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SSRG International Journal of Economics and Management Studies (SSRG-IJEMS) – Volume 6 Issue 6– June 2019
ISSN: 2393 - 9125 www.internationaljournalssrg.org Page 1
Organizational Culture and Business
Performance: An Empirical Study
Yasas L. Pathiranage
Doctoral Student, Faculty of Graduate Studies,
University of Kelaniya, Sri Lanka
Abstract
The objective of this article is to demonstrate
conceptualization, measurement and examine various
dimensions of organizational culture on business
performance. The review begins with an examination
of literature in the field of organizational culture and
business performance. This literature review includes
syntheses of the relevant literature concerning the
role of organizational culture in enhancing business
performance and productivity, which results the
business excellence in the organization. The
literature review comprises various published
sources on the role of organizational culture, such as
journals, periodicals, seminal books, and other
published materials. After analysis of wide literature,
it is found that organizational culture has deep
impact on the variety of organizations process,
employees and its performance. This also describes
the different dimensions of organizational culture.
Empirical evidences further show that lack of
cultural integration among member companies is a
primary cause of the corporate group failure. More
research can be done in this area to understand the
nature and ability of the culture in manipulating
performance of the organization. Managers and
leaders are recommended to develop the strong
organizational culture in order to improve the overall
performance of the employees and organizations.
Keywords – Business Performance, Organizational
Culture, Organizational Excellence.
I. INTRODUCTION
Organizational culture includes the norms that the
members of an organization experience and describe
as their work settings (Schneider et al., 2013). Such
norms shape how members behave and adapt to get
results in the organization. Organizational culture is
how the members of an organization interact with
each other and other stakeholders (Simoneaux &
Stroud, 2014).
Organizational culture is a set of values, beliefs,
and behavior patterns that differentiate one
organization from other organizations (Ortega-Parra
& Sastre-Castillo, 2013). King (2012) defined
organizational cultures as a system of values that
subconsciously and silently drives people to make
each choice and decision in the organization.
Business managers use organizational culture and
corporate culture interchangeably because both terms
refer to the same underlying phenomenon (Childress,
2013).
Business managers use an organizational culture to
differentiate their company from other companies
(Weber & Tarba, 2012). Apple Inc, the International
Business Machines Corporation (IBM), and Hewlett-
Packard Corporation (HP) exist on similar
technology and same operating environment, but
these companies have different organizational
cultures (Schein, 2010). The Apple culture includes
producing simple, elegant, and innovative products
(Toma & Marinescu, 2013). Priorities in HP culture
are employees’ autonomy and creativity (Childress,
2013). The IBM’s cultural focal point is long-term
thinking with loyal and highly motivated employees
(Flamholtz & Randle, 2011; Kotter & Heskett, 1992).
The difficulty about leadership is the handling of
human resources in the organizational culture (Peters
& Waterman, 1982). Yirdaw (2014) noted that
organizational culture is the glue that combines the
nonhuman resources to the human resources in the
organization to establish teamwork and excellent
performance. Organizational culture positively relates
to corporate leadership and governance (O'Connor &
Byrne, 2015).
Many business managers understand the impact of
culture on corporate performance (Unger, Rank, &
Gemunden, 2014). Warren Buffet, one of the top
three richest businesspersons in the world, confirmed
how organizational culture is necessary to
organizational success (Childress, 2013). Similarly,
the founder of Starbucks Coffee Company, Howard
Schultz, explained that organizational culture is a
critical factor in the success of Starbucks (Flamholtz
& Randle, 2012).
II. SOURCES OF AN ORGANIZATIONAL
CULTURE
Organizational culture may spring from different
sources, mainly from the beliefs of the founders
(Martínez-Cañas & Ruiz-Palomino, 2014; Schein,
2010). Uddin, Luva, and Hossian (2013) noted that
the source of organizational culture also includes the
learning experience of group members, as well as the
SSRG International Journal of Economics and Management Studies (SSRG-IJEMS) – Volume 6 Issue 6– June 2019
ISSN: 2393 - 9125 www.internationaljournalssrg.org Page 2
new beliefs and assumptions of new members and
managers. Founders have an opportunity to introduce
a strategy and direction of the organization at an early
stage of the organization. Founders have a significant
impact on how the organization operates (Andish,
Yousefipour, Shahsavaripour, & Ghorbanipour,
2013).
Founders of the organization are the primary
source in establishing a new culture for the new
organization (Flamholtz & Randle, 2012). The
impact of culture occurs when the founders
implement their business strategy and operational
assumptions. Toma and Marinescu (2013) indicated
that the founders’ assumptions might develop
because of their personal experience and cultural
history.
Founders may impose their personal experience
and culture on their employees and partners within
the organization (O’Reilly, Caldwell, Chatman, &
Doerr, 2014). For example, the founder of Apple,
Steve Jobs imposed his personal experiences and
assumptions on employees. Steve Jobs’s experiences
and assumptions contributed to creating an effective
and productive culture at the Apple Corporation
(Kaliannan & Ponnusamy, 2014).
Toma and Marinescu (2013) confirmed that Steve
Jobs successfully imposed assumptions and personal
cultures on the Apple company culture. As a result,
Jobs built a strong and successful organizational
culture. Apple’s corporate culture contributed to
turning the founder’s dreams into realities. Schein
(2010) considered Apple as a good example to show
how the founder’s personal culture and assumptions
profoundly influence the organizational culture.
