars recognise that organisational culture has a distinct effect on the long-term effectiveness and performance of organisations (Cameron & Quinn, 1999). Cameron and Quinn (1999) repeat that successful companies can be distinguished from other companies on the basis of having a distinctive and identifiable company culture. They state, “The major distinguishing feature in these companies, their most important competitive advantage, the most powerful factor they all highlight as a key ingredient in their success, is their organisation culture” (p. 4). Cameron and Quinn (1999) emphasise that every successful company develops its own unique corporate culture. They continue:
Simply stated, successful companies have developed something special that supersedes corporate strategy, market presence, or technological advantages. Although strategy, market presence, or technology is clearly important, highly successful firms have capitalised on the power that resides in developing and managing a unique corporate culture, (p. 4).
Some researchers stress the importance of strong vs. weak as another way to understand the construct of culture (Saffold, 1988). Strong culture can be seen when members of an organisation widely share norms and practices based on a consensus, and when they use these as a basis for shooting trouble situations. Through survey data, strong culture can be recognised from the difference of variance score at the organisation level. An organisation with strong culture will be the one whose variance score is lower.
A low variance score implies high consistency, common practices throughout the organisation, and a widely shared conception of the way things are done within a particular organisation. This implies that ideals, and the degree to which they are commonly understood, should have a direct impact on organisational performance. In summary, there still is no consensus on the meaning of corporate culture, and the methodologies used to study it. Corporate culture can still be identified and diagnosed with a number of different dimensions.
Schein (1985, 1990) presented an account of defining culture viewed through its various manifestations and determined that culture can be seen at three levels. Level One is the most surface observation of an organisation, such as symbols and rituals (e.g., an executive dinning room). Level Two represents a closer view of the culture and is often cited as the company’s values and beliefs (e.g., “this company is the best place to work, bank, and invest”). Level Three represents the internal assumptions and beliefs that motivate the overt behaviours within an organisation (e.g., “I was mentored, so I feel that I should mentor others”). Schein’s research on organisation culture has been cited in many studies.
In another approach to understanding organisational culture, Schein (1999) acknowledges macro levels like nations, ethnic background, and religion and broadens the discussion around the degree of visibility of organisational culture. Schein refers to levels of exposure in which organisational culture is manifested (see Figure 1.).
Figure 1. Uncovering the Levels of Culture (Schein 1992, p. 17)
Artifacts and exposed values are similar in meaning to what Hofstede (2001) refers to as “practices” (p. 393), which are at a more superficial or visible level than underlying values. Artifacts, exposed values, and practice reflect the taken-for-granted beliefs and values.
Schneider (1990) expanded on Schein’s model with what was termed the Five Layers model. This model was similar to Schein’s work in that Schneider defined organisation culture as layers of processes and motivations that appear as deeper values as one peels off the superficial layers. Readily accessible at the perimeter are the observably physical manifestations of culture such as artifacts, behaviour patterns, and norms. As one moves deeper into the manifestations, more cognitive processes such as values and expectations represent culture.
These manifestations of culture were explored by Sackman (1991), who suggested that three overlapping perspectives (variable, cognitive, and holistic) could constitute an effective way to focus on the expression of culture. Sackman proposed that previous research on the categories of culture did not completely discriminate among observable behaviours, artifacts, and underlying meanings. Expressions of culture are tangible and are often seen as simply the way things are done in an organisation. These cultural expressions are found in corporate communications, new employee orientation, training programs, branding, and common terms used in the organisation.
The value of Sackman’s (1991) research is that it brings to the surface the need to be hyperobservant in identifying the means by which culture is communicated and reinforced. However, it fails to provide useful direction as to the application of those observations in engineering change.
Sackman’s (1991) variable perspective captures many of the same characteristics mentioned in Schein’s (1985) Level One symbolism category named as artifacts and behavioural patterns (e.g., the executive dining room). The cognitive perspective relates closely to Schein’s Levels Two and Three. Schein’s areas are corporate-held beliefs and the underlying motives that drive individual behaviour (e.g., corporate values and experience with mentoring). Sackman’s third focus is the holistic perspective of culture, combining the above two variables and integrating them. Essentially, each organisation has a unique set of ceremonies, communications, and customs that drive individual behaviour. This unique behaviour reflects the implicit norms of the organisation and shapes the behaviour of new individuals to match the expected cultural norms.
