The strength of cultural values that are held among employees is taken to be a predictor of future organizational performance, usually refers to financial results. The study of Lee and Yu (2004) aims to examine the possible relationships between corporate culture and organizational performance among Singaporean companies, specifically in three different industries i.e. high-tech manufacturing (randomly selected), hospitals (top three in terms of hospital beds as they are not commercial enterprises) and insurance (top three in market share of life insurance) to investigate whether different industries developed different cultural patterns. There are two objectives: first, it attempts to investigate whether the culture construct is operational related along distinct and repeatable dimensions; second, it attempts to assess how culture affects organizational performance. In this study, culture is treated as an internal variable, and is defined as the shared values and norms of the organization’s people. This is considerably appropriate as the study is primarily concerned with the cause-effect relationship between culture and performance.

The results obtained from the study are mixed. The strength of cultural values was found correlating with the organizational performance of companies in some cases. For example, it was correlated with return on assets in manufacturing companies, growth in annual premiums and sum assured in insurance companies. There were however no significant correlations with hospitals. Thus, the evidence, while supporting the existence of some form of relationship between culture strength and organizational performance, is not strong enough to provide a discerned pattern that is applicable to a wider sample of companies. It may be more interesting to look at the effects of companies’ ranking on various culture dimensions (where significant differences were reported) and their performance. For example, cultural strength was significantly associated with performance in three out of ten performance indicators; practice strength was significantly associated with performance in two out of ten performance indicators. In the manufacturing industry, the degree of supportiveness of companies was significantly associated with one out of three indicators. In insurance industry, the degree of innovation was associated with three out of four indicators. In hospitals, the set of distinguishing values was associated with three out of twelve indicators. These results indicate that the distinguishing elements of an organization’s culture were as important as the cultural strength of the company in determining performance.

Culture is defined in this study as a set of values and beliefs held by employees. Strong cultures, therefore, imply homogeneity and pervasiveness of these values which eventually impacting upon a wide range of organizational processes. Thus, it can be valuable if it improves commitment, loyalty and reduces bureaucratic costs through social control, among other impacts. Arguably, these factors allow a company to achieve competitive advantage through its people. However, strong culture brings with it a potential set of problems. First, strong culture companies may inadvertently stifle the creativity and innovativeness of their employees through blind commitment to a set of ideas. It makes employees more susceptible to groupthink and less ready to accept different ideas or new modes of thinking thus decreases the intellectual diversity in the company. While strong culture may help the implementation of creative ideas, it may not actually help to generate them. The modern economy resembles a complex adaptive system rather than a close equilibrium system where such markets exhibit periods of punctuated equilibrium (times of relative calm and stability which are interrupted by stormy periods or punctuation points). Such disequilibria make it difficult for participants to survive for long periods as their strategies, skills or culture tend to get finely optimized for stable periods, and then suddenly become obsolete when the restructuring occurs. Companies will have a hard time surviving upheavals, market shakeouts and technology shifts.

Strong cultures are only valuable if they exhibit the adaptive and learning qualities. Otherwise, they become a liability during the periods of accelerated change. This perspective offers one possible explanation why the strong culture-performance results are mixed. In addition, culture is unique only if it has attributes and characteristics that are not common to the cultures of many other companies and has proved to be a source of sustained competitive advantage. Thus, research on culture-performance has to control for the distinguishing industry values in order to assess what is truly unique about each organization. This view, therefore, explains the importance of distinguishing cultural elements of each company in determining performance.

There has been evidence of strong relationship between the organizational culture and organization performance in research before 2004. Total Quality Management (TQM), the management paradigm based on the principles of total customer satisfaction, employee involvement, continuous improvement, and long-term partnerships with suppliers and customers, has in the past been questioned by many organizations regarding its ability to improve the financial performance of the company. A study by Dr. Vinod Singhal of the Georgia Institute of Technology and Dr. Kevin Hendricks of the University of Western Ontario in 2000 provides hard evidence that the effective implementation of TQM principle or culture impacts bottom-line business results. The five year study of more than 600 quality award winners showed that, as a whole, they experienced significant improvement in the value of their financial results like common stock, operating income, sales and return on sales, employment and asset growth.

One interesting finding was that companies who win awards based on models such as the Baldrige or the European Quality Award or other independent quality awards, experienced better results than those winning supplier awards only. This evidence provides a compelling case for why companies should use criteria such as the European Excellence Model for planning, training and assessment, and why various state and federal agencies should support such award initiatives. In addition, the findings of this study also indicated that smaller award winners or lower capital-intensive award winners do significantly better than larger award winners or higher capital-intense award winners.

About the Author:

Jerry H.Hall has an interest in Career Change Management related subjects. If you are interesting in finding out more information on Career Changes, please visit this successful Career Change site: http://CareerChange.smartreviewguide.com