The other source of organizational culture is the
learning experience. The learning experience derives
from the social trends of the business environment
(Nguyen & Aoyama, 2014). Uddin et al. (2013) noted
that managers in the organization adapt some
attributes from the community and the business
climate. Employees of the organization live in the
community, and they can impose their culture on the
organization culture. Society may impose its culture
on the organization through members of the
organization because the members of the
organization are part of the community (Gibbs, 2012).
III. HISTORY OF ORGANIZATIONAL
CULTURE
In 1951, Jaques described an organizational
culture in a business context that contained cultural
issues in the manufacturing industry (as cited in
Childress, 2013). In 1982, Peters and Waterman
described the characteristics of higher performer
companies’ organizational culture. Peters and
Waterman also profiled 46 excellent companies in the
United States based on their organizational culture.
Recently many scholars published various books in
the area of organizational culture that makes
organizational culture a popular subject in the field of
business and leadership.
Schein (1985) explained the importance of
organizational culture in organizational performance
by dividing organizational culture into three parts:
assumptions, artifacts, and values. Assumptions
reflect unofficial but important rules in the
organization. Artifacts represent the visible elements
of organizational culture including work process, the
workplace setting, and organizational structures. The
values represent the beliefs of the organization
members and their business strategy (Childress,
2013). The three elements contribute to maintaining
an effective culture in the organization.
Kotter and Heskett (1992) studied more than 200
companies in the United States, and their findings
showed the existence of strong relationship between
organizational culture and business performance.
Schein (2010) acknowledged Kotter and Heskett’s
study as a landmark study in the area of
organizational culture. In addition to these seminal
publications, other similar books and articles
contribute to the development of organizational
culture theory (Childress, 2013). Flamholtz and
Randle provided extensive information in the area of
organizational culture and performance with practical
examples from various organizations in the United
States, Europe, China, and other countries.
In the early 1980s, organizational culture theory
included organizational behavior particularly with
social science disciplines like sociology,
anthropology, and social psychology (Denison, 1990).
Nwibere (2013) confirmed that a lack of theoretical
support to advance the manager’s knowledge existed
in the area of organizational culture effectiveness.
Sharma and Good (2013) conducted an empirical
investigation to identify the impact of organizational
culture on organizational performance and
productivity. The study findings showed that
organizational culture was an essential ingredient of
organizational performance and a source of
sustainable competitive advantage (Childress, 2013;
Kohtamaki, Thorgren, & Wincent, 2016).
IV. ORGANIZATIONAL EXCELLENCE
Maintaining a healthy working culture in the
organization is important to promote a vision of
excellence (Fusch & Gillespie, 2012). Bolboli and
Reiche (2013) indicated that business excellence is a
central feature for the success of any organization.
Business excellence and organizational culture share
common characteristics. Business excellence mainly
includes effective organizational culture because
SSRG International Journal of Economics and Management Studies (SSRG-IJEMS) – Volume 6 Issue 6– June 2019
ISSN: 2393 - 9125 www.internationaljournalssrg.org Page 3
effective organizational culture is a reflection of
excellence in the organization (Brown, 2013).
After a thorough investigation of 46 high-
performer companies in the United States, Peters and
Waterman (1982) shared eight characteristics of
excellent cultures in the organization, including quick
decision-making and problem-solving, autonomy and
entrepreneurship in leadership, and productivity
through people (Abusa & Gibson, 2013). An
excellent culture also includes a value-driven
management and motivated employees.
Peters and Waterman (1982) described attributes
that show the difference between higher and lower
performer organizations. Business managers use the
excellent organizational culture characteristics to
increase productivity and profitability (Childress,
2013). These characteristics are important in
maintaining business excellence and effective
organizational culture in the organization.
V. STRONG AND WEAK ORGANIZATIONAL
CULTURE
In a strong organizational culture, employees have
similar views regarding the organization, and they
behave consistently with organizational values
(Flamholtz & Randle, 2011). Business managers
display a strong organizational culture to influence
employees’ work attitude and performance because
culture engages and motivates employees
(Simoneaux & Stroud, 2014). In a strong
organizational culture, the members of the
organization share the values and goals of the
organization, and new employees quickly adopt these
values (Kotter & Heskett, 1992).
Denison (1990) explained the impacts of
organizational culture on business performance. A
quantitative study results indicate a positive
relationship between organizational culture and
business performance (Han, 2012; Hartnell et al.,
2011; Jofreh & Masoumi, 2013). A case study
research results also show a strong culture as a
driving factor for organizational performance (Pinho,
Rodrigues, & Dibb, 2014; Simoneaux & Stroud,
2014).
New and historical literature showed the existence
of a positive relationship between organizational
culture and performance. For example, Flamholtz and
Randle (2012) confirmed that the organizational
culture has an impact on organizations process,
employee performance, and overall organization
productivity. Sharma and Good (2013) suggested that
strong organizational culture is an important factor to
improve and increase the organization's profitability
and financial performance. Nwibere (2013) also
indicated that a healthy and strong organizational
culture are positive factors to increase organizational
performance.
Strong organizational culture includes an
important role in aligning the organization's current
and future direction (Raza et al., 2014). In contrast,
management with weak or ineffective organizational
culture has the potential to affect profitability and
productivity (Shahzad et al., 2012). In a weak
organizational culture, employees have a problem to
define the organization’s values and to determine the
right process of conducting business in the
organization (Childress, 2013).
