High-performance Organizational Culture around the World


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Key research questions
• Do organizational cultures differ systematically across
geographic regions of the world?
• Do the cultures of multinational corporations differ
from those of local organizations in different regions?

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High-performance Organizational Culture around the World

  1. 1. Volume 7, Issue 1, 2012 researchnotes High-performance Organizational Culture around the WorldResearch at a glance From Regional-Societal Culture toKey research questions Organizational Culture• Do organizational cultures differ systematically across Organizations are embedded within an externalgeographic regions of the world? environment, and this environment includes various• Do the cultures of multinational corporations differ factors that can influence the culture of anfrom those of local organizations in different regions? organization. In addition to economic and industry- level factors, organizations exist within regions andMethods societies that have unique cultural characteristics. AStatistical analyses were conducted using data from number of studies have examined cultural differences422 organizations located in 48 countries further across nations. Geert Hofstede’s work on nationalgrouped into six major regions. cultures provides one example of the complex mosaic of cultural similarities and dissimilarities that areKey Findings emerging from this line of research (Figure 1). ForThe average organizational culture scores of example, in both the US and China – nations withorganizations from different geographic regions seemingly different societal cultures – peopleexhibited a moderate-to-high degree of similarity.Possible exceptions to this overall trend were observed generally prefer achievement, assertiveness, andfor organizations located in Central & South America – material rewards for success (“masculinity”) and arewith typically higher-than-average culture scores across not comfortable with uncertainty and ambiguityindexes – and organizations located in Europe – with (“uncertainty avoidance”). At the same time, peoplelower-than-average culture scores on specific indexes from the US show unique preferences for equal(e.g., Core Values). distribution of power (low “power distance”) and a social system where they are expected to take care of themselves and their families only (high “individualism”), as well as the belief that truth does not depend on“It has been said that arguing against globalization is situation, context, and time (“short-term orientation”).like arguing against the laws of gravity.”- Kofi Annan, 7th Secretary-General of the UnitedNations, 2001 Nobel Peace Prize. Figure 1. Cultural similarities and differences: US, Brazil, & ChinaWith increasing globalization, many organizations are US Brazil Chinafacing challenge of operating in new and differentgeographic locations around the world, and therefore,new and different regional and even societal cultures.Given that regional cultures can and often do differ, thepresent research was undertaken to determine whetherorganizational cultures vary by geographic region; andfurther whether the organizational cultures ofmultinational corporations (MNCs) differ systematicallyfrom locally headquartered organizations.   Power distance Individualism Masculinity Uncertainty Long-term avoidance orientation All content © copyright 2005-2012 Denison Consulting, LLC. All rights reserved. l www.denisonculture.com l Page 1
  2. 2. Given these patterns of national culture differences (and Figure 2. The Denison Organizational Culture Modelsimilarities), it is natural to wonder how these broadercultural patterns trickle down to the organization level.Indeed one international research project conductedin over 60 countries discovered that societal culturalvalues affect organizational culture and practices as wellas leadership behaviors (the GLOBE project; Javidian,House & Dorfman, 2004).However, it remains unclear whether the aspects oforganizational culture that are directly related toorganizational performance also vary across cultures,or whether these performance-related aspects oforganizational culture are more stable. Thus, wespecifically explored whether these performanceenhancing aspects of culture vary by societal culture,using the Denison Organizational Culture Survey (DOCS;Figure 2). The DOCS has been shown to relate toperformance outcomes such as Return-On-Assets,sales growth, market-to-book ratio, and customer and  employee satisfaction, among others. It uses 60-itemsto measure four cultural traits (Involvement, Consistency,Adaptability and Mission). direction as is particularly apparent for the North American,Methodology African, Oceanic, and Asian regions, in which cultureData from 422 companies (326,031 employees) in scores consistently fell in the 40th to 60th percentile range48 countries were used in this research (Table 1). with only a few exceptions noted (e.g., Asian organizationsWe grouped respondents by organization into one scored above the 70th percentile in organizationalof six regions based on the United Nation’s region learning).classification. These companies came from a varietyof industries, and 67% (n=343) were MNCs with some In addition to having culture scores that typically fell aroundMNCs being represented in more than one region. the 50th percentile (i.e., similar overall levels), the pattern of culture scores across indexes was generally similarResults for different regions of the world. In other words, the indexes that tend to be higher (or lower) in one region alsoGreater Similarity than Dissimilarity: tend to be higher (or lower) in the other regions. ScoresLevels and Patterns across the Adaptability trait provide a clear example ofThe bar charts in Figure 3 display the average this consistent pattern as five of six regions (excludingorganizational culture scores by region and culture North America) scored relatively higher on the Creatingindex within the Denison model. These charts generally Change and Organizational Learning indexes and relativelysuggest that there is greater similarity than dissimilarity lower on the Customer Focus index. Other examples ofacross regions of the world. Regions’ scores typically consistent patterns across regions include relative lowsdid not deviate from the 50th percentile (or overall in Capability Development (third panel down) and Coreaverage) by more than 10 percentile points in either Values (bottom panel).Table 1. Number of organizations for each region Region Multinational Total Non-MNC MNC Count Percent North America 37 161 198 38.7 Europe 59 95 154 30.1 Asia 33 36 69 13.5 Central & South America 21 27 48 9.4 Oceania 10 15 25 4.9 Africa 8 9 17 3.3 Total 168 343 511 100.0 All content © copyright 2005-2012 Denison Consulting, LLC. All rights reserved. l www.denisonculture.com l Page 2
