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Studies of organizational culture are almost always based on two assumptions: (a) Senior leaders are the prime determinant of the culture, and (b) culture is related to consequential organizational outcomes. Although intuitively reasonable and often accepted as fact, the empirical evidence for these is surprisingly thin, and the results are quite mixed. Almost no research has jointly investigated these assumptions and how they are linked. The purpose of this article is to empirically link CEO personality to culture and organizational culture to objective measures of firm performance. Using data from respondents in 32 high-technology companies, we show that CEO personality affects a firm’s culture and that culture is subsequently related to a broad set of organizational outcomes including a firm’s financial performance (revenue growth, Tobin’s Q), reputation, analysts’ stock recommendations, and employee attitudes. We discuss the implications of these findings for future research on organizational culture.
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Group & Organization Management
2014, Vol. 39(6) 595 –625
© The Author(s) 2014
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DOI: 10.1177/1059601114550713
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Article
The Promise
and Problems of
Organizational Culture:
CEO Personality,
Culture, and Firm
Performance
Charles A. O’Reilly III1, David F. Caldwell2,
Jennifer A. Chatman3, and Bernadette Doerr3
Abstract
Studies of organizational culture are almost always based on two assumptions:
(a) Senior leaders are the prime determinant of the culture, and (b) culture
is related to consequential organizational outcomes. Although intuitively
reasonable and often accepted as fact, the empirical evidence for these
is surprisingly thin, and the results are quite mixed. Almost no research
has jointly investigated these assumptions and how they are linked. The
purpose of this article is to empirically link CEO personality to culture and
organizational culture to objective measures of firm performance. Using
data from respondents in 32 high-technology companies, we show that
CEO personality affects a firm’s culture and that culture is subsequently
related to a broad set of organizational outcomes including a firm’s financial
performance (revenue growth, Tobin’s Q), reputation, analysts’ stock
recommendations, and employee attitudes. We discuss the implications of
these findings for future research on organizational culture.
1Stanford University, CA, USA
2Santa Clara University, CA, USA
3University of California, Berkeley, USA
Corresponding Author:
Charles A. O’Reilly III, Graduate School of Business, Stanford University, Stanford, CA 94305,
USA.
Email: coreilly@stanford.edu
550713GOMXXX10.1177/1059601114550713Group & Organization ManagementO’Reilly et al.
research-article2014
596 Group & Organization Management 39(6)
Keywords
organizational culture, CEO personality, firm performance
In the late 1970s and early 1980s, the topic of “organizational culture” cap-
tured managers and scholars’ interest. A series of poplar books (e.g., Davis,
1984; Peters & Waterman, 1982), academic conferences, and special issues
of scholarly journals (Administrative Science Quarterly, 1979, 1983; Journal
of Management, 1985; Journal of Management Studies, 1982) highlighted
the promise of organizational culture as a way to understand how organiza-
tions operate and succeed. The logic offered had two components that were
intuitive and seductively simple: (a) Cultures largely reflect the values and
actions of their senior leaders, and (b) cultures are important determinants of
firm performance.
The first premise was that organizational cultures—defined most com-
monly as “the basic assumptions and beliefs that are shared by organizational
members” (Schein, 1985, p. 9), or “a system of shared values defining what
is important, and norms, defining appropriate attitudes and behaviors”
(O’Reilly & Chatman, 1996, p. 166)—are largely created by an organiza-
tion’s senior leaders. For example, in the very beginning of his seminal book,
Schein (1985) claims that “the only thing of real importance that leaders do
is to create and manage culture” (p. 2). He concludes some 300 pages later
asserting, “The unique and essential function of leadership is the manipula-
tion of culture” (p. 317). The widespread assumption has been that cultures
reflect the values, beliefs, and actions of their senior leaders (e.g., Baron &
Hannan, 2002; Davis, 1984; Kotter & Heskett, 1992). However, in a recent
review of the culture literature, Schneider, Ehrhart, and Macey (2013) noted
that “although the theoretical literature on organizational culture is replete
with discussions of the influence of the founder and upper management have
on an organization’s culture, empirical studies of that relationship are hard to
find” (p. 372).
The second intuitively reasonable part of the argument was that organiza-
tional culture was a significant determinant of organizational performance.
Again, however, the evidence for this is mixed. Establishing a consistent
direct link between culture and objective firm performance has been ham-
pered by a number of conceptual challenges including disagreements about
defining culture and the dimensions associated with it (e.g., Schneider et al.,
2013), and a number of methodological challenges such as small samples,
measures designed for other purposes besides assessing culture, and variance
introduced by assessing multiple industries (e.g., Detert, Schroeder, &
Mauriel, 2000).
O’Reilly et al. 597
More than 40 years later, these two fundamental assumptions, with some
minor modifications, remain intact: Organizational culture is largely shaped
by an organization’s leaders and is presumed to be important because it can
have consequential effects on firm performance. Yet, the empirical evidence
for these claims remains fragmented and inconclusive (Hartnell, Ou, &
Kinicki, 2011). In a recent review, Sackmann (2011) concluded that even as
research on culture is becoming more methodologically sophisticated,
researchers’ use of diverse measures of culture and performance is stalling
paradigm development. Almost no studies have attempted to simultaneously
test these two fundamental assumptions by providing an empirical test of the
effects of senior leadership personality on organizational culture and the sub-
sequent effects of culture on objective indicators of organizational perfor-
mance. In doing this, we provide a clearer picture of the origins of organizational
cultures and clarify how culture can affect organizational performance.1
We begin by reviewing previous research on the effects of CEO personal-
ity and leadership on culture and firm performance. We then use data from
more than 1,000 respondents to revalidate a measure of organizational cul-
ture originally developed by O’Reilly, Chatman, and Caldwell (1991) and
investigate the associations between CEO personality, culture, and firm per-
formance for 32 high-technology firms over a 3-year period.
CEO Personality and Organizational Culture
How do senior leaders affect organizational culture? When culture is con-
ceived of as a consensus about norms (e.g., Cooke & Rousseau, 1988; Schein,
1985), then the recurring patterns of behavior of senior leaders becomes a
critical source of information about the normative order for those in the orga-
nization (Bandura, 1986). Based on this social learning perspective, several
authors have identified the mechanisms through which managers might
develop and change cultures. O’Reilly and Chatman (1996) argue that the
mechanisms for developing and changing culture can be seen in the social-
psychological processes of normative and informational influence. Schein
(1985) and others have suggested similar mechanisms that act to signal the
desired normative order, including systems, structures, and processes
designed to reinforce ways of thinking and behaving. While useful, these do
not answer the question of where the desired behavioral regularities come
from. Several scholars have suggested that the true origins of culture can be
found in the fundamental dispositions (values and personalities) of the orga-
nizations’ leaders (Schein, 1985). In this sense, leaders’ values and personali-
ties may be the primary building blocks of organizational culture (Baron &
Hannan, 2002; Detert et al., 2000; Fu, Tsui, Liu, & Li, 2010).2
598 Group & Organization Management 39(6)
Schneider and Smith (2004) define personality broadly to refer to those
individual attributes that “give form, structure, and consistency to people’s
behavior over time and situations” (p. 347). Personality traits are patterns of
thought, emotion, and behavior that are relatively consistent over time and
across situations. Similar to personality, values are enduring subjective judg-
ments or perspectives on what is seen as important that reflect basic disposi-
tions. Values represent one translation of dispositions into situational
preferences (Parks & Guay, 2009). As such, personality and values are impor-
tant precursors of patterns of behavior. With regard to organizational culture,
the patterns of behavior of the CEO may then become a salient source of
information about the normative order.
