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Relationship between organizational culture and performance among German multinational companies in Mexico

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The objective of this research is to determine if there is a relationship between organizational culture and organizational performance in German multinational companies operating in Mexico. To this end, we use a multiple case study, analyzing five German multinational autoparts companies with operations in Mexico, applying a questionnaire to executives at each of the five companies and to 232 employees at one of them. Our main finding is that there is a significant relationship between organizational culture variables and organizational performance variables, such as turnover, job satisfaction, satisfaction with the company, and sales. The study illustrates the importance of promoting human resources policies aimed at increasing employee satisfaction, and studies should be carried out to identify the triggers of satisfaction with greater precision, which may improve the performance of this type of company. The main limitation of this work is that as a case study, the results cannot be generalized; however, very few previous studies have attempted to establish the relationship between culture and performance in the Mexican context, so this study constitutes a milestone for knowledge in this area.
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JournalofBusiness,UniversidaddelPacífico(Lima,Peru)
ISSN20789424
24
Relationship between organizational culture and
performance among German multinational
companies in Mexico
Kathrin Oberföll
kathrin_o@gmx.de
NAD Global, S.A. de C.V.
María Elena Camarena Adame
camarena@fca.unam.mx
Universidad Nacional Autónoma de México
María Luisa Saavedra García
lsaavedra@fca.unam.mx
Universidad Nacional Autónoma de México
Abstract
The objective of this research is to determine if there is a relationship between
organizational culture and organizational performance in German multinational
companies operating in Mexico. To this end, we use a multiple case study, analyzing five
German multinational autoparts companies with operations in Mexico, applying a
questionnaire to executives at each of the five companies and to 232 employees at one
of them. Our main finding is that there is a significant relationship between organizational
culture variables and organizational performance variables, such as turnover, job
satisfaction, satisfaction with the company, and sales. The study illustrates the
importance of promoting human resources policies aimed at increasing employee
satisfaction, and studies should be carried out to identify the triggers of satisfaction with
greater precision, which may improve the performance of this type of company. The main
limitation of this work is that as a case study, the results cannot be generalized; however,
very few previous studies have attempted to establish the relationship between culture
and performance in the Mexican context, so this study constitutes a milestone for
knowledge in this area.
Keywords: Culture, performance, multinationals, social and cultural values.
https://doi.org/10.21678/jb.2018.840
Paper received 24/01/2018 paper accepted 21/11/2018
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizat ional culture and performance among
German multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-48
Editor in Chief: Prof. Dr. Luis Camilo Ortigueira-Sánchez
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
25
Introduction
Today, multinational corporations exist in unprecedented numbers. Besides their
headquarters, these commercial and industrial firms have interests and plants
established in several countries through which they internationalize their capital,
organizational processes, and production by drawing on values, beliefs and procedures
from these different locations.
Each country or region is defined by its own culture: a set of values, traditions, beliefs,
habits, norms, attitudes and behaviors that give identity or belonging to its inhabitants.
Being part of a culture entails certain behavioral traits that differ from those exhibited by
members of other cultures (Schein, 2004), and this in turn affects the performance of the
organizations operating within these cultures. In this context, the culture of German
multinationals in Mexico – some 1,700 firms employing around 120,000 people – merits
study.
Cultural diversity can, understandably, cause problems in interactions between persons
who do not share national origins or nationalities; this is associated with differing
behavior or problem-solving styles in response to certain work situations, or to adapting
certain established work processes from one culture to another.
Just like nations and regions, organizations also develop a culture of their own that
guides the attitudes and behaviors of their members through values, beliefs, and norms.
Organizational culture is not dissimilar from local culture: In this regard, Connaughton
and Shuffler (2007), based on a review of previous studies, demonstrate that national
culture can affect organizational cultures and teamwork. To put it differently, each culture
makes a mark on the organizations that develop within it. Thus, “the organizational
cultures of culturally homogenous cultures incorporate common elements from a general
culture, while in the case of culturally heterogenous countries, organizational cultures will
present greater differences between one another” (Gómez & Ricardo, 2012, p.26).
Along these lines, if an attempt is made to adapt a process from one culture to another,
or if individuals from different national cultures are integrated in a single department,
problematic situations could arise, potentially affecting the team’s functioning and
reducing the organization’s performance (Gregory, Harris, Armenakes & Shook, 2009).
This happens because individuals behave in a way that is consistent with their values;
thus, organizations have to create behavioral expectations that orientate employees to
behave in a way that is consistent with the culture of the organization. In relation to this,
Gregory, Harris, Armenakes and Shook (2009) point out that it is precisely this
relationship between culture and behavior that provides the technical foundations on
which to assert that culture affects performance.
However, heterogeneous teams can also resolve and overcome conflicts by developing
a new organizational culture that proves highly effective, based on a collaborative
approach to conflict management and decision-making (Connaughton & Shuffler, 2007);
firms with such teams are able to establish their own organizational culture that all
members adopt, regardless of their own cultural origins.
However, these assumptions have largely been studied from a theoretical perspective
thus far; this is particularly true in the case of multinational corporations, with their mixture
of organizational factors, for which little empirical research has yet been done. Therefore,
the aim of this study is to determine whether there is a relationship between
organizational culture and performance among German multinationals operating in
Mexico.
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
26
This article contains three sections: I. Theoretical framework, subdivided as follows:
German multinational corporations in Mexico, organizational culture and organizational
performance; II. Method, where we present the research questions, hypothesis,
delimitation of population and sample, variables and indicators, and measurement
instruments; III. Analysis of the results, where we perform and interpret the descriptive
and correlational analyses, and then present the conclusions, recommendations,
limitations, and future lines of research.