  3. 3. A Possible Exception to the Similarity Rule Figure 3. Percentile scores for the DOCS indexesAs the rank-ordered bar charts show, Central and South Creating change Customer focus Organizational learningAmerican organizations generally deviated from the 50th 100percentile by more than +10 percentile points, scoring 90higher than organizations from other regions. For each 80index, we examined the gap between the region with the 70highest score and the region with the lowest score. The 60 50smallest difference existed in Customer Focus where 40there was a 20 percentile point difference between 30organizations in the highest scoring region (Central & 20South America) and those from the lowest scoring region 10(Europe). The biggest difference was in Core Values,where there was a gap of 52 percentile points. In Europe North Africa Oceania Asia Central &general the gaps between the region with the highest America Southscore and the region with the lowest score were America  highest in the Consistency trait (on average a 42 Strategic direction & intent Goals & objectives Visionpercentile point gap across the indexes). The average 100gap was 37 percentile points for the indexes of the 90Mission trait, and was around 30 percentile points for the 80other two traits of Involvement and Adaptability. 70 60In the Adaptability trait, Customer Focus scores were 50lower than other Adaptability index scores by 10 40percentile points or more in all regions with the exception 30of North America. 20 10In the Mission trait, within each region, all three Mission North Europe Oceania Asia Africa Central &index scores were similar to each other and the America Southdifferences were less than 10 percentile points. AmericaIn the Involvement trait, it is interesting to note that in the Empowerment Team orientation Capability developmentCentral & South America, Asia and Oceania regions, 100Empowerment and Team orientation scores were higher 90than in other regions, though Capability Development 80scores were generally more comparable to the other 70regions. 60 50The Consistency trait showed the biggest regional 40 30differences in organizational culture scores, compared to 20other cultural traits. Also, for several of the regions, Core 10Values scores were lower than scores on the other traits. Africa North Europe Asia Oceania Central & America South AmericaMNCs vs. Non-MNCs: Core values Agreement Coordination & integration 100Are their cultures different? 90As we used a database of both MNCs (n=343; 67.1%) 80and non-MNCs (n=168, 32.9%), an interesting question 70remained. Specifically, it is possible that there is 60something inherently different about the culture of MNCs 50versus non-MNCs. For example, does the organizational 40culture of the Asian operations of an MNC differ from the 30organizational culture of a local Asian organization? 20 10 Europe North Africa Asia Oceania Central & America South America All content © copyright 2005-2012 Denison Consulting, LLC. All rights reserved. l www.denisonculture.com l Page 3
  4. 4. Statistical analyses were conducted to examine Conclusionswhether MNCs and non-MNCs were different in their Our research findings show many similarities in theculture scores and to ensure our research findings organizational culture scores of organizations in differenthold for both types of organizations. As can be seen regions.in Table 1, each region included similar percentage ofMNCs (52–62%), except for North America (81%). • In general, culture scores of organizations in North America, Europe, Asia, Africa and Oceania were largelyWhen comparing MNCs versus non-MNCs regardless similar, although organizations in the first two regionsof their regions (see Table 2, “Overall” column), there generally had lower culture scores than the latter regions.were no statistically significant differences in culture • Organizations in Central & South America had higherindex scores between the two types of organizations, culture scores across all four culture traits thanand all differences were less than 10 percentile points. organizations in other regions. • There are few differences between MNCs and localWhen region was taken into account, we found few organizations.differences between MNCs and non-MNCs. Table 2shows the DOCS percentile score differences between In terms of why Central & South America organizationsMNCs and non-MNCs within each region. Only those tend to report higher culture scores compared topercentile score differences of 10 or larger are organizations in other regions, it is hard to say whetherpresented. In North America, MNCs reported this means that the organizational culture in this regionstatistically higher scores in Agreement and Core is inherently more positive, or that survey-takers in thisValues indexes. region tend to provide more positive responses. There is some evidence that Hispanics and Spanish-speakingTable 2. MNCs (M) vs. non-MNCs (local; L): Culture score differences (M – L) All content © copyright 2005-2012 Denison Consulting, LLC. All rights reserved. l www.denisonculture.com l Page 4