During the past several decades, researchers have accumulated an impres-
sive body of findings providing convincing evidence that (a) personality and
values can be assessed with great accuracy (e.g., Funder, 2012; John,
Naumann, & Soto, 2008), (b) values and personality are related to a range of
important individual and life outcomes (e.g., Ozer & Benet-Martinez, 2006;
Roberts, Kuncel, Shiner, Caspi, & Goldberg, 2007), and (c) the myriad of
potential personality and value constructs can be reliably captured by five
essential personality constructs, the so-called Big Five or the Five-Factor
Model (FFM), that integrates decades of earlier research (e.g., John et al.,
2008). The five underlying dimensions include (a) Extraversion, (b)
Agreeableness, (c) Conscientiousness, (d) Neuroticism, and (e) Openness to
Experience.
Of particular relevance for organizational research, a number of studies
have linked Big Five dimensions to both leadership and job performance
(e.g., Barrick & Mount, 1991; Hoffman & Jones, 2005; Lim & Ployhart,
2004). But the vast majority of these studies have focused not on senior lead-
ers but on leader emergence and laboratory studies using student subjects.
When the focus was on senior leaders, dispositions were less useful as predic-
tors (Hoffman, Woehr, Maldagen-Youngjohn, & Lyons, 2011). Only a few
studies have attempted to link senior level leaders’ personality to culture. For
example, in an archival study of 17 CEOs, Peterson and his colleagues inves-
tigated how the personality of the CEO affected the dynamics and norms of
the senior team (Peterson, Smith, Matorana, & Owens, 2003). They found
that CEOs higher on Agreeableness had teams rated as higher in cohesion and
decentralization. Giberson et al. (2009) found some associations between Big
Five measures and organizational culture but did not link culture to organiza-
tional performance. In an attempt to more directly link CEO values, culture,
and firm performance, Berson, Oreg, and Dvir (2008) collected data from 26
CEOs and 256 of their subordinates. Their results showed that different val-
ues (self-direction, security, and benevolence) were associated with different
O’Reilly et al. 599
cultures (innovation oriented, bureaucratic, and supportive). Interestingly,
the differing cultures were differentially related to firm outcomes. More inno-
vative cultures had higher sales growth, more bureaucratic cultures were
more efficient, and more supportive cultures had higher levels of employee
satisfaction but lower sales growth.
Overall, the evidence suggests that personality as manifested in values and
behavior is associated with leadership at the CEO level (Peterson et al., 2003;
Tsui, Zhang, Wang, Xin, & Wu, 2006) and that these may affect the culture of
the organization, although the specific form of these relationships is not clear.
One implication of this argument is that an organization’s senior leaders,
because of their salience, responsibility, authority, and presumed status, have
a disproportionate impact on culture and may be a significant source of cul-
tural influence.
Organizational Culture and Firm Performance
Given the widespread interest in the potential effects of culture on firm per-
formance, it is noteworthy how little clarity there is about this connection. In
an early study, Siehl and Martin (1990) concluded that a link between culture
and firm performance “has not been—and may well never be—empirically
demonstrated” (p. 242). Almost 20 years later, Gregory, Harris, Armenakis,
and Shook (2009) observed that “few empirical studies have provided
detailed insight into the relationship” (p. 673). In a recent review of the asso-
ciations between culture and organizational effectiveness broadly defined,
Hartnell et al. (2011) found significant correlations between culture and
employee job satisfaction, obtained mixed results for culture and subjective
ratings of organizational processes and performance, but found too few stud-
ies of studies of objective performance indicators and culture to come to any
conclusions.
Beginning with the 84 studies identified by Hartnell and including others
not in their sample (e.g., Balthazard, Cooke, & Potter, 2006; Bezrukova,
Thatcher, Jehn, & Spell, 2012), we identified 31 studies that appeared to
explicitly investigate both culture and performance. A review of these showed
that only 9 studies reported associations between culture and objective, firm-
level financial performance outcomes. Of these, several used very small
samples (Calori & Sarnin, 1991; Gordon & DiTomaso, 1992; Siew & Yu,
2004). Only 6 studies had a reasonable sample size and objective perfor-
mance measures (Berson et al., 2008; Christensen & Gordon, 1999; Gordon,
1985; Kotter & Heskett, 1992; Peterson et al., 2003; Sørensen, 2002). Results
from these ranged from no associations between culture and objective firm
performance (Gordon, 1985; Sørensen, 2002) to mixed results (Christensen
600 Group & Organization Management 39(6)
& Gordon, 1999) to positive findings under specific conditions (Berson et al.,
2008; Kotter & Heskett, 1992; Peterson et al., 2003). Thus, while there is
evidence that organizational culture seems to be positively associated with
employee attitudes and subjective assessments of performance (e.g.,
Bezrukova et al., 2012; Denison & Mishra, 1995), there is little evidence
definitively linking organizational culture to objective firm-level outcomes.
There are several understandable reasons for this lack of clarity. First,
designing studies and obtaining data that allow for the assessment of culture
across organizations, especially with the CEO’s participation, has been a
daunting task, often resulting in studies with very small samples and low
power (e.g., Calori & Sarnin, 1991; Gordon & DiTomaso, 1992). For exam-
ple, Denison and Mishra (1995) used archival data on five firms to develop a
theory of culture and then used survey data in an attempt to refine their theory.
While useful, they acknowledge that, “Neither the survey instrument nor the
traits operationalized were ideal for culture research” (p. 207). Similarly, other
researchers have made use of pre-existing surveys that were not designed for
culture research but, post hoc, relabeled the constructs as “culture” (e.g.,
Marcoulides & Heck, 1993). Further compounding the issue is that the rela-
tionship between culture and firm performance has been shown to vary across
industries (e.g., Christensen & Gordon, 1999) such that a significant result
obtained in one setting may not apply in another. This is not to criticize these
efforts but to simply note the difficulty that culture research poses.
Second, there have been disagreements about the definition and measure-
ment of both culture and performance that has resulted in the use of different
frameworks and metrics that make aggregation of results difficult (e.g.,
Schneider et al., 2013). Hartnell et al. (2011) concluded that one reason for the
failure to find culture-performance relationships may be that simple measures
of culture may be too broad. In one of the first published articles on organiza-
tional culture, Andrew Pettigrew (1979) echoed this concern against the use of
simple categorizations: “While providing a general sense of orientation, culture
treated as a unitary concept in this way lacks analytical bite” (p. 574).
Responding to the concern that simple measures of culture might fail to
capture the complexity of culture across different types of organizations,
O’Reilly et al. (1991) developed a more variegated and comprehensive
approach to developing a framework for categorizing organizational culture.
Just as the Big Five personality attributes represent a mid-range theory of
personality, the Organizational Culture Profile (OCP) was designed to empir-
ically identify a set of dimensions that reflect a more comprehensive set of
organizational norms to accurately reflect the complexity, uniqueness, vari-
ety, and range of an organization’s culture. This approach has been refined
and validated by several researchers (e.g., Barber & Wesson, 1998; Judge &
O’Reilly et al. 601
Cable, 1997; Sarros, Gray, Dentsen, & Cooper, 2005; Siew & Yu, 2004). Just
as the Big Five provides a framework for summarizing the effects of person-
ality, the OCP methodology offers a comprehensive way to characterize orga-
nizational cultures on a variety of dimensions.
Finally, as researchers have explored the possible associations between
organizational culture and firm performance, there has been an evolution in
understanding the form that this relationship might take, ranging from a sim-
ple direct association to contingent relationships dependent on firm strategy
and environmental conditions (e.g., Christensen & Gordon, 1999; Khazanchi,
Lewis, & Boyer, 2007; Sørensen, 2002). However, in spite of the strong intu-
ition that organizational culture should be directly linked to firm effective-
ness, the empirical results remain equivocal.
Hypotheses Linking CEO Personality and
Organizational Culture
The argument proposed thus far is that a leader’s personality is manifested in
regularities in his or her attitudes and behaviors and these, in turn, shape cul-
tural norms and expectations. Although there is no expectation that a CEO’s
personality should directly affect firm performance, their patterns of behavior
(expressed in what questions they ask, what they pay attention to and reward,
the types of people they hire, etc.) are likely to shape their firm’s culture (e.g.,
norms regarding what people pay attention to, what behaviors are seen as
important) through a process of social learning. Thus, we expect that certain
CEO personality attributes, expressed in terms of the Big Five, may be asso-
ciated with certain types of organizational culture. Culture, in turn, may be
associated with subsequent firm performance.
