Strong Corporate Culture Enhance Organisational Performance Commerce Essay


The culture of a corporation impacts on its employees, it processes and performance. An organisation where the employee's attitudes and beliefs are in alignment with the organisation's goals and values will benefit from enhanced performance. Management leadership plays a critical role in developing and nurturing the corporate culture in alignment with its external environment.

Defining corporate culture is difficult amongst disciplines who offer varying definitions and explanations as to what culture constitutes. (Daughterty, 2007) An organisation's corporate culture is not static and is constantly evolving over time. Corporate culture can be referred to as the set of values, beliefs and behaviours that shape the organisation. (Deal and Kennedy, 1982; Schein, 1992; Kotter & Heskett, 1992) It also refers to symbols, rituals, myths and practises that have evolved within the organisation. (Pettigrew, 1979). Basically, culture is written and unwritten; the way people think and behave which refers to the pervasive behaviour of the organisation. Deal and Kennedy (1982) refer to this as 'the way we do things around here'. Chatman (1991) further defines the pervasive behaviour of the organisation into seven dimensions: innovation, stability, orientation towards people, outcomes or results, an emphasis on being easy going, attention to detail and the collaborative team orientation. These dimensions can impact on the organisation's performance both financially and non-financially.

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Initially, organisational performance was measured on the financial results of the organisation such as return on assets, investment, equity or sales and profit which reflected the efficiency of the organisation and allowed management to analyse the organisation's environment. (Davis, 2000) This has progressed to a more behaviourist view to include non-financial measures such as job satisfaction, organisational commitment and employee turnover. Barney (1991) sees flaws in both types of measurements as it can be difficult to measure the corporate culture's constantly evolving beliefs against performance. Many theorists argue what constitutes a suitable measurement of performance as the nature of corporate culture is complex, however this is evolving as more endeavours are made. Performance measures now include both quantitative and qualitative methods such as the balanced scorecard approach. The balance scorecard approach measures performance relating to 24 areas focusing mainly on financial, customer, internal processes and employees. (Albright., 2010) Performance measures have been identified to help management strategise, achieve goals, identify problem areas and assess the strength or weakness of corporate culture. (Hartog, 2004)

Most theorists will claim that strong cultures exhibit highly motivated and loyal employees, alignment towards the organisation's goals, missions and values, and increased collaboration of employees to improve efficiency. (Deal and Kennedy, 1982; Denison, 1996; 1999; Kotter and Heskett, 1992; Peters and Waterman, 1982) This enhances the confidence and commitment of employees which reduces stress, absenteeism and improves employee's ethical behaviour. (Saffold, 1998) A strong culture will influence the social control of employee's decision and behaviour, and act as a social glue that assists in understanding the processes and expectations. (Ojo, 2009) This differs from a weak culture where employees are governed by strict rules and guidelines that may create division between the employee's personal agenda and the organization's goals. (Deal and Kennedy, 1982)

Organisations recognizing the corporate culture as an asset will try to develop a strong culture by recruiting the right employees, providing training for integration, and govern by using role model management that rewards good behaviour. This has been shown to enhance the organisation's reputation, service and commitment by employees. (Zemke, 2002) Employees who have a clear understanding of their job design are more effectively motivated and committed towards the organisation's ambitions. This can be achieved by the mission and vision statements, rituals, constructive feedback, job security and linking employee performance to those goals that will be rewarded. (Sawalha, 2012)

The leadership of the organisation plays an important role in the organisation's culture. Schien (1996) claims there is a constant evolving inter-relationship between the leadership and culture. Bass (2006) refers to the leaders as the role models for the organisation's culture as they incorporate the beliefs, values, assumptions and rites of the organisation. The success or failure of the organisation will be dependent upon the founder's beliefs as to the current opportunities and constraints that confront the organisation. Gallagher (2008) correlates enhanced performance to leaders who correctly align the corporate culture with the external environment. Corporate culture is the driver of superior performance and requires stewardship by the leaders, to lead the initiative required to build and maintain the company's culture.

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The leadership style can affect the organisational culture and have an indirect influence on performance. (Ogbanna, 2000) Covin and Slevin, (1988) found that leader's that are bureaucratic or mechanistic in their management style are likely to achieve lower performance results than those organisations that are entrepreneurial or organically structured, due to their inability to respond and adapt to their environment thereby preventing them from maintaining a competitive advantage.