  5. 5. people have a greater preference for extreme responses stays strong across regions. Regardless of the societal(e.g., “Strongly Agree”) than Europeans. Thus, culture, high performance organizations are strong inorganizational culture score differences may be due not cultural traits of of Involvement, Consistency, Adaptability,only to the actual culture of the organization, but also and Mission.to the society in which they are embedded; high scoresmay be reflecting the societal culture as well as the Putting “scores” in the context of global practices,organizational culture. From previous cross-cultural organizations can obtain information on theirresearch conducted on the DOCS, We do know that the performance relative to others and opportunities to learnculture-performance relationship was positive and strong the best practices from high performing organizations.in different regions of the world (Denison, Haaland, & Using a global benchmark is beneficial not only to MNCsGoelzer, 2003). These findings suggest that regardless but also to non-MNCs. Organizations operating only inof what the average ratings are on the indexes, the their native country and not directly competing againstimpact of organizational culture on performance organizations in other countries or regions may considermeasures is the same around the world. Taken together, the current research findings irrelevant to them.our findings combined with those from Denison et al. However, various parts of the world are now moresuggest that even though we observed some differences connected than ever before and the global playing field isacross the regions in our study, organizational culture becoming flatter (Friedman, 2005). Many organizationsimpacts performance in the same way across regions. are faced with a greater degree of indirect competition and are being influenced by new rules and regulationsBest Practices created due to globalization.There are several important best practices all Take the regional differences into accountorganizations should consider following when when implementing actions.undertaking a culture survey and subsequent change It is critical for MNCs to acknowledge that, regardless ofinitiatives, and several of these practices have particular mean differences, how these different aspects ofrelevance when looking across the globe. organizational culture are expressed may differ depending on the societal culture. What works in oneClearly communicate the purpose of the country may not work in another. In our research,culture survey. organizations in Africa and organizations in the U.S.Communicating the purpose and intent of the culture reported similar scores on the Empowerment index butsurvey as well as the need for candid responses is key to the actions needed to drive progress in this area may bea successful culture assessment. This is even more vital very different and implementing the same actions thatfor organizations operating in more than one society, as an organization is taking in one region may not yield thedifferent societies may react differently to assessments or same results in other regions.change initiatives. In fact, studies show survey takersin different cultures report varying degrees of social To conclude, societal culture can be an influencingdesirability (e.g., Bernardi, 2006; Steenkamp, De Jong, factor in organizational culture, and should be taken& Baumgartner, 2010). Although these studies did not into context when building a strategy toward a highspecifically examine social desirability tendencies among performance culture. Also, even though societal cultureorganizational culture survey takers, the findings still might impact organizational culture, high performanceseem to be relevant. Clear communication can help organizational cultures take uniform traits of Involvement,organizations minimize survey participants favoring Consistency, Adaptability, and Mission.positive response options not because they indeed thinkor feel so but because it is a cultural norm to speakfavorably of the company for which they are working.Use a global benchmark and learn thebest practices.Our research findings, combined with those of theprevious research, offer a rationale for using a globalbenchmark rather than other types of benchmarks (e.g.,region or country-specific benchmark). Organizations indifferent regions are largely similar when it comes to whata high performance organizational culture looks like.Societal culture may impact organizational culture, butthe link between organizational culture and performance All content © copyright 2005-2012 Denison Consulting, LLC. All rights reserved. l www.denisonculture.com l Page 5
  6. 6. ReferencesBernardi, R. (2006). Associations between Hofstede’s cultural constructs and social desirability response bias. Journal of Business Ethics, 65, 43-53.Denison, D. R., Haaland, S., & Goelzer, P. (2003). Corporate culture and organizational effectiveness: Is there a similar pattern. In W. H. Mobley & P.W. Dorfman (Eds.), Advances in Global Leadership (pp. 205 – 227). Location: Wagon Lane, UK.Friedman, T. L. (2005). The world is flat: A brief history of the twenty-first century. New York, NY: Farrar, Straus and Giroux.Hofstede, G. (2001). Culture’s Consequences: Comparing Values, Behaviors, Institutions and Organizations across Nations. Thousand Oaks CA: Sage Publications.Javidian, M., House, R. J. & Dorfman, P. W. (2004). A non-technical summary of GLOBE findings. In R. J. House, P. J. Hanges, M. Javidan, P. W. Dorfman, & V. Gupta (Eds.), Leadership, culture, and organizations: The GLOBE study of 62 societies (pp.122-125). Thousand Oaks, CA: Sage Publications.Laurent, A. (1983). The Cultural Diversity of Western Conceptions of Management. International Studies of Management and Organization, 13, 75-96.Steenkamp, J. E. M., De Jong, M. G., & Baumgartner, H. (2010). Socially desirable response tendencies in survey research, Journal of Marketing Research, 47, 199-214.Contact Information Copyright InformationDenison Consulting, LLC Copyright 2005-2012 Denison Consulting, LLC121 West Washington, Suite 201 All Rights Reserved.Ann Arbor, Michigan 48104 Unauthorized reproduction, in any manner, is prohibited.Phone: (734) 302-4002 The Denison model, circumplex and survey are trademarks ofFax: (734) 302-4023 Denison Consulting, LLC.Email: research@denisonconsulting.com Version 7.1, March 2012 All content © copyright 2005-2012 Denison Consulting, LLC All rights reserved. l www.denisonculture.com l Page 6