Does corporate culture contribute to performance?

• Author: Ross, Douglas N.

Abstract

This article explores connections between corporate cultures and corporate performance in various industries. First, it provides a brief background on the notion of "culture"; second, it sets out a brief typology of corporate culture. Third, it examines various corporate cultural types in relation to industry performance; and finally, some conclusions are drawn on the importance to corporate survival of organizational and cultural adaptation to competitive environments.

INTRODUCTION AND CONTEXT

An expert on cross-cultural management, Geert Hofstede (1984, p.21) defines culture as "the collective programming of the mind, which distinguishes one human group from another ... Culture in this sense includes systems of values, and values are among the building blocks of culture." A few years later, his notion of culture broadened into "mental programming ... patterns of thinking and feeling, and potential acting" (Hofstede, 1991, p.4). Sociologists (Namenworth & Weber, 1987, p.8) see culture as a "system of ideas that constitute a design for living." For our purposes here, culture is viewed as a system of values, norms, and ideas, shared by a group of people, that when taken together provide a design for thinking, living and potential acting.

There are, however, many types of cultures, including national, country or regional (Hofstede, 1984, 1991; Schneider & Barsoux, 1997; Terpstra & David, 1991); global electronic (Targowski, 1990); ethnic; gender; generational; business, professional; occupational; and organizational, or corporate (Bloor & Dawson, 1994). While this paper draws from the international management literature, which has long acknowledged the importance of national cultural characteristics as determinants of management behavior (Farmer & Richmond, 1965; Schneider, 1988), it serves only to position the notion of corporate culture within a broader context.

This paper focuses on corporate culture and, specifically, the effects of corporate culture on a business' performance.

CORPORATE CULTURE: WHO WE ARE, WHAT WE DO, WHAT WE STAND FOR

What then is corporate culture? Why is it important? Does it relate to corporate success or failure?

We reach back a paragraph or so for a definition that can be applied in the corporate context: culture is a system of values, norms, and ideas, shared by a group of people, that when taken together provide a design for thinking, living and potential acting. By values is meant the shared assumptions of what ought to be or, in other words, what a group believes to be right and desirable; norms relate to rules and guidelines that set out expected behavior in various circumstances. So corporate culture reflects the values of the founders, underpins the vision/ mission of the firm, establishes the main operating orientation of the company, and provides the basis for a shared identity for company members. Its importance lies in the fact that not only does culture constitute a kind of inter-personal glue that holds an organization together, but also it can function as an informal control mechanism that may help coordinate employee efforts.

Although it is tempting to speak of "a" corporate culture, organizations have many subcultures. These can vary by business unit, geographical location, division, or department. Subcultures can clash. Again drawing from the international management sphere, a human resources manager from a global pharmaceutical company discovered that a major challenge in China, Korea and Taiwan was to persuade managers there to accept promotions. Among other things, their values were such that they did not wish to compete with their peers for career rewards and did not want to assume...