Previous research has shown that, under certain conditions, each of the
Big Five dimensions may be associated with leader emergence, job perfor-
mance, culture, and possibly even the organization’s strategy (Berson et al.,
2008; Giberson et al., 2009; Judge, Bono, Iles, & Gerhardt, 2002; Nadkarni
& Herrmann, 2010). Although one could easily hypothesize how combina-
tions of the Big Five dimensions might affect organizational culture, for sim-
plicity, we focus here solely on the potential direct effects on organizational
culture.
CEO Openness to Experience
Openness to Experience is the tendency to be imaginative, unconventional,
and independent. Previous research has shown mixed associations between
Openness and leadership (Hoffman & Jones, 2005); however, we expect that
602 Group & Organization Management 39(6)
those CEOs who are high on Openness are more likely to create cultures that
value innovation and change. For instance, Nadkarni and Herrmann (2010)
reported that CEOs who were higher on Openness were also more likely to
adapt their strategies in the face of change. Thus, we predict that CEOs who
are higher on Openness will be more likely to have cultures that value inno-
vation, speed, experimentation, and risk-taking:
Hypothesis 1: CEOs who are higher on Openness to Experience will be
more likely to be associated with cultures that emphasize adaptability
(innovation, speed, and risk-taking).
CEO Conscientiousness
Conscientiousness refers to the tendency to control impulses and tenaciously
pursue goals. At very high levels, those high on Conscientiousness can also
be careful, compulsive, preoccupied with rules, and concerned with avoiding
mistakes. Therefore, at the CEO level, high levels of Conscientiousness may
produce cultures that are more rule oriented, centralized, and careful (e.g.,
Peterson et al., 2003). Thus, we expect that CEOs who are high on
Conscientiousness will be more likely to be associated with cultures that are
more detail oriented and emphasize analysis, precision, and attention to
detail.
Hypothesis 2: CEOs who are higher on Conscientiousness will be more
likely to be associated with cultures that are detail oriented.
CEO Agreeableness
Individuals high on Agreeableness are typically seen as modest, helpful, and
willing to compromise (e.g., Peterson et al., 2003). People who are low on
Agreeableness are more competitive than cooperative and can be seen as
skeptical, unconcerned about others’ feelings and antagonistic. There is some
evidence that low Agreeableness can lead to higher performance (e.g., Lepine
& Van Dyne, 2001). At the CEO level, we predict CEOs who are lower on
Agreeableness will have cultures that are more competitive and achievement
oriented with higher expectations for performance.
Hypothesis 3: CEOs who are lower on Agreeableness will be more likely
to be associated with cultures that are more results oriented (e.g., high
expectations for performance, achievement oriented).
O’Reilly et al. 603
CEO Neuroticism
People who score high on Neuroticism tend to be anxious, emotionally unsta-
ble, defensive, and upset by minor threats or frustrations. Those who are low
on Neuroticism are seen as emotionally stable, relaxed, and secure. In a meta-
analysis, Judge et al. (2002) found that Neuroticism was negatively associ-
ated with leader emergence. Because of this, leaders who score high on this
dimension are seen as more likely to be associated with cultures that are less
collaborative. Thus, we predict the following:
Hypothesis 4: CEOs who are higher on Neuroticism will be more likely
to be associated with cultures that are less collaborative.
CEO Extraversion
The most obvious aspect of Extraversion is the propensity to prefer extensive
interactions with others. However, extraverts are also characterized by opti-
mism, energy, and a preference for excitement (e.g., Judge et al., 2002).
Extraverts have been shown to be socially engaging and able to involve oth-
ers. For example, Giberson et al. (2009) found that CEOs who were higher on
Extraversion were associated with more market-oriented cultures. Thus, we
expect that CEOs who are more optimistic and sociable to be more likely to
create cultures that emphasize a customer orientation than those who are
more introverted.
Hypothesis 5: CEOs who are higher on Extraversion will be more likely
to be associated with cultures that are more customer oriented.
Organizational Culture and Firm Effectiveness
As reviewed earlier, the evidence for a link between organizational culture
and objective measures of firm performance has been mixed, with no consis-
tent evidence showing that culture contributes to financial performance. We
believe that there are two reasons for this lack of clarity. First, organizational
culture is multidimensional and has been measured in a myriad of ways. It
may be that a given facet of culture may be relevant in some circumstances
and irrelevant in others. For instance, in a stable industry with a low-cost
strategy, a hierarchical culture (internally focused-stable) might be positively
associated with success, while under more dynamic conditions this culture
could either be irrelevant or negatively associated with performance. This is
especially important for studies where the sample of firms spans multiple
604 Group & Organization Management 39(6)
industries where different cultural dimensions may be more or less valuable
(e.g., Kotter & Heskett, 1992). Research on organizational culture that uses
samples where there are likely to be wide variations in industries and firm
strategies may miss the subtle differences in cultures that drive performance
unless the design permits these to be controlled or accounted for.
Second, the association of a firm’s culture and performance may also
depend importantly on the outcome variables studied. For instance, previous
studies have documented associations between more people-friendly cultures
and employee attitudes (e.g., Berson et al., 2008). However, those aspects
that promote positive employee attitudes may be unrelated—or even nega-
tively related—to a firm’s financial performance. In contrast, those aspects of
a firm’s culture that promote financial performance (e.g., a strong emphasis
on delivering results) may be unrelated—or negatively related—to employee
attitudes. Market-based measures of a firm’s value (e.g., Tobin’s Q) in which
analysts and investors estimate the future value of a company through its
stock price may value cultural attributes like a firm’s ability to innovate even
if that aspect of the culture comes at the expense of short-term profit (e.g.,
Amazon prioritizes long-term growth over short-term profit). The fact that
some cultural dimensions may be positively related to some outcomes and
negatively related to others may account for some of the mixed results in
studies of culture and firm performance.
In spite of these complexities, research does suggest that certain cultural
dimensions may be important for firm performance and broadly related to
short-term financial performance regardless of the specific strategy adopted.
First, as previous research has shown, adaptability appears to be a critical
cultural element in promoting firm performance (e.g., Chatman, Caldwell,
O’Reilly, & Doerr, 2014; Kotter & Heskett, 1992). Second, and related, a
culture that emphasizes a results-orientation appears generally useful regard-
less of the strategy a firm pursues (e.g., Detert et al., 2000). Finally, in terms
of strategic execution, firms that are more detail oriented are more likely to
perform well when compared with those that are not, especially in competi-
tive markets (e.g., Khazanchi et al., 2007). This suggests the following three
hypotheses:
Hypothesis 6: Organizations whose cultures emphasize adaptability more
will perform better than those that emphasize adaptability less.
Hypothesis 7: Organizations whose cultures emphasize results more will
perform better than those that emphasize results less.
Hypothesis 8: Organizations whose cultures emphasize detail orientation
more will perform better than those that are less detail oriented.
O’Reilly et al. 605
Method
Research Design and Sample
There were two steps in our research design. First, to assess the culture in our
sample organizations, we used a slightly revised version of the OCP (O’Reilly
et al., 1991) to collect culture data in 2009 from a set of large, publicly traded,
high-technology firms headquartered in the United States (n = 56 firms, n =
880 respondents) and a separate set of privately held firms headquartered in
Ireland (n = 44 firms, n = 378 respondents). This full panel of data was used
for our factor analyses, that is, to identify specific dimensions of organiza-
tional culture that characterize an organization. Second, once we had identi-
fied these dimensions, we used a subset of the U.S. sample to collect data on
CEO personality as rated by company employees and firm performance for
2011. This subset of U.S. firms was qualified based on the reliability of
responses within the firm. We used only this U.S. subsample of data to test
hypotheses about CEO personality, culture, and firm effectiveness.