Theoretical framework
German multinational firms in Mexico
At present, the economic relationship between Germany and Mexico is rather robust.
Since 2011, Mexico has been Germany’s second-largest trading partner in Latin
America; in turn, Germany is Mexico's main trading partner in the European Union,
accounting for more than a third of its trade with the grouping. These close links are
bolstered by the presence of some 1,700 German-owned companies in Mexico,
according to the Mexican-German Chamber of Commerce (CAMEXA). The accumulated
capital of German companies in Mexico amounts to around US $25 billion (Schindler,
2012); these firms employ 120,000 people, and generate 7% of Mexico’s industrial
output. Their productive activities are centered mainly on the automotive,
pharmaceuticals, chemical, electrical and electronic, transport, and logistics industries
(Schindler, 2012).
The automotive industry is crucial to both the German and Mexican economies; in
Germany it characterizes the economic structure of various regions, and is responsible
for almost 800,000 direct jobs and 1.8 million indirect jobs (Friedrich, 2010). Sales in the
industry represent 20% of Germany's total across all industries, and make up 33% of the
country’s trade surplus.
Germany is regarded as the innovation hub for the global automotive industry (Germany
Trade & Invest, Automobil-Industrie); as such, large sums of money are allocated each
year to research and development, where many jobs are concentrated.
In Mexico, the automotive industry generates 3.8 percent of the country’s GDP (PWC,
2013), comprising 18% of all manufacturing and 23% of exports while employing 551,000
people directly and indirectly (Deutsch-Mexikanische Industrie- und Handelskammer,
2012). Indeed, given its manufacturing pedigree, low operating costs, the benefits of
NAFTA, and its long industrial tradition, Mexico is a favorable base for the automotive
industry (PWC, 2013).
Organizational culture and performance
There is no general consensus on the meaning of culture, with different authors defining
it from the perspective of their particular approaches (Kroeber & Kluckhohn, 1952; Allaire
& Firsirotu, 1984). For this study, we define it as the set of customs, beliefs, morals, laws,
and ideas that are expressed in behavior, symbols, artifacts and lifestyle: in sum, a
reflection of how society adapts to its environment. Culture may be learned or it may be
passed down from generation to generation.
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
27
Human relations theory gave rise to studies on organizational behavior, and this field has
been broadened through focuses on organizational culture; according to Denison,
Nieminen and Kotrba (2014), the first to use and describe the term “cultural organization”
was Elliott Jaques in 1951, who regarded it as an informal social structure that explains
the failure of formal policies.
Various different conceptualizations of organizational culture emerged thereafter
(Geertz, 1973; Hofstede, 1980; Deal & Kennedy, 1982; Smircich, 1983; Martin & Siehl,
1983; Schein, 2004; Allaire & Firsirotu, 1984; Cooke & Rousseau, 1988, Denison, 1991;
Gordon & di Tomaso, 1992; Kotter & Heskett, 1992; Cunha & Cooper, 2002; Van Den
Berg & Wilderom, 2004; Hofstede & Hofstede, 2005), but they all adhere to the notion of
a system of ideas or patterns created and inherited within an organization, predisposing
its members to a certain type of behavior.
Schein’s (1984) model is one of the best known in studies of organizational culture. It is
based on three levels: artifacts, beliefs and values, and basic assumptions. This model
analyzes culture according to the degree to which it is visible to the observer. Artifacts
are the visible products of a group and include language, technology, style, myths, and
stories; or, in the case of an organization, structure, processes, and so on – that is, all
that is easy to see but difficult to decipher. In turn, beliefs and values, as processes and
ways of thinking and acting that have proven successful, draw heavily from artifacts.
They are adopted by existing members, transmitted to new ones, and established as the
organization’s philosophy, serving as a behavioral guide in certain situations (Schein,
2004).
Based on a review of the literature, we have identified certain dimensions and variables
used to measure organizational culture (Table 1).
Table 1 Dimensions and variables of organizational culture
VariablesDefinitionIndicators
Hierarchy/Stru
cture
Cooke&Rousseau(1988)Humanistichelpful,affiliative,approval,conventional,
dependence,avoidance,oppositional,power,
competitive,competence/perfectionistic,
achievement,selfactualizing
Denison(1984)Involvement
VanDenBerg&Wilderom(2004) Externalorientation,interdepartmentalcoordination,
improvementorientation
Cameron&Quinn(2011)Hierarchy,clan,adhocracy,market
Hofstede(1980)Parochialvs.professional,opensystemvs.closedsystem,loose
controlvs.tightcontrol,pragmaticvs.normative
Ginevicius&
Vaitkunaite
(2006)
Involvement,transmissionofinformation,strategic
direction,communication,coordinationand
integration
Harrison(1972) Organizationalorientation,personorientation,market
Hofstede(1980) Powerdistance,individualismvs.collectivism,uncertainty
avoidance,masculinityvs.femininity(longtermvs.shortterm
orientation)
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
28
Values
Deal&Kennedy(1982) Toughguy/macho,workhard/playhard,betyourcompany,
process
Denison(1991)Mission,adaptability,consistency
Cameron&Quinn(2011)Hierarchy,clan,adhocracy,market
Cunha&Cooper(2002)Organizationalorientation,performanceorientation,
peopleorientation,marketorientation
Human
resources
VanDenBerg&Wilderom(2004)Autonomy,humanresources
Hofstede(1980) Processorientedvs.resultsoriented,employeeorientedvsjob
oriented
Ginevicius&
Vaitkunaite
(2006)
Cooperation,learning,careaboutclients,adaptability,reward
andincentivesystem,agreement
Source: Compiled by authors based on the authors cited.