Schein (2010) noted that management with weak
organizational culture lacks transparent and
consistent communication in the organization. In a
weak organizational culture, employees behave in a
manner inconsistent with the organization priorities
because of insufficient communication and lack of
uniform direction from the leadership (Flamholtz &
Randle, 2011). When the organizational culture is
weak, the organization existence is at risk because
organization members have different values and
beliefs, where they may work against the
management’s priority (Eaton & Kilby, 2015).
In a strong organizational culture, business
managers may develop and maintain a strong cultural
foundation in the organization (Simoneaux & Stroud,
2014). The foundation work includes establishing the
organization members’ working culture and
developing a set of rules and trends of doing business
in the organization (Flamholtz & Randle, 2011).
Customers and other stakeholders use the
organization members’ culture and their work trends
to identify their organization from other
organizations culture (Cian & Cervai, 2014).
Customers and other stakeholders may perceive and
use the organizational culture as a distinguishing
factor in identifying a good organization from a bad
organization (Childress, 2013).
Business managers use a strong organizational
culture to substitute formal rules and regulations in
the organization (Denison, 1990). Schein (2010)
noted that establishing a set of standards and trends in
the organization mainly includes creating a well-
defined communication channel among employees
and managers. Business managers may use the
communication channel to develop transparent
communication and to encourage a culture of sharing
and teamwork among members of the organization
(Cao, Huo, Li, & Zhao, 2015).
Transparent communication includes a high level
of participation by all members of the organization
(Miguel, 2015). High levels of participation and
employee involvement in the decision-making
process are important to motivate employees.
Motivated employees can develop a sense of
ownership and responsibility culture in the
SSRG International Journal of Economics and Management Studies (SSRG-IJEMS) – Volume 6 Issue 6– June 2019
ISSN: 2393 - 9125 www.internationaljournalssrg.org Page 4
organization (Engelen, Flatten, Thalmann, & Brettel,
2014). Once employees developed a sense of
ownership and responsibility culture, their
commitment to the organization significantly
improves without close supervision (Nwibere, 2013).
Loyal and engaged employees are important to
maintain an effective organizational culture and to
improve performance in the organization. For
example, Pinho et al. (2014) noted that employees
with a sense of ownership might significantly
improve performance and productivity in the
organization. When employees have a sense of
ownership and responsibility, they may fulfill their
responsibility without close supervision and control
(Denison, 1990). Business managers can use their
time to concentrate on other priorities in the
organization.
Organizational culture is a motivational instrument
in promoting performance in the organization (Jofreh
& Masoumi, 2013). The coordinated effort of
managers and employees may contribute to a positive
working environment (Miguel, 2015). Schein (2010)
noted that employees might motivate and improve
their performance when they work in a positive
working environment. The study findings showed
that loyal and engaged employees promote effective
organizational culture to improve performance and
productivity in the organization (Fiordelisi & Ricci,
2014).
Business managers with strong organizational
culture use transparent and open communication to
motivate employees and to improve performance and
productivity in the organization (Kohtamaki et al.,
2016; Senaji et al., 2014). Transparent
communication in the organization includes
employees’ participation and involvement in
organizational activities. When organization
members engage in open communication, they may
easily share relevant information throughout the
organization (Simoneaux & Stroud, 2014).
Employees may develop a sense of ownership and
responsibility when involved in the organizational
decision-making process (Engelen et al., 2014). In a
strong organizational culture, business managers
encourage their employees to participate in a key
decision-making process. The employees’
involvement in the organizational decision-making
process is important to improve performance and
productivity (Miguel, 2015).
In a strong organizational culture, employees and
business managers have an excellent professional
quality that contributes to performance improvement
in the organization (Pinho et al., 2014). Professional
quality contains (a) respect and dignity between
employees and managers, (b) high commitment to
customer services, and (c) motivation and moral
engagement to achieve organizational priorities
(Busse, 2014). When employees and business
managers develop respect and dignity between them,
they can help each other and may integrate their
knowledge and experience to improve performance
in the organization (Miguel, 2015).
Strong organizational culture is important to
motivate employees in the organization. Motivated
employees are primary drivers to improve
performance in organizations (Simoneaux & Stroud,
2014). Schein (2010) indicated that highly motivated
employees might perform in the organization better
than unmotivated employees. Flamholtz and Randle
(2011) also noted that motivated employees use their
time efficiently in performing their daily tasks.
Fiordelisi and Ricci (2014) found motivated
employees as important factor to improve
performance and achieve organizational goals.
VI. POSITIVE ORGANIZATIONAL CULTURE
Business managers may develop and maintain a
positive organizational culture to improve
organizational performance and productivity in the
organization (Flamholtz & Randle, 2011). Study
findings in the area of organizational culture showed
that a positive organizational culture as a functional
culture in improving performance and productivity in
the organization (Childress, 2013). Inabinett and
Ballaro (2014) found the existence of a positive
relationship between positive organizational culture
and performance.
Many business managers confirmed that a positive
organizational culture as a primary factor in the
success of their businesses (Childress, 2013; Melo,
2012). For example, the founders from Walmart and
Southwest Airlines confirmed that their
organizational culture is a primary factor in their
business success (Flamholtz & Randle, 2011). The
founders of Google and Apple also identified their
positive organizational culture as the ultimate source
of sustainable competitive advantage (Simoneaux &
Stroud, 2014).