In reviewing these different approaches to culture, one finds that culture is often defined in a holistic context. However, the cited research often focuses on observable behaviour or assesses the cognition around the organisation’s expression of culture. It is for this reason that Schein’s (1985) definitions are seen as the dominant framework for culture (Hatch 1997).
Along the lines of an integrated holistic view of culture, Goffee and Jones (1996) viewed culture through the lens of sociology. It was their premise that corporate culture can be viewed in two types of human interaction: solidarity and sociability. Solidarity is the extent to which an organisation can elicit from its members an alignment and pursuit of shared objectives, regardless of personal objectives. Sociability is the degree of friendship interactions among members. These two dimensions were plotted on a matrix to illustrate four types of culture: networked, communal, fragmented, and mercenary (see Figure 2). Goffee and Jones proposed that there is no one best culture. Instead, managers should assess, understand, and determine whether their current culture best fits their specific competitive environment. If there is not an alignment between environment and culture, managers should consider techniques to transform the culture.
Figure 2. Two dimensions, four cultures. Taken from “What Holds the Modern Company Together,” by R. Goffee and G. Jones, 1996, Harvard Business Review, 74, 43-58.
To explore how to transform culture, Kunda (1992) broke culture down into three points. First, management spends a great deal of energy on developing and communicating the ideology of the organisation. Second, these ideologies are embodied in corporate policies and procedures governing employees’ work life. Third, employees adopt these ideologies as expectations of performance and perform within those parameters. The result of these three steps is that there are no formal modes of acting. Rather, members appear to have internalised the norms of behaviour and are relying upon their own resources to meet the expectations of the culture.
Effects, Performance and Measurement of Corporate Culture
Consider the financial effectiveness of a company whose culture is not well defined. Is there a direct correlation between financial effectiveness and culture? A company with vague values, direction, and purpose seems destined for a lacklustre existence when compared to a company that has clearly defined values, goals, and motivation (Cudaback 2000). The effectiveness of these values varies based on the industry, market, and economy at any given time (Kanter 2001). Research often shows that many organisations failed to read the business environment and created or maintained a culture that did not give the organisation an edge over its competitors (Brown, 1995).
Performance outcomes tend to be governed by the culturally expected behaviours of individuals in the company (Cudaback 2000). Employees are the conscience of the expectations placed on them of when and how to behave. This was illustrated in the often-cited Hawthorn studies, in which workers modelled the performance behaviours they thought were expected of them. (Brown 1995). This illustrates the power that employee expectations can have on productivity and performance.
Petty et al. (1995) focused on the empirical relationship between culture and performance. The first challenge is to operationalise the definition of organisational culture. The authors defined culture as a long-term phenomenon that can be affected and observed within a shorter time. This is an important differentiation to make to support the usefulness of trying to change an existing culture.
With the concept of culture defined, the authors then correlated measures of culture with performance indicators, and they found strong links between the two measures (Petty et al., 1995). Among the four dimensions of culture assessed (teamwork, trust and credibility, performance and common goals, and organisational functioning), the strongest indicator of that link was evident in the correlation between teamwork and performance. These findings fit intuitively with the notion that a high level of teamwork leads to greater performance. In an Internet culture, employees are required to create new working teams at a very fast pace (Cudaback 2000; Kanter 2001). Those companies who manage teamwork dynamics well are those who, for the sake of basic survival, have mastered this ability through repeated trials.
Goffee and Jones (1996) presented examples of how different cultures in market-related environments are effective. An example is an organisation with design, manufacturing, and marketing teams who are independent within the organisation. When a task requiring collaboration presents itself, the cultural norm is to focus collectively to make things happen. The reason behind this collaborative effort involves financial incentives for forged team performance. Tasks that require them to team together, for the mutual benefit of the departments, are more likely to succeed over tasks that benefit one department only.
Organisational culture includes the shared values, beliefs, and behavioural norms and expectations within an organisation. Klein et al. (1995) demonstrated a link among organisation culture, amount of control, employee performance, and perceived quality of service. Their findings strongly indicated that corporate culture had both a direct and indirect influence on service quality. Perceived quality of services had a strong positive relationship to constructive beliefs. This study illustrates that the purpose behind a corporation’s culture is to rally employees around a particular set of beliefs. These beliefs motivate employees to meet expectations of quality, performance levels, and customer service.