In the view of Hamann, Schiemann, Bellora and Guenther (2013), the aim of
organizational performance ought to be organizational effectiveness In this regard,
Strasser et al. (quoted by Hamann et al., 2013), note that organizational effectiveness is
“the degree to which organizations are attaining all the purposes they are supposed to”
(p.70). Hamann et al. (2013) distinguish between two types of performance – operational
and organizational – while they see operational performance as “the fulfillment of
operational goals within different value chain activities” (p.71). For their definition of
organizational performance, they quote Combs et al. in reference to “the economic
outcomes resulting from the interplay among an organization’s attributes, actions, and
environment” (p.70).
Denison (1991), was one of the first authors to develop a model of organizational culture
in different contexts, attempting to quantify organizational culture by relating it to
performance. This model takes into account the four features of organizational culture:
mission, participation, adaptability, and consistency, relating them to variables of
performance and confirming the relationship between organizational culture and
performance (profitability, sales growth, market share, innovation, quality of products and
services, and employee satisfaction).
Many researchers have attempted to validate Denison's model. These include Gómez
and Ricardo (2012), who establish a direct, positive relationship between culture and
innovation; Mobley, Wang and Fang (2005), who, on the basis of this relationship,
propose profiles of different companies; and Nazir and Lone (2008), who study
employees of firms in the cement, textile, and steel industries, obtaining the same results
as Denison.
However, there are other studies in which the model is less effective; for instance,
Martínez (2010) do not obtain strong affirmations about the model's discriminative
validity in relation to the firms studied.
Other works are able to relate organizational culture with performance; Franke, Hofstede
and Bond (1991) conduct a comparative study to determine why certain countries
develop competitive advantages while others do not, finding there to be a significant
relationship between the dimensions of organizational culture (power distance,
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
29
individualism, masculinity, uncertainty avoidance, Confucian dynamism, integration,
human values, and moral discipline) and a country’s growth rate.
For their part, Gálvez and García (2011) empirically validate the relationship between
different types of organizational culture (clan, adhocracy, hierarchy, market, and
innovation) and performance systems (internal processes, open systems, rational,
human relations).
Table 2 presents a broader overview of past studies, most of which are based on the
contributions of Hofstede, Denison, or Cameron and Quinn. We adapt these indicators
to the present study and relate them to performance, financial, and operational
measures.
Table2Researchontherelationshipbetweencultureandperformance
AuthorObjective Variables Findings
Denison(1991)Establishtherelationship
betweenorganizationalculture
(OC)andperformance
FourdimensionsofOC
Financialindicators
Arelationshipdoes
exist
Calori&Sarnin
(1991)
Proposeahypothesisonthe
relationshipbetweenOCand
organizationalperformance
(OP)
TwelvedimensionsofOC
Financialindicators
Relationships
establishedinthecase
somedimensions
Franke,Hofstede
&Bond(1991)
Identifyculturalfactorsthat
appeartobetherootof
economicdevelopment
Hofstede'sfivedimensions
GDPpercapita,growthrate
Relationshipbetween
GDPpercapitaand
certaindimensions
Relationshipbetween
alldimensionsandthe
growthrate
Gordon&Di
Tomaso(1992)
Investigatetherelationship
betweenthestrengthofOCand
OP
SixdimensionsofOC
Assetgrowth
Arelationshipdoes
exist
Marculides&
Heck(1993)
Drawuparelationshipmap
betweenOCandOP
FivedimensionsofOC
Financialindicators
Arelationshipdoes
exist
Strongrelationship
betweentask
organizationand
performance
Chow,Haddad&
Wu(2002)
RelationshipbetweenOCand
OPinnonwesternsettings
EightdimensionsofOC
Financialindicators
Arelationshipdoes
exist
Ogaad,Larsen&
Marnburg
(2005)
RelationshipbetweenOCand
theperformanceofmanagersin
therestaurantindustry
FourdimensionsofOC
Efficacy,cleaning,additional
sales,personnelcost,profit
margin
Norelationshipexists
betweenOCandOP
Winston&
Dadzie(2007)
Determinetherelationship
betweenthedimensionsofOC
andOP
FourdimensionsofOC
Profitmargin,growthand
marketshare
Relationshipbetween
hierarchyandsales
growth
Gálvez&García
(2011)
Verifytherelationshipbetween
OCandcompanyperformance
FivetypesofOC
Fiveperformancesystems
Partialrelationships
found
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
30
SaiOnCheung,
Wong&Lam
(2012)
Establishtherelationship
betweenthedimensionsofOC
andOP
EightdimensionsofOC
Financialindicators,internal
processes,customers,
innovationandlearning
Asignificant
relationshipexists
betweenOCandOP
Jacobs,
Mannion,
Davies,Harrison,
Konteh&
Walshe(2013)
Examinetherelationship
betweenthecultureofhigh
performanceandthehospital
starratingssystem
FourtypesofOC
Starsystem
Apositiverelationship
exists
Yesil&Kaya
(2013)
Investigatetherelationship
betweenOCandfinancial
performance
Fourtypesoffinancial
indicators
Norelationshipwas
found
Ozigbo(2013)Exploretherelationship
betweenOCandOP
FourdimensionsofOC
Financialindicators
Apositiverelationship
exists
Wei,Samiee&
Lee(2014)
Establishtherelationship
betweenOCtypesandOP
indicators
TwotypesofOC
Market,productandfinancial
indicators
Partialrelationships
found
Boyce,
Nieminen,
Gillespie,Ryan&
Denison(2015)
Studythelongitudinal
relationshipsbetweenOCand
OP
FourdimensionsofOC
Customersatisfaction,sales
Significantrelationships
found
Naranjo,
Jiménez&Sanz
(2016)
Studytheroleoforganizational
cultureasafactorthatcan
stimulateorrestraininnovation,
andcanthusaffectthe
performanceoffirms
Adhocracy,clan,market,and
hierarchy
Innovationindicators
Significantpositive
relationshipsfound
Leithy(2017)
Developandproveatheoretical
frameworkthatcombinesOC
andOPasdependentvariables.