Due to the complex nature of corporate culture, it has been difficult to measure the relationship between culture and performance. (Denison, 1996; Peters and Waterman, 1982; Saffold, 2008) However, there are correlations between organisations with a strong culture that performed strongly financially (Kotter, 1992) and non-financially (that had higher employee participation resulting in higher efficiency) (Denison, 1996). Further investigation as to what made these organisations successful was based on the qualities of the culture. Kotter (1992) demonstrated that successful organisations (companies that produced more than three times the net income of lower performers) were innovative and adaptable to their environment with strong managerial leadership that emphasised its core values of customers, stakeholders and employees. Peters and Waterman (1982) noted that the benefits of these attributes can result in receiving timely market information, joint product development and intense brand loyalties which enhance the organisation's performance. As Kotter mentions that in a constant ever changing world, an unadaptive culture will not support long term performance. This lack of innovation can become a liability during times of change. (Ogbinna & Harris, 2000)

Other elements considered essential to enhancing organisational performance involve a strong sense of community that values learning and collaboration, (Lewis, 2002) an organisation that fits with its environment's conditions (Deal and Kennedy, 1982), organisations that encourage a learning environment and management strategies that allow employees to create, acquire, share and manage knowledge within the organisation (Chang & Ahn,2005; Robinson 2005). This differs to Saffold (1988) who argues that 'strong culture hypotheses' are over simplistic concepts as performance and culture are not directly linked and are uniquely complex. However, Barney's (1986) perspective claims high performing organisations may share many common traits but benefit from those traits differently. Barney's (1986) view is that a strong culture must be valuable in economic terms, it must have attributes and characteristics that are rare and the organisation must be imperfectly imitable in order to maintain superior performance and a competitive edge. An organisation's corporate culture is unique in character and will require different qualities to enhance performance dependent upon its environmental factors.

The uncertainty of the external environment and the more complex it is, can impact on the employees negatively despite how strong the culture is. The external environment can be dynamic and uncertain due technology changes, political and economic upheaval, customer preferences change and increased competition. (Yuki, 2008) Organisations that have experienced mergers or acquisitions can often display weakened corporate culture and performance. (Wriston, 2007) Corporate culture is slow to change and difficulty arises when trying to change the embedded beliefs and values of corporate culture. (Schein, 1996) It is important that leadership helps foster the culture and communicate effectively the strategy, values and beliefs to influence the organisation's ability to stabilise the organisation for effective change and sustainability. (Gallagher, 2008)

A strong culture is capable of leading an organisation into decline. An organisation that behaves unethically or immorally, disregards safety measures, engages in payoffs or bribes, whistle blowing or is involved in conflict of interest issues can negatively impact the organisation's performance. Simms (1992) relates these issues to Irving Janis' theory, Groupthink where the culture sabotages its business environment. Simms (1992) links the Groupthink theory with the organisation's culture and strong leaders who are able to gain unanimous support for poor decisions. Kotter's (1992) approach sees strong cultures as capable of dysfunctional elements as well as functional ones. He characterises the dysfunction of a strong cultural organisation as arrogant, insular with bureaucratic centralisation, supporting a value system that cares more about self interest than about customers, stakeholders, employees or good leadership. Managers ignore the critical environment and cling to outmoded and ossified practices that will undermine the organisation's ability to survive. The cultural drummer can lead the organisation into success or failure. (Kotter, 1992)

In conclusion, this Literature Review has shown there is a correlation between a strong culture and performance. It is important organisations invest in fostering their corporate culture as it can lead to greater efficiency which will impact on performance. Successful organisations with a strong culture are seen to value their employees, customers, stakeholders and management. Good leadership will strategize to provide a role model of the beliefs, values and goals of the organisation which can be communicated through stories, rituals, mission statement, procedures and practises. Employees that are recruited to fit with the organisation's beliefs and values, offered stable job security, training, clear job designs and performance based rewards are shown to be motivated, less stressed, hard working, committed and loyal to the organisation. This will impact on performance through ethical behaviour, customer service, quality of collaboration, innovation and low employee turnover. It is also important that management is aware and avoids incorporating the dysfunctional elements of the culture which can sabotage the organisation's performance and sustainability. Managers need to ensure the organisation is in alignment with the external environment which can be difficult in an ever changing world. Despite these factors, the corporate culture of the organisation can be seen as an effective tool to keeping the organisation focused and in alignment towards performance success and sustainability.

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