U.S. firm sample. We identified 60 firms to invite to participate in this study
using the following criteria: The firms were publicly traded, U.S.-headquar-
tered, had their primary operations in the high-technology sector (hardware,
software, Internet services—SIC 35xx, 36xx, 38xx, 73xx; GIC Sector 45;
S&P Economic Sector 940), and concurrently employed a minimum of 20
alumni from three focal West Coast business schools. Alumni from these
schools are highly prone to joining high-technology firms post-graduation,
and thus expedited the identification of current employees within our target
industry.
Alumni of these business schools provided culture assessments of their
employing organizations using the revised OCP. In fall 2009, we sent pro-
spective informants an email inviting them to participate in an online survey
assessing their organization’s current culture. We specified that informants’
culture assessment responses were confidential and would not be identified
to their employers, and that the study results would not identify their organi-
zations by name. We received a total of 880 culture assessments from infor-
mants in 56 of the 60 firms. We included all 880 responses from U.S.-based
employees in the factor analysis described below. Eighty-nine percent of the
56 firms were included in the list of the Fortune 1000, representing the larg-
est American firms, and collectively they generated 75% of the total revenue
from high-technology Fortune 1000 firms in 2009. Informants’ average ten-
ure with the focal firm was 7.19 years with 24% having worked there for
more than 12 years, and 28% of the informants were women. All had earned
606 Group & Organization Management 39(6)
a bachelor’s degree or higher and 74% of informants had earned an MBA.
These respondents were also approached at a later time to provide assess-
ments of CEO personality.
Irish firm sample. To diversify the sample of organizations used in assessing
culture dimensions in technology firms, we invited 44 high-technology, pro-
fessional services, construction, and consumer goods firms headquartered in
Ireland to participate in the study. The firms were privately held and ranged
in size from 20 to more than 2,000 employees (
X
= 210.2, SD = 324.6), and
in age from 5 to 111 years (
X
= 28.8, SD = 23.9). Of the 469 employees
invited to serve as organizational informants (using a similar email as for the
U.S. firm sample), 378 (81%) completed the OCP assessment for their firm.
Nineteen percent were female and the informant’s average tenure was 7 years
at the focal firm (
X
= 6.52, SD = 3.56); 14% had worked at the firm for more
than 12 years; and 15% had MBA degrees (74% had BA/BS equivalents or
higher). These responses were only used for determining the dimensions of
culture; only the U.S. firms were used to test our hypotheses.
Independent Variables
The OCP uses a Q-sort method to provide a quantitative, assessment of an
organization’s culture. The OCP consists of 54 norm statements (e.g., fast
moving, being precise) that emerged from a review of academic- and practi-
tioner-oriented writings on culture, and were selected to provide a wide-rang-
ing and inclusive set of descriptors (e.g., O’Reilly et al., 1991). In the two
decades since the development of the original OCP item set, a variety of
business and environmental factors have affected the salient aspects of orga-
nizations’ cultures (e.g., Judge & Cable, 1997). Obvious examples include
shifts in customer service models, changes in technology, globalization, and
financial failures (e.g., Berman, 2011). Therefore, we modified or replaced
16 of the original items to make the item set more timely, relevant, and com-
prehensive. We retained the 54-item distribution structure and deleted origi-
nal items that were highly redundant, did not discriminate in past research, or
did not load cleanly on the OCP factor structure, replacing them with new or
modified items.
The email invitation sent to informants included a link to the online OCP
assessment. Informants were presented with a definition of culture (“those
things that are valued and rewarded within your company—that is, the pat-
tern of beliefs and expectations shared by members, and their resulting
behaviors”). They were then prompted to sort the 54 value statements that are
most characteristic and uncharacteristic of your organization’s culture by
O’Reilly et al. 607
assigning them into one of nine categories labeled from 1 = “Most
Uncharacteristic” to 9 = “Most Characteristic,” placing fewer items in the
extreme and more items in the middle categories. (The required distribution
was 2-4-6-9-12-9-6-4-2.)
Culture dimensions. Consistent with the processes used in developing the
original OCP, we conducted a principal components analysis with varimax
rotation to derive the factor structure of the revised OCP (n = 1,258). We
began the principal components analysis with all 54 items, and iterated to
both (a) eliminate items that did not load on any factors or loaded highly on
more than one factor, and (b) revise the number of identified factors based on
the scree plot (indicating successively decreasing eigenvalues). Based on this
sample, we ultimately derived a six-factor solution that includes 34 of the
OCP items and explains 44% of the total variance. All of the final items
loaded above .40 on one factor and had cross-loadings on other factors of less
than .30. The six-factor solution was readily interpretable and consistent with
a scree plot. Each factor had an eigenvalue over 1.0. The six factors were
labeled Adaptability, Integrity, Collaborative, Results Oriented, Customer
Oriented, and Detail Oriented. These factors overlap substantially with the
original factor analyses of the OCP (O’Reilly et al., 1991), with the differ-
ences between the original and the ones we identify primarily being attribut-
able to the modified items (e.g., customer oriented). Table 1 shows the rotated
component matrix including the amount of explained variance each factor
accounts for, as well as each item’s factor loadings. The appendix contains
the full item set and identifies revised items.
We calculated factor scores for the six factors for each respondent. The
overall measure of each dimension of an organization’s culture was com-
puted by averaging the individual respondents’ factor scores on that dimen-
sion. Thus, each firm is measured on six independent attributes of culture. We
used these firm-level measures for all subsequent analyses. The average
number of respondents per company is 20.25 (SD = 13.11).
To determine the appropriateness of aggregating culture-factor responses
at the firm level, we computed several metrics of inter-rater reliability and
agreement (LeBreton & Senter, 2008). First, we calculated an rwg(j) value for
each firm. The rwg(j) indicates how highly respondents within the firm agree
on the level of the six culture factors, as compared with a uniform distribution
of responses (i.e., the null hypothesis). We obtained values for all firms (
X
= 0.91, SD = 0.03) that exceeded the recommended minimum value of 0.70
(Klein et al., 2000), indicating high within-firm agreement. Second, we cal-
culated two intraclass correlation (ICC) metrics: ICC(1), which indicates
how much variance in ratings of each of the culture factors is explained by
608 Group & Organization Management 39(6)
Table 1. Factor Analysis—Rotated Component Matrix.
Components (Factors)
Adaptability Integrity Collaborative
Results
oriented
Customer
oriented
Detail
oriented
Variance accounted for
10.5% 8.5% 7.9% 6.6% 5.6% 5.1%
Being innovative 0.60 0.09 (0.01) 0.06 0.04 0.09
Risk-taking 0.59 (0.15) (0.27) 0.01 (0.02) (0.13)
Being willing to experiment 0.59 (0.10) (0.05) (0.12) (0.08) (0.09)
Fast moving 0.51 (0.37) (0.21) 0.10 (0.13) (0.10)
Being quick to take advantage
of opportunities
0.46 (0.34) (0.19) (0.01) 0.15 (0.08)
Not being constrained by
many rules
0.42 (0.18) 0.01 (0.27) (0.23) (0.24)
Adaptability 0.41 (0.27) 0.02 (0.07) 0.03 (0.12)
Making your numbers (0.43) (0.11) (0.17) 0.39 0.18 (0.30)
Predictability (0.63) (0.06) (0.01) (0.18) 0.05 (0.09)
Being rule oriented (0.63) (0.12) (0.11) 0.05 (0.05) 0.11
Being careful (0.64) (0.09) 0.05 (0.25) (0.09) 0.15
Having integrity (0.01) 0.77 0.08 (0.02) (0.03) 0.02
Having high ethical standards (0.05) 0.76 0.07 0.01 0.02 0.04
Being honest 0.01 0.67 0.03 (0.04) (0.06) 0.04
Respecting individuals 0.00 0.53 0.35 (0.20) (0.03) (0.11)
Being fair (0.02) 0.48 0.07 (0.31) 0.05 (0.10)
Working in collaboration
with others
0.03 0.06 0.71 0.11 (0.03) (0.00)
Being team oriented 0.02 0.12 0.65 0.10 (0.03) 0.02
Cooperative (0.09) 0.03 0.60 (0.16) (0.08) (0.02)
Being supportive (0.07) 0.17 0.44 (0.36) (0.03) (0.01)
Avoiding conflict (0.38) (0.16) 0.43 (0.29) (0.07) (0.09)
Hard-driving 0.04 (0.33) (0.44) 0.28 (0.17) (0.07)
Confronting conflict directly 0.11 0.02 (0.47) 0.11 (0.16) 0.12
Being aggressive 0.02 (0.26) (0.51) 0.26 (0.14) (0.10)
Being results oriented (0.12) (0.10) (0.12) 0.60 0.11 (0.12)
Having high expectations for
performance
0.13 (0.07) (0.08) 0.58 (0.07) 0.02
Achievement oriented (0.05) (0.08) (0.11) 0.53 (0.08) (0.09)
Security of employment (0.16) (0.01) (0.07) (0.57) (0.09) (0.11)
Being customer oriented 0.05 0.01 0.07 (0.04) 0.80 0.05
Listening to customers 0.00 0.05 0.06 0.00 0.79 0.08
Being market driven (0.05) (0.16) (0.07) 0.09 0.52 (0.23)
Paying attention to detail (0.08) (0.03) 0.02 0.09 (0.12) 0.74
Emphasizing quality (0.04) 0.09 0.00 (0.11) 0.25 0.62
Being precise (0.27) (0.08) (0.14) (0.08) (0.12) 0.62
Note. Extraction method was Principal Component Analysis. Rotation method was Varimax with Kaiser
Normalization. Rotation converged in seven iterations.