Jobsatisfaction,organization
commitment
Financialperformance
Norelationshipexists
Langat&Lagat
(2017)
Establishwhetherarelationship
existsbetweenorganizational
cultureandperformance
Cultureofparticipation
Employeeperformance
Asignificantpositive
relationshipexists
Source: Compiled by authors based on the authors cited.
Based on these studies, the variables of organizational culture can be grouped into:
hierarchy/structure, values, and human resources. We include all of these variables in
this study, and especially the indicators of hierarchy, orientation, internal functioning,
values, and employees.
Thus, organizational performance is a combination of financial performance with
indicators such as financial ratios, sales, costs; and of operational performance with
indicators such as respect for employees, products, and customers.
We prepared a questionnaire based on Hofstede’s (1980, 2001) indicators of culture
(power distance, individualism vs. collectivism, uncertainty avoidance, masculinity vs.
femininity, long-term vs. short-term orientation) for the values; the indicators of Cameron
and Quinn (2011) hierarchy, clan, adhocracy, market) for the variables of structure and
hierarchy; and Denison’s (1991) variables of operational performance (innovation,
market share, quality, employee satisfaction).
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
31
Method
This is a qualitative study, since the values on which the data are based are
predominantly qualitative. We collected the data through personal interviews and a
questionnaire. The study is cross-sectional, in that we analyzed the organizational
culture of each of the selected firms on a single occasion. Our approach is also
correlational, as we establish the influence of organizational culture on performance. We
collected the data through a direct structured questionnaire applied personally to five
company directors and to 232 employees to one of these firms.
Research questions
To understand culture and performance within organizations and establish a relationship
on the basis of the variables, we formulated the question: is there a significant
relationship between organizational culture and performance within German
multinational corporations in Mexico?
On the one hand, we sought to ascertain the nationalities of the employees at the
selected subsidiaries, as well as the values, beliefs, habits, and behaviors that exist
within these firms. This prompted another question: are there any conflicts between
employees as a result of differing values, beliefs, or behaviors? How are or were such
conflicts addressed? What are or were the consequences of these conflicts?
Moreover, we were interested in finding out how the firms measure their performance:
whether they have their own metrics or model, and whether these can be related to the
indicators we use in this study. To this end, we posed another two questions: What aims
do the firms pursue in terms of performance? And, what is their current performance
status?
Research hypothesis
The studies conducted by Denison (1991); Gordon and Di Tomaso (1992); Marculides
and Heck (1993); Franke, Hofstede and Bond (1999); Chow, Haddad and Wu (2002);
Ogaad, Larsen and Marnburg (2005); Winston and Dadzie (2007); Gálvez and García
(2011); Jacobs, Mannion, Davies, Harrison, Konteh and Walshe (2013); Ozigbo (2013);
and Boyce, Nieminen, Gillespie, Ryan and Denison (2015) find that there is a significant
relationship between culture and organizational performance, even when different
indicators are used to measure both variables.
H1:There is a significant relationship between organizational culture and performance.
Eighty-one percent of autoparts firms operating in Mexico have majority foreign
ownership, while the remaining 19% are Mexican-owned. German multinationals tend to
prefer foreign executives (ProMexico, 2013; PWC, 2013) which leads us to our second
hypothesis.
H2: Individuals of different nationalities work for German multinational corporations.
According to PWC (2013), there are several reasons why German multinationals opt to
establish themselves in Mexico, not least the low production costs, openness to markets,
proximity to interdependent companies in the same group, and the widespread adoption
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
32
of just-in-time deliveries. Mexican production processes are closely linked to those in
Germany. The firms favor Mexican workers because of their high level of training
acquired from previous work at German multinationals, while German executives enrich
their interpersonal skills through their interactions with local employees (ProMexico,
2013).
H3: The organizational culture of the multinational corporations is influenced by both
German and Mexican culture.
Connaughton and Shuffer (2007) argue that national culture can affect organizational
culture and make teamwork difficult, while Gómez and Ricardo (2012) propose that the
more heterogeneous the culture between two countries, the greater the difference
between the organizational cultures; thus, when two individuals from different cultures
are incorporated in a department, conflicts may be expected to arise (Gregory, Harris,
Armenakes & Shook, 2009).
H4: There are conflicts that are caused by cultural differences
Schein (1984, 2004), refers to cultural dimensions as artifacts; that is, visible aspects of
a culture, of which the structure of an organization is one example. In turn, Cooke and
Rousseau (1988), Denison (1984), Van Den Berg and Wilderom (2004), Cameron and
Quinn (2011), Hofstede (1980), and Ginevicius and Vaitkunaite (2006) argue that
empirical studies prove structure to be a dimension of organizational culture, and that it
has an influence on organizational culture.
H5: The structure of an organization influences its performance
Gordon and Di Tomaso (1992), and Ogaad, Larsen and Mamburg (2005), find that
values influence organizational performance as a consequence of people's behavior. It
is important that the organization create an expectation that employees behave in a
certain desired way.