Business managers with a positive organizational
culture may develop a high level of trust in the
leadership (Andish et al., 2013). In a positive
organizational culture, business managers use a
transparent leadership style to develop and maintain
trust in the organization (Simoneaux & Stroud, 2014).
Transparent leadership includes a consistent decision-
making process and transparent communication
throughout the organization. When business
managers show consistent decision-making processes
and transparent communication in the organization,
employees may develop trust on leadership (Miguel,
2015).
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ISSN: 2393 - 9125 www.internationaljournalssrg.org Page 5
Business managers with a positive organizational
culture are responsible for clarifying and
communicating organizational goals and objectives to
employees and other stakeholders in the organization
(Simoneaux & Stroud, 2014). In a positive
organizational culture, employees may clearly
understand their organization goal and values
(Flamholtz & Randle, 2012). Childress (2013) noted
that when employees share and understand the
organization’s values, they might engage on value
added activities.
VII. EFFECTIVENESS OF
ORGANIZATIONAL CULTURE
Business The organizational culture literature
contains information on how business managers use
effective organizational culture to improve
performance and productivity (Flamholtz & Randle,
2012; O’Reilly et al., 2014). Business managers
believe that effective organizational culture is an
asset, and ineffective culture is a liability for
organizational success (Flamholtz & Randle, 2011).
Eaton and Kilby (2015) indicated that business
managers use organizational culture to control and
moderate the working environment throughout the
organization.
Hartnell et al. (2011) noted that business managers
use an effective organizational culture (a) to shape
employee attitudes, (b) to improve operational
effectiveness, and (c) to increase financial
performance in the organization. Operational
effectiveness contains information on how
management uses an effective organizational culture
to introduce and innovate new products and to
improve process and service. Financial performance
includes information regarding the achievement of
profitability, productivity, and growth in the
organization.
Effective organizational culture is a combination
of strong and positive culture. In a strong culture, the
organization members behave in a way consistent
with organizational values (Flamholtz & Randle,
2011). In a positive organizational culture, employees
share the goals and values of the organization
(Flamholtz & Randle, 2012). Business managers may
establish an effective organizational culture to
improve performance and productivity in the
organization (Inabinett & Ballaro, 2014). Givens
(2012) noted that managers with effective
organizational culture promote excellent customer
service and an innovative business environment. In
an effective organizational culture, business
managers show employee-focused leadership, sound
interpersonal relationship, and ethical decision-
making processes (Engelen et al., 2014).
Business managers use an effective organizational
culture to maintain a positive work environment
(Pinho et al., 2014). Effective organization culture is
a collection of sub-organizational cultures. Such
culture includes (a) healthy customer service, (b)
employee-oriented management, (c) strong
interpersonal relationship, (d) exemplary leadership,
and (e) ethical decision-making process (Childress,
2013). Maintaining an effective organizational
culture in the organization is essential to motivate
employees (Berg & Wilderom, 2012). Managers with
an effective organizational culture may improve
performance in the organization (Shahzad et al.,
2012).
In an effective organizational culture, employees
share the organization’s values and beliefs (Schein,
2010). When employees share the organization’s
value, they can perform better to achieve the
organization’s objectives (Denison, 1990). Study
findings in the area of organizational culture showed
that effective organizational culture includes shared
values and common purpose to create a sense of
teamwork in the organization (Flamholtz & Randle,
2011).
Members of the organization use an effective
organizational culture to develop teamwork and
knowledge sharing culture (Wiewiora, Murphy,
Trigunarsyah, & Brown, 2014). Schein (2010)
indicated that managers with an effective
organizational culture encourage teamwork to
improve performance in the organization. Teamwork
is an essential factor to achieve common
organizational objectives. In an effective
organizational culture, business managers and
employees work together to improve performance
and productivity in the organization (Childress, 2013).
Eaton and Kilby (2015) noted that effective
organizational culture is important to motivate and
retain competent employees in the organization.
Business managers with effective organizational
culture give priority to excellent customer services
(Berg & Wilderom, 2012). In most cases,
organizational leadership contains outstanding
customer service as part of a mission statement
(Denison, 1990). Miguel (2015) indicated that
leadership must value good customer service as a
source of sustainable competitive advantage. Denison
(1990) also noted that in an effective organizational
culture, employees share the organization’s values
and beliefs. When employees share the organizational
values and beliefs, they motivate themselves to
achieve organizational goals by providing caring and
comfortable service for customers (Childress, 2013).
In an effective organization culture, customer service
is an essential responsibility for business managers
(Berg & Wilderom, 2012).
In an effective organizational culture, business
managers use employee-focused and transformational
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leadership to improve performance and productivity
in the organization. Veiseh, Mohammadi, Pirzadian,
and Sharafi (2014) found that the existence of a
positive relationship between transformational
leadership and organizational culture. Wiewiora et al.
(2014) indicated that transformational business
managers encourage collaboration and teamwork.
When business managers encourage collaboration
and teamwork in the organization, employees may
benefit from shared experience and supportive
alliance culture (Man & Luvision, 2014). In a
supportive and collaborative culture, employees may
develop a friendly environment in the organization
(Veiseh et al., 2014). Wiewiora et al. (2014) noted
that a friendly working environment is important to
motivate employees for better performance.