O’Reilly et al. 609
firm membership, and ICC(2), which informs us how reliable the firm-level
culture-factor scores are (Bliese, 2000). The average ICC(1) value (
X
= 0.19,
SD = 0.14) for the six culture factors exceeded the recommended minimum
value of 0.06. Likewise, the average ICC(2) value (
X
= 0.88, SD = 0.09)
exceeded the recommended minimum value of 0.70. Together, these mea-
sures provide justification for aggregating each of the six culture-factor rat-
ings at the firm level and indicate that the six culture factors are shared,
reliable constructs with significant between-firm variance (Bliese, 2000;
Klein et al., 2000).
CEO personality. To assess CEO personality, we administered the Ten-Item
Personality Inventory (TIPI) which assesses personality using the Big Five
Model (or FFM). This instrument was developed by Gosling, Rentfrow, and
Swann (2003) and has been shown to be reliable and valid (e.g., Anderson,
Brion, Moore, & Kennedy, 2012; Ehrhart, Ehrhart, Roesch, Nadler, & Brad-
shaw, 2009). Previous research has suggested that the accuracy of observers’
ratings of personality is higher than self-assessments (Funder, 2012; Oh,
Wang, & Mount, 2011). For example, Kolar, Funder, and Colvin (1996) dem-
onstrated that aggregated personality judgments made by others were more
accurate than self-ratings.
In spring 2011, we contacted 648 of the 880 respondents to our fall 2009
culture survey of U.S. high-tech firms. These 648 respondents were current
employees who were based in the United States (i.e., the remaining 232
respondents were either former employees or based overseas). Of these 648
respondents, 250 individuals completed a follow-up survey asking them to
assess their CEO’s personality (39% response rate). We analyzed personality
data for the CEOs of 32 U.S.-headquartered high-tech firms, and from 250
U.S.-based current-employee informants. The demographic profile of CEO
personality informants is very similar to that of the culture informants. Thirty-
four percent were female and their average tenure with the focal firm was
7.19 years, with 25% having worked at their focal firm for more than 12
years. All had earned a bachelor’s degree or higher and 69% of informants
had earned an MBA. We therefore have an average of 7.81 informants per
CEO personality assessment (SD = 4.87; range = 3-25).
To determine the appropriateness of grouping the CEO personality ratings
by company, we conducted a similar analysis on the five personality dimen-
sions as described above for the six culture factors. The average rwg(j) of the
personality scale scores of the firms (
X
= 0.78, SD = 0.12) exceeded the 0.70
cutoff, indicating high within-firm agreement. The two ICC metrics also sup-
port aggregation. The average ICC(1) value (
X
= 0.09, SD = 0.03) for the
five separate personality traits exceeded the recommended minimum value of
610 Group & Organization Management 39(6)
0.06, and the average ICC(2) value (
X
= 0.72, SD = 0.10) exceeded the rec-
ommended minimum value of 0.70. As with the culture factors, these three
measures provide justification for aggregating each of the five personality-
dimension ratings at the firm (CEO) level.
Firm Performance
One of the difficulties in making sense of previous research on organizational
culture and firm performance is the lack of standardization and comparability
across dependent variables. Therefore, for this study, we assessed firm per-
formance on five separate dimensions. First, we collected financial perfor-
mance metrics (revenues) for the 2 years after the culture data were obtained.
This provides a measure of firm growth. Second, to assess the market valua-
tion of the firm, we collected Tobin’s Q, which is the market-to-book value of
the company. Third, because external perceptions of a firm can be a valuable
intangible resource, we used the 2010 Fortune Magazine “Most Admired”
ranking as an indicator of firm reputation. To investigate the association of
organizational culture and employee attitudes, we used employee ratings of
their firm for 2010 as reported by the website Glassdoor. Finally, we gathered
stock analysts’ buy and sell recommendations for the period 2009 to 2011.
Change in financial performance. The logged value for each firm’s total reve-
nue (
X
= US$9.26 million, SD = US$1.51 million) for the 2011 fiscal year
(FY2011) was obtained from Compustat North America Financials Annual.
This indicator represents a firm’s ability to generate sales. The equivalent
2009 metric was included in the revenue model, as we were interested in
changes in performance. One of our sample firms was acquired prior to the
FY2011 reporting period, so we analyze revenue growth using a sample of 31
rather than 32 firms. We conducted the analyses using both logged versions
of the dollar-value for revenues.
Tobin’s Q. Tobin’s Q is the ratio of the market value of a firm’s assets (stock
market value) compared with the book value. It is a widely used measure of
the future value of a firm as perceived by the stock market (Chung & Pruitt,
1994).
Corporate reputation. We assessed corporate reputation using the 2010 For-
tune Magazine “Most Admired” ranking (Bernasek, 2010). We use the
inverse value of a firm’s rank such that higher numbers represent a better
reputation. The Fortune surveys were conducted by polling 4,170 executives,
directors, and securities analysts who work at 667 companies within the 10
O’Reilly et al. 611
largest U.S. industries. For the “Most Admired” ranking, respondents selected
the 10 companies they admired most from a list of the companies that ranked
in the top 25% in the prior year’s survey, plus the top 20% of their own indus-
try (
X
= 8.41, SD = 16.81).
Analysts’ stock recommendations. We gathered historical data regarding stock
analysts’ recommendations for each firm during the study-period years
(2009-2011) from Thompson-Reuters I/B/E/S First Call. Analysts who cover
each stock recommend that investors either Buy, Sell, or Hold the stock each
year. For each company, based on the analysts who followed the company,
we computed the average percentage of Buy recommendations over the
3-year period (
X
= 55.4%, SD = 17.2%).
Glassdoor ratings. Glassdoor is a website that uses anonymous employee
comments and ratings (on a five-point scale) to rate employee satisfaction
with the company (www.glassdoor.com). We obtained overall ratings for
each of the 32 firms in our sample (
X
= 3.23, SD = 0.41, range = 2.40-4.0).
The number of employees rating each company ranged from 64 to more than
5,000 (
X
= 1,038).
Control Variables
We controlled for a set of variables that could influence culture and firm per-
formance. First, even though the sample firms were in the high-technology
industry, we identified each firm’s sector as software, hardware, or a combi-
nation, using SIC codes, from Compustat North America. Firms with SIC
35xx (Industrial and Commercial Machinery and Computers), 36xx
(Electrical and Electronic Equipment Except Computers), or 38xx
(Instruments and Related Products) were coded as Hardware (variable “SW” =
0), whereas those with SIC 73xx (Business Services) were coded as Software
(variable “SW” = 1). To determine whether a company was involved in a
mixture of hardware- and software-oriented production, each company’s fis-
cal year 2009 business segments (as reported in the 10-K) were analyzed.