H6:The cultural values of an organization influences its performance
Cheung, Wong and Lam (2012) refer to conflict resolution as a dimension of
organizational culture, and verify its relationship with organizational performance.
Meanwhile, Connaughton and Shuffler (2007) argue that conflicts can be resolved with
the collaboration of employees.
H7: The way in which conflicts are resolved and the outcomes of conflicts influences
performance
Delimitation of population and sample
Our target population was made up of German multinational corporations in Mexico.
There are currently around 1,700 German-owned firms operating in Mexico, distributed
across different economic sectors. We delimited the population to the automobile
components industry, given its level of development in both Germany and Mexico.
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
33
We chose the multiple case study option for our sample, analyzing five cases of firms
that produce autoparts and automobile components. Although we based our selection
on the firms’ availability and willingness to grant access, all of them were based in the
southeast of Mexico. In the case of Firm E, we applied the questionnaire to a larger,
stratified sample of employees – 232 in total – at the request of the management.
Variables and indicators
Having identified the dimensions and variables shown in Table 1, we concluded that the
variables that describe organizational culture are Structure, Values, and Conflict
Resolution.
In turn, we measured structure by way of the following indicators: Orientation, Hierarchy,
Leadership Style, Information Flow. Moreover, we measured values by way of: Power
Distance, Individualism vs. Collectivism, Uncertainty Avoidance, Masculinity vs.
Femininity, and Short-term vs. Long-term Orientation. To measure conflict resolution, we
used Conflict Type, Conflict Frequency, and Conflict Resolution as indicators.
For their part, the variables of organizational performance are Financial Performance
and Operational Performance. We decided to measure financial performance by way of
the indicators Return on Assets (financial ratio), Sales, and Growth, since these are the
most frequently used in the literature. For Operational Performance, we chose the
indicators of Denison (1991) and Denison, Janovics and Young (2005): innovation,
Product and Service Quality, Market Share, Quality of Goods and Services, and
Employee Satisfaction, again because they coincide with the indicators obtained.
Measurement instrument
Our instrument was a 60-question questionnaire based on the literature review, which
we used to obtain a profile of the firms’ organizational culture and performance (see
Table 3).
We applied this questionnaire to five firms through interviews with experts in the fields of
production, human resources, and administration, which gave us an initial introduction
to the organizational culture and performance of the firms.
Table 3 Description of the measurement instrument
VariablesIndicators Items/Questions
Structureand
Hierarchy
Orientationtowardsexternalor
internalfactors
Internalfactors,externalfactors(p.1,2).
Hierarchy Organizationalstructure,typeof
hierarchy(p.3,4).
Leadershipstyle Typeofleadership,objective,authority,
delegation,control,integration,freedom
(p.511).
Informationflow Transmission,direction,communication,
coordination(p.1215).
PowerdistanceDecisionmakingstyle,closenessto
employees(p.16,17).
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
34
Values
Individualismvs.collectivism Valuesappreciatedthatdenote
individualityorcollectiveness(p.18)
Uncertaintyavoidance Compliancewithrules,jobinsecurity(p.
19,20).
Masculinityvs.femininity Factorsappreciatedthatdenote
masculinityorfemininity(p.21).
Shorttermvs.longterm
orientation
Resultsorientation(p.22).
ConflictresolutionTypeofconflict Conflictbetweenemployees,conflictwith
customers(p.2324).
Solution Numberofconflicts,consequences,
solution(p.2527).
PerformancePerformance Objectives,measurement(p.2830).
Financial
performance
ROA Netincome/Totalassets*100(p.31).
Incomefromsales Totalsalesindollars(p.32)
Salesgrowth (Currentsales/previousyear’ssales‐1)(p.
33,34).
Operational
performance
Innovation Innovationdepartment,innovation
process,originofinnovation,%of
productsinnovatedoreliminated(p.35
41).
Qualityofproductsandservices Originofquality,qualityassessment,
errorpercentage,customerservice,after
salesservice,returns(p.4250).
Marketshare Marketsegmentation,marketposition,
marketsurveillance(p.5155).
Employeesatisfaction Absenteeism,rotation,satisfaction,salary
level,incentives(p.5660).
Analysis of results
First, we interviewed one of the managers of each firm. Then, we applied the
questionnaire described in Section 2.5 to the 232 employees of Firm E.
We conducted a descriptive and correlational analysis using the chi-squared test and
Spearman’s correlation, with a confidence level of 95% and an alpha error of 5%. Using
the results of these analyses, we prepared crosstab tables and graphs to facilitate
interpretation of the findings.
Description of the firms
Four of the firms were large (+250 employees): Firm A (193 + across several plants),
Firm C (450), Firm D (210 + across several plants), and Firm E (778). Firm B was the
only medium-sized one (60 employees). It should be noted that firms A, B, C, and E are
tier 1 suppliers, while Firm D is tier 2 and is soon to become tier 1. Each firm is distinctive
because of the product they sell, the market segment they supply, or their main
customer.
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
35
Firm E has an advantageous position in the market, covering 80% of the demand of its
main customer, an assembly firm, but also supplies to other firms in smaller quantities.
Its product is low-volume, considered to be artisanal, and aimed at a premium market
segment. Ninety percent of its output is exported to the United States, where it has a
large market.
These firms have been well established in the Mexican market for more than 12 years,
having started operations there because production and labor costs are lower than in
Germany or the United States. Their presence also allows them to provide a faster supply
and a closer service to the large assemblers operating in Mexico or the United States,
enabling reduced times as well as operating and logistics costs.
The organizational culture of multinational firms
Structure and hierarchy
Of the twelve interviewees, only three, or 25%, were women. This implies that males
predominate in the management positions of these companies.