Quantitative research evidence in the field of
organizational culture showed the existence of a
positive relationship between high interpersonal
relationship and organizational culture (Veiseh et al.,
2014). In an effective organizational culture, business
managers encourage employee-centered interpersonal
relationship in the organization (Engelen et al., 2014).
Qualitative study results showed that a strong
interpersonal relationship as a significant factor to
improve employees’ satisfaction in the organization
(O’Reilly et al., 2014).
In an effective organizational culture, business
managers may address employees’ interest. The
managers who understand the role of their company
culture may respond appropriately to employees’
interest (Childress, 2013). Nongo and Ikyanyon
(2012) indicated that when strong interpersonal
relationships exist in the organization, employees
could positively communicate and share their ideas
with their managers. When business managers open
their doors for employees, they may encourage
employees to express their opinions without
reservation and hesitation (Veiseh et al., 2014).
Business managers use an open-door policy and a
strong interpersonal communication with their
employees to develop a high level of trust in
leadership (Busse, 2014). The differentiation of
services is largely connected to culture and people
centric value creation, and service sector driven
markets are usually competitive due to differentiation
and branding strategies (Dissanayake & Weerasiri,
2017; Kahandawaarachchi, Dissanayake & Maitra,
2016). When employees are content and have trust in
the leadership, they can develop a sense of ownership
and responsibility in the organization (Denison,
1990). Denison (1990) also indicated that a sense of
ownership and responsibility as an important factor to
engage and motivate employees for better
performance. Nongo and Ikyanyon (2012) found that
employee engagement and better performance as an
essential element to improve organizational
performance and productivity.
IX. DENISON ORGANIZATIONAL CULTURE
MODEL
Denison (1990) identified four elements of
organizational culture model (a) involvement, (b)
consistency, (c) adaptability, and (d) mission. The
four organizational culture model elements are
essential in developing and maintaining an effective
organizational culture in the organization (Kotrba et
al., 2012). Denison indicated that involvement and
consistency as internal factors in developing an
effective organizational culture. Adaptability and
mission are external factors in maintaining an
effective organizational culture.
Mousavi, Hosseini, and Hassanpour (2015) noted
involvement as a critical factor for organizational
culture effectiveness. Involvement includes
transparent communication, employee-focused
leadership, and strong interpersonal relationships in
the organization (Engelen et al., 2014). In an
effective organizational culture, business managers
encourage high employee involvement and
participation of members of the organization in major
organizational activities (O’Reilly et al., 2014). When
employees participate in the organizational decision-
making process, they develop a sense of ownership,
trust, and loyalty for the organization (Denison,
1990). A sense of ownership and responsibility are
part of the effective organizational culture elements.
Sense of ownership, trust, and loyalty are important
factors to motivating employees in the organization
(Kotrba et al., 2012).
When employees participate in the organizational
decision-making process, they become more
responsible and accountable for their actions
(Denison, 1990). The study findings in the area of
organizational culture show that the existence of a
positive relationship between high employee
involvement in decision-making process and
performance (Hacker, 2015). However, Givens (2012)
argued that a high level of involvement in various
activities creates a lack of specialization, where
difficulty exists to identify the responsible person for
the particular assignment.
High level of employee involvement in the
organization decision-making process may contribute
to the organizational culture effectiveness (Denison,
1990). However, the degree of organizational culture
effectiveness may depend on the geographical
location of the organization. For example, Engelen et
al. (2014) used 643 participants from several German
and Thailand companies to examine the relationship
between organizational culture and business
performance from a geographical location
perspective. Englen et al. confirmed that the high
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degree of involvement contributes to the
organizational culture effectiveness in Thailand
instead of Germany.
In an effective organizational culture, members of
the organization from different backgrounds fairly
share the organization’s values, beliefs, and symbols
in the organization (Mousavi, et al., 2015). Effective
organizational culture exists when a group of people
comes together from a different background to reach
a common purpose (Flamholtz & Randle, 2011).
When members share the organization’s values and
beliefs, they understand and coordinate their
responsibility consistent with organizational values.
Schein (2010) indicated that when organization
members share values and beliefs in the organization,
they could maintain effective communication and
strong organizational culture.
In an effective organizational culture, business
managers establish an effective communication,
which is important to coordinate employees’ activity
and increase involvement in the organizational
decision-making process (Givens, 2012).
Organizational culture emerges from the collection of
organizational members’ behaviors. Effective
organizational culture never exists without a group of
people, shared assumptions, and effective
communication (Schein, 2010; Sok, Blommel, &
Tromp, 2014).
Research findings in the area of organizational
culture show the existence of consistency in the
organization as a reflection of the organizational
culture effectiveness (Givens, 2012). Givens (2012)
agreed that consistency is one of the primary factors
to create a strong organizational culture and improve
employees’ performance in the organization.
However, Nongo and Ikyanyon (2012) argued that a
high level of consistency in the organization does not
directly affect employees’ commitment and
performance in the organization.
Adaptability is the ability of business managers in
the organization in perceiving and responding to the
external environments (Schein, 2010). In an effective
organizational culture, managers are passionate and
responsive to internal and external factors. In
adaptability principle, business managers have the
ability to modify the existing organizational culture
to accommodate necessary changes. The change
includes improving internal elements, modernizing
internal departments and products in response to
external competitions (Mousavi et al., 2015).