Companies that derived more than one third of their revenue from their non-
primary sector (as determined by SIC) were coded as Mixed (variable
“HWSW (Hardware/Software) Mix” = 1).
We also controlled for firm size using the log of the number of employees
in fiscal year 2009, gathered from Compustat North America. We included
two indicators of firm age in our initial regression equations: number of years
since founding and number of years since going public, gathered from com-
pany reports and SEC (Security and Exchange Commission) filings;
612 Group & Organization Management 39(6)
however, we dropped these indicators because they never changed our results
and were highly correlated with firm size. We also included a dummy vari-
able indicating whether the CEO was also the founder of the firm. This did
not change the results and was excluded from the reported results.
Results
Table 2 reports the correlations among the variables. As expected, given the
use of factor scores, correlations among the six culture dimensions are mod-
est. For the dependent variables, revenues for 2009 and 2011 are highly
correlated. Highly admired firms are also those with more employees, higher
revenues, and a higher Tobin’s Q. Interestingly, CEOs who are higher on
Openness also have a higher Tobin’s Q, suggesting that external raters such
as investors are sensitive to the CEO’s personality. Consistent with several
of the hypotheses, the bivariate correlations show that CEO personality
dimensions are related to organizational culture (e.g., higher levels of
Agreeableness and lower levels of Neuroticism are associated with more
collaborative cultures) and that culture is related to firm outcomes (e.g.,
more adaptable cultures have a higher Tobin’s Q, are more admired in the
Fortune rankings, and have higher employee ratings). Finally, and consis-
tent with previous research demonstrating that there are industry-based vari-
ations in organizational cultures (e.g., Christensen & Gordon, 1999; Siew &
Yu, 2004), there are differences in culture across firms depending on their
market segment.
Table 3 reports the regressions of CEO personality on the six culture dimen-
sions. After controlling for differences in market segments and firm size, the
results reveal a number of significant relationships between CEO personality
and firm culture. First, as proposed in Hypothesis 1, CEOs who were more
Open (curious, comfortable with new ideas, nonconventional) had cultures
that were more adaptive (risk-taking, fast moving, willing to experiment).
Consistent with Hypothesis 2, more Conscientious CEOs (hard working,
orderly, disciplined) were associated with more detail-oriented cultures (ana-
lytical, precise, attention to detail). Results also support Hypothesis 3 which
proposed that CEOs who were rated as less Agreeable (less willing to compro-
mise, less concerned with the feelings of others, less trusting) would be associ-
ated with cultures that were more results oriented. No support was found for
Hypothesis 4 which proposed a relationship between CEO Neuroticism and
collaboration. There was also no confirmation of Hypothesis 5 that proposed
an association between CEO Extraversion and a more customer-oriented cul-
ture. Overall, these results suggest that the personality of the CEO can be
significantly related to the organization’s culture. Although not reported here,
613
Table 2. Means, Standard Deviations, and Correlations among Study Variables.
Variable M SD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
1. Software
0 = Hardware 56%
1 = Software 44%
2. HWSW mix −.75**
0 = Not Mixed 37%
1 = Mixed 63%
3. Log Employees FY 2009 9.75 1.28 .08 .15
4. Culture: Adaptability 0.07 0.67 −.13 .09 −.01
5. Culture: Integrity 0.20 0.50 .12 −.22 .05 −.27
6. Culture: Collaboration −0.04 0.69 .34 −.54** −.06 −.11 .40*
7. Culture: Results oriented 0.15 0.44 −.28 .47** .33 −.24 −.34 −.34
8. Culture: Customer
oriented
−0.11 0.54 .07 .14 .20 −.24 .21 .31 .05
9. Culture: Detail oriented 0.05 0.48 −.23 .29 −.08 .02 −.24 −.39* .11 −.12
10. Personality: extraversion 4.92 1.31 .16 −.07 .14 .16 .00 −.12 −.06 −.05 −.13
11. Personality:
Agreeableness
4.21 1.25 −.04 −.19 −.35* .07 .29 .55** −.35* .12 −.48** −.07
12. Personality:
Conscientiousness
5.84 0.63 −.23 .21 −.25 .09 .17 .22 −.03 .13 .14 −.37* .44*
13. Personality: Neuroticism 3.06 1.13 .00 .27 .23 .15 −.31 −.62** .15 −.19 .40* .45** −.81** −.58**
14. Personality: Openness 5.05 0.94 .05 −.08 −.13 .54** −.23 −.19 −.32 −.34 .14 .09 .01 .17 .14
15. Log Revenue FY 2009
(US$millions)
9.02 1.54 .06 .19 .94** .21 −.05 −.08 .29 .09 −.15 .19 −.30 −.23 .25 −.04
16. Log Revenue FY 2011
(US$millions)
9.26 1.51 .03 .25 .91** .29 −.13 −.13 .35 .09 −.07 .16 −.31 −.19 .26 .00 .99**
17. Tobin’s Q 2009 3.67 2.02 .23 .09 .26 .42* −.16 −.12 −.18 .25 .14 −.23 −.22 .05 .18 .42* .31 .37*
18. Fortune Most Admired 8.59 16.75 .24 .18 .50** .46** −.06 −.18 .06 .04 .20 .13 −.25 .05 .31 .25 .63** .69** .54**
19. Glassdoor 2010 3.23 0.41 .01 −.10 −.27 .51** .01 −.01 −.15 −.28 .12 −.04 .24 .17 −.07 .48** −.20 −.13 .16 .17
20. Analyst “Buy” 2009-2011 55.4 17.2 .13 −.04 .46** .24 .22 −.03 .11 .11 .00 .33 −.13 .01 .15 −.01 .47** .50** .10 .48** .09
*p < .05. **p < .01.
614 Group & Organization Management 39(6)
additional analyses suggested that the associations between CEO personality
and organizational culture were stronger for CEOs with longer tenure.
Table 4 reports the results of hierarchical regressions and show the rela-
tionships among the culture dimensions and five measures of firm perfor-
mance. Hypothesis 6 proposed that cultures that emphasized adaptability
(innovation, risk-taking, speed) would be related to subsequent firm perfor-
mance. Results show that firms whose cultures were higher on adaptability
had significantly higher revenue growth over the 2009-2011 period, higher
market valuations (Tobin’s Q), were seen as more admired by Fortune raters,
were more likely to be recommended by stock analysts, and had higher
employee ratings as reported by Glassdoor. No support was found for
Hypothesis 7 which proposed that firms with more results-oriented cultures
would have significantly higher revenue growth. Finally, Hypothesis 8 pro-
posed that firms with more detail-oriented cultures would also perform better.
Model 1 in Table 4 shows a significant association between culture and rev-
enue growth. Model 3 also shows that firms rated as higher in the Fortune
Most Admired rankings also had more detail-oriented cultures. Although not
hypothesized, the results in Table 4 also show that firms with more customer-
oriented cultures (market driven, listening to customers) had a higher Tobin’s
Q, suggesting that investors place a higher value on organizational cultures
that emphasize a customer orientation. Results also showed that firms whose
cultures placed a higher value on integrity (honest, fair, ethical) were more
likely to be more recommended by stock analysts. Overall, these results
Table 3. CEO Personality and Organizational Culture.