The impact of culture on employees’ beliefs was discussed by Earl and Nahapiet (1999), who published a case study on a Swedish financial services company in Stockholm. The firm, Skandia, was founded in 1855, was listed on the Stockholm exchange in 1863, and is the only company originally listed on the Exchange surviving today. Many consider culture to be the key to this company’s longevity. The norm in the company is to examine the present to better understand and position the company for its future. A common company activity is to bring people from across all functions and countries, particularly younger employees, together at a site called the Future Center. The aim is to ask questions about the future and learn to stretch into opportunities that are emerging. The opportunities are emerging because of the questions. This cultural focus has led to a long history of “firsts” for this company, which many identify as the reason for its current and future success.
This ability to adapt was the focal point of a study by Kitchell (1995), where the relationship between culture and technology use was examined. Several cultural dimensions were considered to influence innovation adoption, and the study examined the dimensions differentiating adaptive from non-adaptive companies. The specific areas examined were environmental turbulence, internationalisation, corporate objectives, risk taking, communication, staff relationships, and innovation adaptation.
The results showed that innovators were actively changing themselves in parallel with their environment. In response to competitive markets, they invested in technology, increased market penetration, coordinated self-improvement programs, and engaged in risk taking. Non-innovators tended to exhibit pessimistic characteristics and viewed new technology as futile. They tended toward operating “as is,” in hopes that the environment would change to favour their business plan again. This parallels well with the hypothesis that companies created in the Internet marketplace tend to view technology and innovation as assets to be managed rather than as obstacles to endure (Kanter 2001).
Perspectives on the relationship of culture to performance were grouped into three theories (Kotter & Heskett 1992). Theory I suggests that a strong culture leads to strong performance, which seemed to be too simplistic to account for all influencing factors. Theory li proposes the need for alignment between a strong culture and employees; this also was found to be too simplistic and not able to account for corporate adaptability and long-term performance. Theory II suggests that cultures that help organisations anticipate and adapt to market changes will produce good long-term economic performance. A key factor of Theory III is its consideration of the needs of a firm’s key constituencies, including shareholders, customers, employees, and suppliers. Firms that focused on all key managerial constituents (customers, stockholders, and employees) and possessed leadership from managers at all levels outperformed, by a large margin, firms that did not have these cultural traits. Kotter and Heskett found that 10% of the 207 firms in their study had the cultural characteristics that would improve economic performance (see Figure 3).
Figure 3. Stock price, net income, revenue, and workforce comparisons between adaptive and non-adaptive organisations. Taken from Corporate Culture and Performance by J. Kotter and J. Heskett, 1992, New York: Free Press.
Kotter and Heskett (1992) stopped short of exploring all business markets and determining which characteristics led to improved economic performance by market. In some business sectors, corporate culture has little bearing on performance; in others, it can represent a powerful advantage over competitors (Burt 1999). Typically, the corporate cultures of government, academia, and research organisations have little impact on performance. Members of the retail, software, durable goods, and service sectors have clearer linkage.
Strong cultures provide stability and predictability for their members, which allows for clear direction on how to respond to ambiguous situations. In some cases, it can also distract from flexibility to the point where the culture strongly influences the wrong approach. One example, outlined by Kraut (1996), involves the release of Intel’s Pentium computer chip in 1994. After the release, it was found that, in some cases and in certain situations, there was a decrease in reliability of that chip. Intel’s response was to be open about the problem, but it statistically downplayed the severity of it. In response to customer inquires, Intel set up overly detailed procedures and documentation to replace chips for customers who were experiencing problems. While this policy was consistent with the firm’s strong engineering culture, it did little to instil trust.
The definition and operational ability of performance has been less problematic (Siehl 1988). Researchers in both arenas generally measure performance with financial ratios. For example, the four standard ratios frequently most utilised in research include return on assets, return on equity, return on sales, and earnings per share (Siehl 1988). Past research demonstrates that there are many ways to assess performance ranging from qualitative factors, like employee satisfaction, to quantitative variables, like shareholder wealth (Cameron 1986). Financial indices are used extensively to measure organisational performance (Denison 1995). However, there is also an inherent paradox of the performance measurement. It involves “whose performance” (Blau & Meye 1971) as different stakeholders have different definitions of performance or effectiveness, and hold different and incomparable standards (Cameron & Whetten 1983).