As to the nationality of the employees, the five firms primarily employ Mexicans, in
addition to a minority of foreign nationals (largely Germans, Americans, or Brazilians).
This shows that a mix of nationalities is not particularly general, which disproves H2 -
that individuals of different nationalities work together at the firms.
Many of the processes applied come from Germany and are adapted in Mexico. It is also
notable that all interviews refer to a certain dependence on the parent company in
Germany due to a vertical structure (in a range of 1 = very vertical and 5 = very horizontal,
the median is 2) and a somewhat centralized hierarchy (in a range of 1 = very centralized
and 5 = very decentralized, the median is 2).
However, the companies display different forms of organizational structure. A, B, and C
utilize functional or product-based divisions, while D is structured around international
divisions, with most products exported, and E has geographical divisions.
As to leadership style, there is a tendency for decision-making to be centered on the
boss (the median is 3 on a scale of 1=boss and 5=team), with some team contributions
(median of 3, where 1=boss, 5=own knowledge) and moderate employee decision-
making freedom (median of 3.5, where 1=low and 5=high freedom). Although a high
degree of process planning and control is noted (the median is 2.25, where 1=high
control and 5=high flexibility), more importance is still placed on results than on process
(even though the median is 3 on a scale of 1=result and 5=process).
However, there are differences between the firms: A and C are led by a highly
centralizing boss and B, D and E by a boss more open to receiving suggestions, while D
also has much more flexibility in its processes than the other four. Finally, A, C, D and E
are more result-oriented, while B is more process-oriented.
Although firms A, B and D use SAP as an information system, the departments only have
access to information that corresponds to them; Firm E has a different system than SAP,
and the information is shared either with all departments or just the corresponding ones;
for its part, Firm C has no information system, and the information is only shared with
the individuals directly involved. Each of the firms admit to difficulties caused by the
receipt of delayed or incomplete information; while at Firm D conflicts arise from
information not arriving on time or to the right person.
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
36
Values
Table 4 presents a comparison of the firms’ position in relation to the values, based on
Hofstede (1980). It is notable that they all have very different profiles than one another,
while Firm E stands out for having an intermediate profile in each category.
Table 4 Comparison of values in firms
Powerdistance
SmallMediumLarge
B/GermanyC/EA/D/Mexico
Individualismversuscollectivism
IndividualismCollectivism
B/GermanyA/EC/D/Mexico
Masculinityversusfemininity
MasculinityFemininity
B/C/Mexico/GermanyD/EA
Uncertaintyavoidance
LowMediumLong
C/D/E/GermanyA/B/Mexico
Shorttermversuslongtermorientation
ShortMedium Long
A/C/DB
According to these results the firms tend towards collectivism, just like Mexican society
as a whole in Hofstede and Hofstede (2005). Firms B, C, D and E tend towards
masculinity, as prior studies have found German and Mexican society to do. In this work,
all firms tend to avoid unknown situations. This can be seen in their dependence on the
parent company, and the standard processes and rules it imposes. A, C and D take more
of a short-term approach to work, which could mean that they still operate more like a
family company. The managers believe that a firm of the size of E should not be so
paternalistic, because this hampers development. It can be seen clearly that the firms
possess some values considered as salient in Mexico, and others so regarded in
Germany; this proves hypothesis H3, that organizational culture is influenced by both
Mexican and German culture.
Conflict resolution
Hypothesis H4 holds that conflicts are caused by workplace interaction between
individuals from different cultures. The interviewees point to certain cultural differences
related to “German punctuality”, “the rigid processes from Germany”, Mexican flexibility
and improvisation”, and “the indiscipline of the Mexicans”, etc. – that is, they are aware
of certain differences, but are used to them given their frequent dealings. They do not
mention problematic situations or conflicts resulting from different habits or ways of
thinking or acting by individuals from other cultures, probably because the numbers of
foreign employees are minimal. Thus, H4, that conflicts are caused by individuals with
different national cultures, does not hold true.
The internal conflicts that do occur more frequently are associated with the firms’ daily
operations: Firm A mentions problems related to internal communication of unspecified
objectives; Firm B faces problematic situations caused by information delays and
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
37
differences between team members; similarly, Firm C suffers from information failures
and, occasionally, a lack of cooperation between employees; firm D points to other
issues, such as differing senses of urgency from one department to another, lack of
demarcation of responsibilities or operating levels, and inter-personal problems related
to gossip or competition in pursuit of recognition; finally, Firm E, as well as problems of
communication, information, and cooperation, cites abuse of authority, abuse of
bonuses, bribery of the supervisor, and unpunctuality as sources of conflict.
Across the four companies, these problems all lead to the same general consequences:
delays in the production process. There would appear to be more conflicts in firms D and
E, leading to feelings of frustration among the employees. No serious problems were
reported in relation to customers, though there are some disputes around supplier
failings, non-compliance with delivery times, or lack of follow-up of customer needs.
However, in general, conflicts are resolved directly, without impacting business relations
or causing a loss of customers.
Performance indicators within the firms
Employee performance is measured on a daily basis. Moreover, the firms have a
department for product improvement and operators are always notified of any design
changes.
Financial and operational performance
Table 5 provides a comparison of the firms’ performance levels. It is notable that none
of the four firms share their financial information in detail with their bosses, with this
information handled internally by the financial departments. As to ROA, income, growth,
and so on, only the managers of Firm E seem to be better informed. In the absence of
such information, any comparisons of financial performance would be inconclusive.