Adaptability Integrity Collaboration
Results
oriented
Customer
oriented
Detail
oriented
Software −0.04 −0.27 −0.30 0.03 0.25 0.03
HWSW mix 0.16 −0.41 −0.77** 0.44 0.32 0.36*
Log Employees FY
2009
0.00 0.22 0.20 0.28 0.21 −0.14
Extraversion −0.08 0.02 −0.04 0.30 0.28 −0.18
Agreeableness 0.05 0.26 0.36 −0.88* −0.41 −0.30
Conscientiousness −0.17 0.35 0.24 −0.21 −0.17 0.62**
Neuroticism 0.07 0.20 −0.05 −0.96−1.07 0.62
Openness 0.50** −0.28 −0.20 −0.11 −0.11 −0.07
Adjusted R20.28 0.66 0.46 0.36 0.16 0.27
F2.38* 0.55 4.00** 2.88* 1.68 2.32
Number of firms 29 29 29 29 29 29
Note. Entries are standardized coefficients.
p < .10. *p < .05. **p < .01.
O’Reilly et al. 615
generally support the hypothesized associations between organizational cul-
ture and measures of firm performance.
When the results in Tables 3 and 4 are taken together, a clear picture
emerges showing that three of the Big Five personality dimensions
(Conscientiousness, Openness, and Agreeableness) were significantly related
to three dimensions of organizational culture (detail oriented, adaptability,
and results oriented). Importantly, adaptability and detail oriented were sub-
sequently related to firm outcomes (revenue growth, market value, reputa-
tion, and employee attitudes).
Additional Analyses
Although we had no a priori expectations that CEO personality would be
directly associated with firm outcomes, the implicit model of CEO personal-
ity-culture-firm performance suggests a possible mediation model.
Combining our two sets of hypotheses, we used the bootstrapping method
suggested by Preacher and Hayes (2008) to examine specific mediating
Table 4. Organizational Culture and Firm Performance.
Revenue
Growth
2009-2011
Tobin’s Q
2009
Fortune Most
Admired
Glassdoor
2010
Analyst
“Buy”
2009-2011
Software 0.01 0.91** 0.70** −0.04 −0.07
HWSW Mix 0.05 0.83** 0.65** −0.09 −0.18
Log Employees
FY 2009
−0.16 0.04 0.35* −0.26 0.50*
Log Revenue FY
2009
1.12**
Adaptability 0.09* 0.50* 0.54** 0.66* 0.51*
Integrity −0.06 −0.13 0.18 0.33 0.47*
Collaboration 0.02 −0.01 0.06 0.01 −0.29
Results oriented 0.10* −0.20 0.03 0.31 0.22
Customer
oriented
0.05 0.36−0.08 −0.10 0.18
Detail oriented 0.090.20 0.27* 0.18 0.13
Adjusted R20.98 0.40 0.69 0.21 0.26
F161.50** 3.21** 8.75** 1.932.14
Number of firms 31 32 32 32 30
Note. Entries are standardized coefficients.
p < .10. *p < .05. **p < .01.
616 Group & Organization Management 39(6)
effects of culture on personality and performance. These results showed that
the effect of CEO Openness on revenue growth was mediated by a culture of
adaptiveness. However, independent of culture, there were significant posi-
tive effects of CEO Openness on Tobin’s Q, Fortune reputation, and Glassdoor
employee rankings, suggesting that when external judgments are made by
investors and industry experts, the personality of the CEO has effects inde-
pendent of culture. No other significant mediation effects for other personal-
ity variables emerged.
Although the data do not permit us to make strong claims about causality,
these results are consistent with a model that suggests that the personality of
the CEO can shape organizational culture which, in turn, may be associated
with firm performance. The results suggest that when a comprehensive assess-
ment of culture is made, and when the sample is homogeneous with regard to
industry, there are direct links between culture and firm performance.
Discussion
Since the inception of research on organizational culture, scholars have sug-
gested that this research should provide a critical link between firm leader-
ship and organizational performance (e.g., Barney, 1986; Schein, 1985).
Unfortunately, that promise has remained largely unfulfilled. Although orga-
nizational culture remains a topic of great interest and importance to practi-
tioners, academic research on the topic has largely failed to elucidate the
relationships among leadership, culture and objective indicators of organiza-
tional performance. In spite of the 4,600 studies of culture identified by
Hartnell (Hartnell et al., 2011), only a few empirical studies have addressed
this topic (e.g., Berson et al., 2008; Peterson et al., 2003). Using comprehen-
sive measures of both personality and organizational culture, we contribute to
this stream of research by showing that the personality of the CEO is associ-
ated in predictable ways with types of organizational culture and that culture
can be related to firm performance.
The specific links that we found were quite straightforward. For instance,
CEOs who are higher on Openness to Experience are more likely to be asso-
ciated with cultures that emphasize adaptability than are those CEOs who are
less Open to Experience. CEOs who are more Conscientious have cultures
that are more detail oriented than those who are lower on Conscientiousness.
CEOs who are less Agreeable (skeptical, competitive) are more likely to have
organizational cultures that are more results oriented than those who are
higher on Agreeableness. These findings are consistent with a social learning
perspective on culture; that is, insofar as personality is a precursor to consis-
tent patterns of behavior and insofar as cultural norms reflect the behaviors of
O’Reilly et al. 617
their senior managers, it seems reasonable to expect that CEOs with different
personality profiles will engender cultures that reflect their personalities.
Although previous studies of culture and objective firm performance have
yielded mixed results, we find clear associations between organizational cul-
ture and firm performance in terms of financial performance, market valua-
tion, reputation, analysts’ recommendations, and attitudes among employees.
For example, cultures that are more adaptable and detail oriented are posi-
tively linked to revenue growth. The logic here is straightforward. When a
culture, or normative order, emphasizes adaptability (e.g., being fast, taking
advantage of opportunities), a firm is more likely to adjust to changes.
Similarly, when people in an organization share consistent expectations about
the importance of being detail oriented (e.g., emphasizing quality, paying
attention to detail), the firm is more likely to successfully implement their
plans. In this way, culture, acting as a social control system, can help with the
execution of strategy.
The results also show that cultures that emphasize adaptability and detail
orientation are significantly associated with higher ratings from Fortune’s
Most Admired list, are given more positive evaluations by employees, have a
higher market-to-book value, and are evaluated more positively by stock ana-
lysts. These results suggest that while CEO personality, as expected, has little
direct effect on a firm’s financial performance, it can affect perceptions of
others in the form of how the market and employees evaluate the company.
Although we are unable to investigate the specific mechanisms linking CEO
personality to culture and culture to performance, previous research offers
insight into how these might be related. First, research has shown that personal-
ity is strongly associated with behavioral regularities (e.g., Barrick & Mount,
2005; Ozer & Benet-Martinez, 2006). The logic is that personality drives pat-
terns of behavior which, in turn, affect how people interpret what is important
and how to think and behave. At the CEO level, these consistent patterns of
behavior may shape interpretations of what is important and how to behave—
the culture of the organization (O’Reilly & Chatman, 1996; Schein, 1985).
Given how pervasive the assumptions about CEO leadership, culture, and
performance are, why has the empirical evidence been so thin? There are
several answers to this question. First, while there have been numerous stud-
ies (laboratory and field) linking personality and leadership, these have not
been conducted at the CEO level where collecting data is more difficult.
Second, because of the variations in the definition and measurement of cul-
ture, the linkage between culture and firm performance has been hard to
explicate. Some earlier studies have been limited by imposing a restricted
model of culture thereby reducing the opportunity to discover relationships
between a range of salient culture characteristics and firm performance
618 Group & Organization Management 39(6)
(Hartnell et al., 2011). Third, aside from variations in the measurement of
culture, previous studies have used a variety of subjective measures of firm
effectiveness (e.g., Gregory, et al., 2009). These often relied on perceptual
measures or judgments of perceived performance, making it difficult to com-
pare across studies.
Compounding these difficulties, many of the studies of culture and perfor-
mance have often used convenience samples of companies in different indus-
tries where performance measures may or may not be relevant (e.g., Gordon,
1985; Siew & Yu, 2004). For example, comparing the ROI (Return on
Investment) of firms in one industry with those in another may give a mis-
leading impression of performance across companies. Studies that attempt to
find relationships using heterogeneous samples, especially without careful
industry controls, can easily fail to uncover real relationships. We believe that
a strength of the present study, and perhaps one reason why we find strong
associations of culture and performance, is that we focused narrowly on one
industry where the performance metrics had equivalent relevance.
