Corporate Culture and Performance

Artifacts espoused values, and basic assumptions form the basics of understanding organizational culture. An organizational culture is the customary or traditional ways of thinking and doing things, which are shared to a greater or lesser extent by all members of the organization (and) which new members must learn and at least partially accept in order to be accepted into the services of the firm.

In other words, organizational culture is a framework that guides day-to-day behavior and decisions making for employees and directs their actions toward completion of organizational goals. Indeed, culture is what gives birth to and defines the organizational goals. Culture must be aligned with the other parts of organizational actions, such as planning, organizing, leading and controlling; indeed if culture is not aligned with these tasks, then the organization is in for difficult times.

In a study of more than 200 companies, Harvard Business School researchers tried to determine which factors make some organizational cultures more successful than others. If success factors could be isolated, they reasoned, companies could embark on programs to change their cultures in order to be more successful.

Two levels of culture are identified, one visible and one invisible. First, on the visible level, are the behavior patterns and styles of the employees. Second, on the invisible level, are the shared values and assumptions that are held over a long period of time. This second level is the more difficult to change. Changes in the first level in behavior patterns and styles over time can lead to change in the more deeply held beliefs. In this way, cultural change is something like ‘momentum’ in athletics; it emerges out of behavior. In sports trying to get the momentum is a coaching recipe for failure trying to execute the little details is effective and the momentum sometimes follows.

The results of the Harvard study indicate that culture has a strong and increasing impact on the performance of organizations. The study had four main conclusions:

1. Corporate culture can have a significant impact on a firm’s long term economic performance
2. Corporate culture will probably be an even more important factor in determining the success or failure of firms in the next decade
3. Corporate cultures that inhibit strong long term financial performance are not; rare; they develop easily, even in firms that are full of reasonable and intelligent people.
4. Although tough to change, corporate cultures can be made more performance enhancing

Some corporate cultures are good at adapting to changes and preserving the performance of the organization, while others are not. They distinguished between “adaptive” and “unadaptive” corporate cultures, and they defined the core values and common behaviors in each kind off culture.

Family Dollar exemplifies the financial success that a strong culture can help build. A bell rings whenever a customers enters creating a homely atmosphere says president and chief operating officer (COO). There is usually at least one person up front to greet customers not only with a Hello but also with eye contact. This customers oriented personable culture contributed to the company’s $1.2 billion in sales for 1992.

Similarly, The limited Inc., offers an example of the close connection between culture and financial performance. The culture at The Limited is deeply imbued with the underlying values of the chairman who asserts, a company that is only profit driven is on the wrong path. He considers good people the key to success in a business. At The Limited, before people can even be considered for employment, they must first show that they share the ethics and values of the company: integrity, honesty, tolerance, openness and loyalty. The Limited encourages the development of an employee community that can identify with customers, treat them courteously, and be friendly to the point of making them feel at home. Having people pay allegiance to monolithic $19 billion or $20 billion enterprises is not just enough. It’s much more effective when it’s broken down into units that people can identify with and that can capture their imagination as individuals. Managers at The Limited call employees associates because they really are associated with the success of the business The culture at The Limited thus emphasizes the relationships between the company, employees, and customers that ground its financial success.

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