Table 5 Indicators of financial and operational performance
Indicator Firm A Firm B Firm C Firm D Firm E
ROA - - - 14% -
Income/sales
Mill. pesos) > 250 4 – 100 > 250 > 250 (800) > 250
(1500)
Growth 5% - 30% Little over 0% 40%
Errors < 1% 1 - 2% 2 - 3% 0.2 – 0.5% 0.5-2%
Complaints 3 per month 1 per month 0 - 20% 5% 0.5%
Returns 0 0 < 1% 1 - 5% 0.5%
Share 80% 50% 80% 60% 18% (80%)
Absenteeism 3% 1% < 5% 2 / 20% < 2%
Turnover 1 1 / 3 1 1 / 3 1
Most firms did not provide information about return on assets (ROA), information on sales
is not very detailed, and information on growth is very varied, so it is difficult to make
comparisons.
On the other hand, highly detailed information on operational performance is available,
and shows that the error percentage in the production or service is very low across all
firms: the lowest is Firm D, at 0.2%, while the highest is Firm C, at between 2 and 3%.
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
38
Meanwhile, complaints are minimal in these firms, and do not exceed 5%. In the case of
market share, differences do exist: firms A and C both state that they supply around 80%
of the market, while firms B, C, and E reach 50%, 60%, and 18%, respectively.
Finally, in the category of employee satisfaction, firms A, B, C, and E record absenteeism
rates of more than 5%, while D points to a rate of 2% among those in administrative
posts and of 20% for operators.
Staff turnover is low; however, in Firm B, there is a high turnover of outsourced
contractors, while Firm D has a high turnover among its operators. Thus, one’s position
(and hence employment situation) influences satisfaction.
Relationship between organizational culture and performance
In our analysis, we found no relationships between the initial variables of culture
(Structure, Values, and Conflict Resolution) and performance (Financial Performance,
Innovation, Market Share, Quality, and Employee Satisfaction). We did, however, find
relationships between isolated indicators (See Graph 1). This leads us to reject
hypothesis H5, which states that structure influences performance; hypothesis H6, which
assumes that the values influence performance; and hypothesis H7, which proposes that
the way of resolving conflicts influences performance.
Graph 1. Relationships between indicators
We also conducted an analysis utilizing the interviews with the 232 employees of Firm
E; we used Spearman's rho since the indicators are qualitative, ordinal, and nominal.
In addition, we conducted a cross-tab analysis with the categorical ordinal variables in
order to find relationships between them. The results show that there are correlations
not only between indicators of organizational culture and indicators of performance, but
also within the same groups (we do not show the result of all of the correlations due to
space restrictions).
Orientation
Structure/Hierarchy
Avoidance/long- or
short-term employment
Decision-makin
g
Co
n
t
r
o
l
/
fl
e
xi
b
ili
ty
Information
Conflicts and their
resolution
Satisfaction
Absenteeism
Perceived
Innovation
Partici
p
ation
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
39
The correlations that prove significant between the indicators of organizational culture
and performance are shown in Graph 2. The influence of indicators of culture on
employee satisfaction was predominant, so the notion that cultural factors influence
performance through employee satisfaction is worthy of consideration.
Graph 2 shows the relationship between absenteeism and misunderstandings due to
information failings, as well as that between turnover and misunderstandings, and
conflict frequency; on the other hand, job satisfaction is related to external orientation,
misunderstandings, rules, and conflict frequency; and finally, firm satisfaction is related
to external orientation, rules, and conflict frequency. The only quantitative performance
indicator is related to decision-making freedom.
Graph 2. Relationship between organizational culture and performance
These results are considered as proof that a significant relationship exists between
organizational culture and organizational performance, which confirms hypothesis H1.
Relationship between job satisfaction and firm values
Hofstede (1980) proposes that a nation’s cultural and subcultural dimensions influence
the way in which organizational transactions are carried out (e.g., marketing, hiring
practices, rewards programs, supervisor-employee interactions, and use of technology),
and in turn, these transactions influence job satisfaction.
External Orientation
(Orient_1)
Decision-making freedom
(Estlid_4)
Misunderstandings (Info_2)
Rules (Evas_1)
Conflict Frequency (Solu_2)
Own Ideas (Innov_1)
Product Quality (Calidad_1)
Shared Quality (Calidad_2)
Reworks (Calidad_3)
Complaints (Calidad_4)
Returns (Calidad_5)
Absenteeism (Satisf_1)
Turnover (Satisf_2)
Job Satisfaction (Satisf_3)
Firm Satisfaction (Satisf_4)
Sales
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
40
To establish the relationship that exists between job satisfaction and firm values
(whereby the latter are defined as individualism vs. collectivism, masculinity vs.
femininity, power distance, uncertainty avoidance, and long-term vs. short-term
orientation), we used a chi-squared method with a confidence level of 95% and an alpha
error of 5%. Below, we present only the results that proved significant.
In addition, we propose the following hypotheses:
H8: There is a significant relationship between satisfaction with the job and the firm and
with individualism vs. collectivism.
H9: There is a significant relationship between satisfaction with the job and the firm and
with masculinity vs. femininity.
H10: There is a significant relationship between satisfaction with the job and the firm and
with power distance.
H11: There is a significant relationship between satisfaction with the job and the firm and
with uncertainty avoidance.
H12: There is a significant relationship between satisfaction with the job and the firm and
with long-term vs. short-term orientation.
The crosstabs between satisfaction and individualism vs. collectivism clearly show that
most of those who selected more individualist values for the firm are less satisfied (more
or less satisfied), both with their job and with the firm. Those who selected more
collectivist values are more satisfied (quite satisfied) both with the job and the firm (see
Table 6). Thus, H8 cannot be rejected.