Finally, studies that have explored the interrelationships among CEO per-
sonality, culture, and performance (Berson et al., 2008; Peterson et al., 2003;
Siew & Yu, 2004) have been forced to rely on comparatively small samples.
Using small samples with narrow measures of culture, subjective perfor-
mance metrics, and firms from heterogeneous industries does not seem like a
successful strategy for investigating these relationships. In the present study,
we attempt to minimize these weaknesses by using comprehensive measures
of personality and culture and focusing on a narrowly defined sample where
performance metrics are likely to be comparable and relevant.
Limitations and Future Research Directions
There are several obvious and important limitations to the present study.
First, although we have a reasonable number of respondents across firms in
the sample, our final sample size is 32 firms, which means that any analyses
are of comparatively low power and more subject to misinterpretation than
large sample studies. This is both a legitimate cause for caution in interpret-
ing and generalizing from the results and a fact of life of doing cross-organi-
zational studies that require the participation of senior leaders. The fact that
our sample is drawn from the same industry and we use further industry con-
trols may mitigate some of the problems associated with the use of heteroge-
neous samples. Similarly, the use of standardized firm effectiveness measures
in the present study may make it easier to compare across future studies.
A second important limitation of the current study has to do with the cau-
sality among our variables. Although we were careful to collect financial data
O’Reilly et al. 619
after our assessment of culture, the CEO personality data were collected after
the original culture data. As personality has been shown to be reasonably
stable over very long time periods, our inference is that culture is more apt to
reflect the CEO’s personality rather than the opposite, but any timing for
causation is ambiguous. It may be that reverse causation is occurring. For
example, it may be that in established organizations with clearly defined cul-
tures, the CEO is chosen on the basis of fit with that culture rather than the
CEO shaping the culture. However, for a number of our firms, the CEO was
also the founder, so the causality in these instances seems clear. Similarly, it
is also possible that firms with a particular record of performance may end up
with characteristic cultures, rather than the opposite. Again, the use of depen-
dent variables that were measured after the culture was assessed may mitigate
some of this effect but cannot rule it out. Clearly, it will take a more rigorous
research design and significant longitudinal data to resolve these issues.
An additional limitation of the present study may be its focus on firms
from a single industry. As we noted above, focusing on one industry allows
for the use of relevant performance measures and controls appropriate to an
industry, but studying a single industry leads to questions about how findings
might generalize. For example, for our sample of technology-driven firms,
adaptability was strongly related to our performance measures. These compa-
nies are often dealing with short product life cycles, rapidly evolving tech-
nologies, and challenging competition. In this environment, the ability to
innovate and evolve may be critical. For companies in other industries, other
aspects of a culture such customer orientation might be more predictive of
performance. Future research could explore these variations.
A final potential weakness of the present study has been its phenomenon-
driven focus. The emphasis has been on documenting the empirical relation-
ships between CEO personality, culture, and objective performance, not on
fine-grained testing of nuanced theories. Although the overarching theoreti-
cal framework for our study is that of culture operating through normative
and informational influence, the study was not designed to permit more fine-
grained tests of this or other theories of culture. Similarly, we investigated
only direct relationships between CEO personality and culture and not more
complicated profiles (e.g., Barondes, 2011). Finally, we did not hypothesize
mediated relationships between personality, culture, and performance or
between firm strategy, culture, and effectiveness. Having established that,
with appropriate controls, direct associations among these constructs can
exist, more fine-grained research is clearly warranted.
A practical implication of these results is relevant for CEOs and boards of
directors. Although the CEO’s personality may not have direct effects on firm
performance, the evidence presented here suggests that it may have important
620 Group & Organization Management 39(6)
effects on the culture of the company. Furthermore, the results suggest that
important observers of the firm, such as analysts, may make substantive judg-
ments about the firm based on the CEO’s pattern of behavior. These judg-
ments may have effects on the firm’s reputation.
Appendix
Items in Organizational Culture Profile (OCP) Assessment.
Achievement oriented Cooperative
Action oriented Emphasis on professional growth
Adaptability Emphasizing quality
Avoiding conflict Fast moving
Being aggressive Hard-driving
Being analytical Having high ethical standards
Being calm Having high expectations for performance
Being careful Having integrity
Being competitive High levels of conflict
Being customer oriented Individual goals are transparent
Being decisive Learning from mistakes
Being easygoing Listening to customers
Being fair Making your numbers
Being honest Not being constrained by many rules
Being innovative Paying attention to detail
Being market driven Predictability
Being people oriented Putting organization’s goals before unit’s goals
Being precise Respecting individuals
Being quick to take advantage of
opportunities
Risk-taking
Being reflective Security of employment
Being results oriented Sharing information freely
Being rule oriented Stability
Being supportive Taking individual responsibility
Being team oriented Taking initiative
Being tolerant Urgency
Being willing to experiment What you know matters more than who you know
Confronting conflict directly Working in collaboration with others
Note. Items in italics were added in revising the OCP, replacing the following items: Autonomy,
Being Demanding, Being Highly Organized, Being Socially Responsible, Developing Friends at
Work, Emphasizing Simplicity Over Complexity, Enthusiasm for the Job, Fitting In, Flexibility,
Having a Clear Guiding Philosophy, Having a Good Reputation, High Pay for Good Performance,
Informality, Integrity and Honesty, Making Your Numbers, Working Long Hours.
O’Reilly et al. 621
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research,
authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publi-
cation of this article.
Notes
1. Organizational culture and organizational climate are both constructs that have
been used to understand psychological phenomena in organizations; both focus
on the creation and impact of social contexts and rest upon the assumption of
shared meanings, and in this sense, they are complementary constructs (Ostroff,
Kinicki, & Tamkins, 2003; Schneider et al., 2013). Although both constructs focus
on shared meanings, climate is grounded in temporal perceptions of aspects of
organizational structure and systems while culture reflects the meanings derived
from underlying values and norms (Schneider et al., 2013). Since climate focuses
on perceptions of situational phenomena (e.g., organizational systems and struc-
tures), it is, by definition and measurement, more transitory and, in our view, less
likely to be related to organization-level performance over time. Culture, on the
other hand, rooted in fundamental values and beliefs, is likely to be more endur-
ing and is likely to have more pervasive effects on organizational functioning and
performance. For this reason, we focus here on organizational culture.
2. We use the compound term values and personality here because a number of
studies of CEOs have used “values” rather than personality. As Parks and Guay
(2009) note, the two constructs are similar in that they both influence behavior
through habitual routines. They are different in that “values” are more learned
and normative than personality. Previous research has often made little distinc-
tion between the two.
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Author Biographies
Charles A. O’Reilly is the Frank E. Buck Professor of Management at the Graduate
School of Business at Stanford University. He studies culture, leadership, demogra-
phy and organizational innovation and change.
Jennifer A. Chatman is the Paul J. Cortese Distinguished Professor of Management
at the Haas School of Business, University of California, Berkeley. Her research
focuses on organizational culture, leadership, and norms in diverse work groups.
David F. Caldwell is the Stephan and Patricia Schott Professor of Management in the
Leavey School of Business at Santa Clara University. His research focuses on organi-
zational culture, work group dynamics, and innovation.
Bernadette Doerr is a PhD student in Management and Organizations (MORS) at
UC Berkeley’s Haas School of Business. She studies leadership, personality, self-
awareness, and culture.
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Nell Esercito svizzero il processo di selezione e lo sviluppo della carriera per i quadri di milizia e professionali è disciplinato in modo chiaro. Si tratta di una condizione im- prescindibile per garantire trasparenza e correttezza. Nello stesso tempo, i contenuti e i metodi degli strumenti di selezione dispiegano il loro effetto anche sulla cultura aziendale e di condu- zione. L'organizzazione è sollecitata a tenerne conto, da un lato garantendo al candidato un'esecuzione professionale del processo di selezione e, d'altro lato, influenzando la cultura di conduzione mediante un'impostazione consapevo- le dei contenuti.
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