An effective organizational culture includes a set
of fundamental assumptions that the members of the
organization have planned, exposed, and developed
in dealing with external adaptation problems (Cian &
Cervai, 2014). Business managers often modify and
adopt new situations in the organization because of
various internal and external factors. In the
adaptability principle, employees are competent to
adapt, restructure, and reinstitute internal processes,
behaviors, and attitudes in response to external forces
and demands (Denison, 1990). Adaptability is a
critical organizational cultural element in promoting
business performance (O’Reilly et al., 2014).
In an effective organizational culture, business
managers define the organization mission by
providing purpose and meaning to every major part
of the organization’s mission (Givens, 2012). The
mission contains (a) clear direction and vision, (b)
strategic decision and intent, and (c) goals and
objectives of the organization that members use to
guide the activities of the organization (Mousavi et
al., 2015). In an effective organizational culture,
business managers use the organization’s mission and
vision to determining the organization short and long-
term goals (Nongo & Ikyanyon1, 2012). Business
managers use the organization mission to provide
appropriate direction to internal and external
stakeholders (Raza et al., 2014).
One of the responsibilities of business managers is
aligning organizational culture with their business
mission (Denison, 1990). Business managers believe
that making successful alignment between
organizational culture and business mission is a
challenging task and an essential responsibility for
them to secure the success of the organization (Eaton
& Kilby, 2015). In an effective organizational culture,
business managers align the organization’s mission
with organizational priorities to improve performance
and to determine future directions of the organization
(Raza et al., 2014). Quantitative study findings in the
field of organizational culture show the existence of a
positive relationship between mission and business
performance (Mousavi, et al., 2015).
Mousavi et al. (2015) found that involvement and
adaptability principles directly affect organizational
performance while the other two principles indirectly
affect organizational performance. Nongo and
Ikyanyon (2012) confirmed the existence of a
positive relationship between adaptability and
commitment in improving organizational
performance. Quantitative study results in the field of
organizational culture also showed that the existence
of a strong relationship between mission and
organizational performance (Givens, 2012).
X. TYPES OF ORGANIZATIONAL CULTURE
Four types of organizational culture include (a)
clan culture, (b) adhocracy culture, (c) hierarchy
culture, and (d) competition culture (Fiordelisi, 2014;
Sok et al., 2014; Wiewiora et al., 2014). Clan or
supportive culture contains an employee-oriented
leadership, cohesiveness, participation, and teamwork
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(Han, 2012). Adhocracy or an entrepreneurial culture
includes innovative, creative, and adaptable
characteristics (Veiseh et al., 2014). Sok et al. (2014)
defined hierarchy culture as a combination of rules
and regulations to control activities in the
organization. Market culture includes competition
and organizational goal achievement (Pinho et al.,
2014).
The assumption and values of clan culture include
human affiliation, collaboration, attachment, trust,
loyalty, and support (Fiordelisi, 2014). In a clan
culture, managers need to act in a democratic manner
to inspire and motivate employees to establish a
culture of excellence in the organization (Miguel,
2015). An interpersonal relationship is active in the
effective organizational culture. Organization
members behave appropriately and develop a sense
of ownership when they have trust in, loyalty to, and
ownership in the organization (Nongo & Ikyanyon,
2012). Clan culture includes teamwork, participation,
employee involvement, and open communication
(Pinho et al., 2014). In a clan culture, business
managers encourage teamwork and employee
empowerment (Yirdaw, 2014). The ultimate goal of
clan culture is improving employee performance
through commitment, sense of ownership, and
responsibility (Han, 2012; Murphy et al., 2013).
Research findings in the area of organizational
culture showed how clan culture positively relates to
organizational performance (Han, 2012; Man &
Luvision, 2014; Murphy et al., 2013). By contrast,
Givens (2012) argued that clan culture includes
employee relation issues instead of improving
efficiency and effectiveness in the organization.
Kotrba et al. (2012) compromised both views,
supporting the clan culture’s indirect role in
improving performance and they acknowledge the
clan culture’s direct role in improving efficiency and
effectiveness. In a clan culture, business managers
encourage employee engagement and commitment to
the organization because committed employees may
perform their task efficiently and deliver their
responsibility effectively (Nongo & Ikyanyon, 2012).
In adhocracy or an entrepreneurial culture,
organization members may require clarification for
their job assignments including the importance and
impact of the assignment to achieve organizational
goals (Veiseh et al., 2014). The values and
assumptions of adhocracy culture include (a) growth,
(b) risk taking, (c) creativity, (d) diversity, (e)
independence, and (f) adaptability (Hartnell et al.,
2011). In adhocracy culture, business managers
allocate more resources for research and development,
and they encourage employees’ involvement in
creative and innovative research activities (Sok et al.,
2014).
In adhocracy culture, innovation and creativity are
important to enhance productivity and to improve
services in the organization. The ultimate result of
adhocracy culture is innovation and change
(Fiordelisi, 2014). Research evidence in the area of
organizational culture show the existence of a
positive relationship between adhocracy culture and
innovative entrepreneurial orientation (Engelen et al.,
2014). Other research findings also showed the
existence of a positive relationship between
adhocracy culture and financial effectiveness in the
long-term (Hartnell et al., 2011).