Hansen and Wernerfelt (1989) studied the determinants of firm performance by comparing economic factors and organisational factors. They tested three performance models, which were: (1) economic model, (2) organisational model and (3) myriad model. They used accounting rates of return as the measurement of performance. They found that organisational factors can explain a firm’s profit twice as much as economic factors. Other researchers used other measures. The approach of using one item to measure the different factors associated with performance could be questioned in terms of validity and/or reliability.
Other organisational characteristics have been found to be related to performance. A firm’s size was found to impact performance negatively. Additionally, the performance and quality of managers are critical to changing employees’ behaviour and the performance of the organisation (Hansen & Wernerfelt 1989). Research also suggests that managers can change the behaviour of their employees and thus enhance the performance of the organisation by altering the formal and informal organisational structure, reward systems, etc.
Despite the fact that considerable attention has been directed toward culture as a central aspect of organisations, few attempts have been made to develop measures of culture. It appears that the controversies related to defining culture and what dimensions should be included have contributed to the difficulty in designing a measure. Cameron and Quinn (1999) suggest the quantitative approach is suitable for establishing a relationship between the national dimensions of culture and management practices in multiple organisations and countries: “To conduct comparisons among multiple cultures, quantitative approaches must be used. It is crucial, however, that those responding to a survey instrument actually report underlying values and assumptions (culture), not just superficial attitudes or perception (climate)” (p. 135).
A small number of instruments are available to assess culture quantitatively. Denison (1990), and Denison and Neale (1996) developed the Organisational Culture Survey. This survey is explained in detail in later in this chapter. Reynolds (1986) developed an instrument to capture aspects of organisational culture and the perceived work context of the individual. Cooke and Rousseau (1988) proposed the Organisational Culture Inventory as an instrument to profile organisational culture in terms of behavioural norms and expectations. Goll and Sambharya (1995) developed a model that focuses on the fit of culture and strategy with special focus on the influence of corporate ideology.
Cameron and Quinn (1999) developed the Organisational Culture Assessment Instrument (OCAI). The OCAI was based on the Competing Values Framework, which explains the underlying value orientations that characterise organisations. These value orientations are usually competing or contradictory to one another (Cameron & Quinn 1999). Organisational Culture Survey was often utilised due to its practicality and its ability to capture applied management practices, shifting away from a more “academic model.” Denison’s culture model is rooted in workplace behaviours and expressed in workplace language (Denison & Neale 1996).
A review of the literature suggests that the definition of corporate culture can be centred in a social context (Hofstede et al. 1990; Ouchi 1981; Sathe 1983). Intuitively, this social context falls into what many would refer to as societal values, beliefs, assumptions, and myths that help an individual to assimilate into an organisation and to understand its expectation of him or her. These expectations are often defined and modelled by the leadership of the organisation, and hence are supported by both intrinsic and extrinsic rewards (Hofstede et al. 1990). Both financial and non-financial factors have been found to impact a firm’s performance. While both can represent a company’s performance, it is important to identify whose performance is being measured in order to assure accuracy.
The firm’s corporate culture should be like a melting pot where employees and partners with their diverse talent could create a “salad bowl”, where each one is different but when they come together, they create synergies, which lead to an excellent work. The corporate culture should be one to enhance economic performance without loosing the sight of different cultures, which exist within the firm. For this appreciation of the various cultures is required along with such systems which leverage these differences to create synergies. (Schein 1999)
To achieve this cultural competence has to be imbibed into the organisation. It can be defined as “the capacity to integrate seemingly opposed value”. Just recognising cultural differences is not enough; the need of the hour is to develop cultural competencies. The management should have the capability of modifying strategy according to the specific context of a cross-cultural situation and also, the propensity to reconcile seemingly opposing value and to bridge these differences. The first requirement for this change is effective leadership. If the leader can direct the efforts of opposing values towards one corporate value cultural competence is achieved.
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