Table 6 Relationship between job/firm satisfaction and individualism vs. collectivism
The same is observed in the case of masculinity vs. femininity; the participants who
selected the more masculine factors express less satisfaction with their job and the firm
(more or less satisfied), while those who selected more feminine factors are more
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
41
satisfied with the job and the firm (quite satisfied) (see Table 7). Thus, H9 cannot be
dismissed.
Table 7 Relationship between job/firm satisfaction and masculinity vs. femininity
Power distance, which denotes fear of expressing disagreement with a superior,
indicates that the more fear that employees have, the less satisfied they will be. Thus,
55% of those who almost always feel fear are more or less content with the job and the
firm. Meanwhile, 45 and 55% of those who stated they never or sometimes felt fear are
quite content with their work and the firm, which is evidenced by their lower level of
workplace stress (see Table 8); as such, H10. cannot be rejected.
Table 8 Relationship between job/firm satisfaction and power distance
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
42
The significance levels of hypotheses H11 and H12 were greater than p>0.05, so these
hypothesis can be rejected.
Conclusions and implications
Our analysis of the organizational culture of the firms shows that the composition of the
group of employees is rather homogeneous, with a limited presence of individuals of
different nationalities; thus, Hypothesis 2 is rejected. In turn, hypothesis 3 is confirmed,
since organizational culture is influenced by German and Mexican culture. This can be
seen in the prevalence of values associated with the two countries: power distance tends
to be high and companies are mostly collectivist, distinctive features of Mexico; while
masculinity and uncertainty evasion, both distinctive features of Germany, also
predominate.
The prevailing factors in all cases were: dependence on the parent company, leading to
a vertical and centralized hierarchy; and the high degree of control and planning, leading
to intermediate freedom in decision-making. It is also notable that all firms were very
customer-oriented and somewhat product-specialized. We also confirmed that the firms
established themselves in Mexico for reasons of cost reduction and to be close to their
customers.
As to conflicts, we rejected H4, having found that conflicts arise not because of cultural
differences, but because of work issues such as failures in the flow of information,
differing senses of urgency, unclear responsibilities, and gossip and suspicion at
operational levels, which result in delays in the manufacturing or service process.
As to firm performance, quality is good, which is reflected in low percentages of rework,
waste and complaints. Market share differs greatly from one company to another, with
differences arising from the influence of the main customer, target market, and structure
of each firm.
As to employee satisfaction, there are differences across positions and between
permanent and outsources workers. Satisfaction is also related to indicators of
organizational culture; uncertainty avoidance influences it, with outsourced workers the
least satisfied, and those with long service as permanent employees found to be the
most satisfied.
It is not possible to maintain the proposed structure of variables composed of the stated
indicators. There are only relationships between H5 (influence of the structure on
performance), H6 (influence of values on performance) and H7 (influence of conflicts
and their resolution on performance). However, through our analyses (qualitative,
categorical variable and correlations), we found relationships between indicators of
culture and performance. This correlation is consistent, although we did not determine
any causality.
In sum, we confirm that organizational culture has a significant influence on performance,
and thus cannot discard hypothesis H1. We propose the following recommendations.
Because structure is so important for market share, the firms ought to be very clearly
delimited: the responsibilities of each department and post must be taken into account;
the flow of information must be without interruptions; and even if the company is growing
or downsizing, this structure must have adaptation mechanisms in place.
Oberföll, K., Camarena Adame, M.E. & Saavedra García, M.L. (2018) Relationship between organizational culture and performance among German
multinational companies in Mexico. Journal of Business, Universidad del Pacífico (Lima, Peru) Vol.10(2): 24-47
43
Finally, we found a relationship between the level of individualism vs. collectivism,
masculinity vs. femininity, employee satisfaction, and fear of one’s superior. The values
of collectivism should be strengthened in order to increase employee satisfaction and
retain their employment.
Limitations and future lines of research
The main limitation of this study concerns the mixed design of the questionnaire, which
included open, dichotomous, ordinal questions, making it difficult to establish
relationships; moreover, as a multiple-case study, it is not possible to generalize the
findings. Another limitation involved the impossibility of obtaining indicators of financial
performance to establish their relationship with organizational culture. However, further
research would be required to work with specific indicators to identify variables; for
example, increasing the number of ordinal indicators to form groups of variables, and
establishing an exact model on the relationships between these variables through a new
survey based on these indicators. Another line of research is oriented towards the study
of values as the core of organizational culture and its influence on performance.
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... It involves the values, norms, beliefs, way of work, and interactions among other factors (Jalal, 2017). When different people from different cultures work together, they bring about these differences that may affect the performance of the organization in the end (Oberföll, 2018). This effect may be positive or negative according to the ability of the employees to adapt themselves to different cultures. ...
... They found that a significant positive relationship exists between the culture of the organization and the employee's performance. Oberföll et al. (2018) also found a relationship between organizational culture and business performance. The research studied correlations between several elements of organizational culture and business performance considering the decision-making process as part of the organizational culture which is affected by values, rules, and orientation of the culture. ...
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... Generally, organizational culture is linked with the administrative area by developing models and theories according to strategic management to obtain better financial results (Deal and Kennedy 1982;O'Reilly and Chatman 1996;O'Reilly et al. 1991;Schein 1988). Cameron and Quinn (2006) argued that organizational culture is the main characteristic that distinguishes successful companies (Cameron and Quinn 2006), and when a firm shows a high level of culture, its organizational performance also increases (Denison 1990;Kirkman et al. 2016;Oberföll et al. 2018;Schein 1988). ...
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