In hierarchy culture, business managers give
priority in establishing effective control systems
throughout the organization. In hierarchy culture,
organization members follow the rules and
regulations, and each activity set with pre-defined
procedures and rules (Hartnell et al., 2011).
Hierarchy culture includes clear communication
channels, stability, consistency, and reinforcement
(Fiordelisi, 2014). The final goal of hierarchy culture
is efficiency and effectiveness. Han (2012) showed a
negative relationship between hierarchy culture and
financial performance. Other research findings also
showed the existence of a negative relationship
between hierarchical culture and customer integration
(Cao et al., 2015).
In a competition culture, organizational members
have clear objectives to increase their reward through
market achievement (Han, 2012). Competition
culture includes (a) gathering customer and
competitor information, (b) appropriate goal setting,
planning and decision-making, and (c) task focus
leadership. Competition culture also contains market
aggressiveness and achievement.
The competition culture includes open
communication, competition, competence, and
achievement (Miguel, 2015). In competition culture,
business managers focus on external effectiveness
through market control and secure competitiveness
through market achievement. Miguel (2015) noted
that business managers must have knowledge of their
clients and market priority to survive in the
competitive market. In a competition culture,
business managers must maintain customer-driven
leadership because the priority in competition culture
is customers’ satisfaction (Han, 2012).
The other priority for business managers in
competition culture is to satisfy the owners of the
company. The ultimate goal of competition culture is
high market share, revenue, high profit, growth, and
productivity (Hartnell et al., 2011). In an effective
organizational culture, business managers use the
organization member’s values, priorities, and
behaviors to make the company's business journey
easy and competitive in the marketplace (Eaton &
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Kilby, 2015). The proper alignment of fair
competition and stakeholders’ satisfaction is
important for organizational culture effectiveness.
Previous empirical studies in the area of
organizational culture showed that the existence of
cultural acceptance variation in various geographical
locations (Engelen et al., 2014). For example, Shim
and Steers (2012) found the existence of more
hierarchical and clan cultures in Southern Korean
companies than organizational culture in the United
States and Japan. The other study findings also
showed that the existence of more collaborative
culture in Southern Korean companies than in the
United States and Japan. By contrast, Shim and
Steers found risk takers, innovative, assertive, and
future-oriented business managers in the United
States, rather than in Korean companies.
XI. MEASURING THE EFFECTIVENESS OF
ORGANIZATIONAL CULTURE
Business managers may consider various methods
to evaluate and measure their organizational culture
effectiveness. Using the appropriate measurement
method is important because management may use
some measurement factors that fail to capture the
complexity of culture from different types of
organizations (O’Reilly et al., 2014). Hartnell et al.
(2011) found the existence of a disagreement and
lack of universal standardization to measure an
organizational culture effectiveness. O’Reilly et al.
(2014) used the six factors method to measure
organizational effectiveness and performance. The
six factors include (a) adaptability, (b) integrity, (c)
collaborative, (d) result oriented, (e) customer
oriented, and (f) detail-oriented factors. Flamholtz
and Randle (2012) also identified three evaluation
elements to evaluate the organization culture
effectiveness. The three elements include (a) cultural
alignment, (b) behavioral consistency, and (c)
cultural gaps. The six factors of O’Reilly et al. are
more detail and suitable to measure the
organizational values, beliefs, and norms (as cited in
Hacker, 2015). The result from the evaluation may
identify cultural gaps that show the difference
between the desired values and the actual value in
practice.
Fusch and Gillespie (2012) introduced a
performance analysis model to determine the gap
between the desired performance and the actual
results in the organization. Fusch and Gillespie’s
performance analysis model showed how business
managers identify performance gaps by comparing
the actual organizational performance to the desired
performance. A desired organizational performance
includes a detailed analysis of the organization’s
vision, mission, strategy, and desired results. The
actual performance analysis contains a brief
discussion of internal and external factors including
economic, market, and customer relations. Fusch and
Gillespie noted that the importance of identifying
performance gaps as a primary approach to deploying
effective performance interventions method. Fusch
and Gillespie used a work-life approach as a
performance intervention to create a positive impact
on organizational culture and performance.
Flamholtz and Randle (2012) identified an
organizational culture evaluation method, which
includes five key dimensions of organizational
culture. The five key aspects contain (a) customer
orientation, (b) employee orientation, (c)
performance standards, (d) commitment to change,
and (e) company process orientation.
Customer orientation includes how the
organization’s managers understand their clients and
how employees serve their customers. Business
organizational managers must have identified values
to guide employee interaction with customers
(O’Reilly et al., 2014). The value contributes to the
organizational culture effectiveness by maintaining a
high level of customer satisfaction in the organization
(Hartnell et al., 2011).
The second important dimension for
organizational effectiveness is employee orientation
(Flamholtz & Randle, 2012). Flamholtz and Randle
(2012) defined employee orientation as the process of
motivating employees in the organization. Employee
orientation includes how people behave while
performing their jobs in the organization. Business
managers use employee orientation to maintain a
strong organizational culture in the organization.
Every organization has a group of people with
different cultures and backgrounds. Organizational
culture is important to combining the organization
members’ different backgrounds and personal culture
into a commonly accepted organizational culture
(Green, 2012). Low employee turnover and high
employee satisfaction contribute to the organizational
culture effectiveness (Hartnell et al., 2011). The
effective organizational culture characteristics
contains employee satisfaction and empowerment in
the organization, which are key to motivate and retain
competent and trustworthy employees.
The third organizational culture dimension
includes an input that how performance and
accountability standards collaborate in the
organization (Flamholtz & Randle, 2012).
Performance and accountability standards contain a
standard that shows when and how employees
receive evaluations, benchmark standards, rewards,
and accountability for their performance. O’Reilly et
al. (2014) noted that performance and accountability
standards have a profound impact on employees’
work performance and behaviour. The performance
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and accountability measure contributes to the
organizational goal achievement and the
organizational culture effectiveness (Green, 2012).
The fourth essential dimension for the
organizational culture effectiveness is innovation and
commitment to change (Flamholtz & Randle, 2012).
Commitment to change and innovation includes how
the company community views, commits and reacts
to change and innovation. Flamholtz and Randle
(2012) indicated that commitment to change and
innovation included the managers’ readiness to lead
unexpected changes and preparation to improve
products and services. Commitment to innovation
and readiness for change are important strategic
components for the organizational culture
effectiveness (Hartnell et al., 2011).
The fifth organizational culture effectiveness
dimension is a company process orientation
(Flamholtz & Randle, 2012). Company process
orientation is the process of how the company system
operates including planning, organizing, decision-
making, communication, and social responsibility.
Organizational culture effectiveness includes
economically feasible planning, transparent decision-
making processes, clear communication channels,
and socially responsible organizations (O’Reilly et al.,
2014).
Effective organizational culture includes highly
motivated employees, high level of customer
satisfaction, well-established performance standards,
openness to change, innovation, and clearly defined
company process orientation (Flamholtz & Randle,
2011). Business managers may use company process
orientation in evaluating organizational culture
effectiveness. The various aspects of organizational
culture effectiveness relate to the company
performance (Schneider et al., 2013). For example,
more innovative organizational culture may
contribute to higher business growth. Bureaucratic
organizational culture may increase efficiency.
Supportive organizational culture may promote
employee satisfaction (O’Reilly et al., 2014). In
another empirical evidence, Chatman, Caldwell,
O’Reilly, and Doerr (2014) confirmed that a strong
consensus culture in the organization affects net
income, and a strong adaptability culture affects
revenue.
XII. THE ROLE OF ORGANIZATIONAL
CULTURE ON BUSINESS PERFORMANCE
Fusch and Gillespie (2012) indicated that
developing a positive workplace culture leads a
performance improvement in the organization.
Organizational culture is an important determinant
factor for business performance (O’Reilly et al.,
2014). Uddin et al. (2013) confirmed the existence of
a strong relationship between organizational culture
and business performance. Childress (2013) also
noted that an organizational culture does affect
business performance positively or negatively.
Innovations in businesses are blessed by
organizational culture and this area has been
recognized as a needed research scope (Dissanayake,
Wasantha & Jinadasa, 2017).
Unger et al. (2014) found the existence of a
positive relationship between corporate culture and
financial performance. In another empirical research,
Flamholtz and Randle (2012) found 46% of corporate
earnings affect by organizational culture
effectiveness. However, Berg and Wilderom (2012)
argued that the organizational culture might affect
performance, where the change is a longer time
interval showing the effects of culture on financial
performance.
When business managers use organizational
performance to express action, organizational
performance is the ability to execute tasks in the
organization by its members (Uddin et al., 2013).
Managers may use action performance to measure
with high, medium, or low scales. When managers
use business performance to express an outcome,
business performance is the output or results of an
organization including productivity, profitability, and
growth (Carter & Greer, 2013). The output may
measure against its intended goals and objectives.
Berg and Wilderom (2012) identified five factors
to measure the impact of organizational culture on
business performance. The factors include (a)
employee empowerment, (b) external emphasis, (c)
interdepartmental collaboration, (d) human resource
orientation, and (e) the performance improvement
tendency. These factors are important to measure the
impact of organizational culture on business
performance (Unger et al., 2014).
XIII. CONCLUSION
This review contained a brief discussion and
synthesis of the various literature in the area of
organizational culture in the context of business
performance. The literature review included a critical
analysis and synthesis of literature related to the
conceptual framework of an organizational culture
theory. It also discussed about achieving business
excellence and productivity include challenges for
business managers in diversified companies. It was
noted that lack of cultural integration among member
companies is a primary cause of the corporate group
failure (Weber & Tarba, 2012). Unless business
managers establish an effective organizational culture,
the high level of diversification leads them to poor
performance.
Many business managers confirmed that effective
organizational culture is an important element for the
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success of their businesses (Flamholtz & Randle,
2012). The quantitative study results in the area of
organizational culture showed the existence of a
positive relationship between organizational culture
and business performance (Han, 2012; Hartnell et al.,
2011). Qualitative study findings also showed how
business managers use an effective organizational
culture to motivate employees, to attract customers,
to improve operational effectiveness, and to increase
financial performance (Hartnell et al., 2011).
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AUTHOR
Yasas L. Pathiranage, BSc Eng (Hons), MSc CPM,
DCSE, GICE (UK), Aff.M.ASCE, AMIE (SL) is a Doctoral
Student in Faculty of Graduate Studies, University of
Kelaniya. He has been employed in the industry as an
Engineering / Management Professional and Visiting
Lecturer since 2000. Presently, he is serving as the
CEO of Bitumix (Private) Limited.
