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Profiles of Organizational Culture: The Variable Effects of Consistency Aaron M. Schmidt1, Michael A. Gillespie2 , Lindsey M. Kotrba2 , Samantha A. Ritchie1, & Daniel R. Denison3 1The University of Akron, 2Denison Consulting, 3International Institute for Management Development **Please direct questions and requests to the first author at aSchmidt@uakron.edu
We investigate the combined effects of four organizational culture traits (involvement, consistency, adaptability, and mission) on firm financial performance (sales growth, market to book ratio, and return on assets), for a large sample of organizations.
As hypothesized, the effects of consistency on market-to-book and sales growth varied in both magnitude and direction as a function of other key culture traits.
Namely, consistency is more positively related to financial performance when the other traits are high, and is sometimes negatively related to financial performance when the other traits are low.
“ [S]hared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration” (Schein, 1992, p. 12).
“ [T]he underlying values, beliefs, and principles that serve as a foundation for an organization’s management system as well as the set of management practices and behaviors that both exemplify and reinforce those basic principles” (Denison, 1990, p. 2).
Culture and Bottom-Line Performance
Culture has long been regarded as critical to organizational effectiveness (Peters & Waterman, 1982; Schein, 1992; Wilkins & Ouchi, 1983).
Empirical research supports this (Denison, 1984, 1990; Denison & Mishra, 1995; Fey & Denison, 2003; Gillespie et al., 2008; Kotter & Heskett, 1992).
The Denison Model Adaptability Pattern..Trends.. Market Translating the demands of the business environment into action “ Are we listening to the marketplace ?” Direction..Purpose..Blueprint Defining a meaningful long-term direction for the organization “ Do we know where we are going?” Involvement Commitment..Ownership ..Responsibility Building human capability, ownership, and responsibility “ Are our people aligned and engaged? “ Consistency Systems..Structures.. Processes Defining the values and systems that are the basis of a strong culture “ Does our system create leverage? ” Measurement Model Fit Statistics: χ 2=122,715 ( df =1692; N =30,808); RMSEA=.048; GFI=.88; AGFI=.87; CFI=.98
Involvement, Adaptability, and Mission will moderate the relationship between Consistency and financial DVs.
Consistency positively related to financial DVs when other traits are high
Consistency negatively (or less positively) related to DVs when other traits are low
Effect expected to be more pronounced for Adaptability and Mission (external focus) than Involvement (internal focus).
Effect hypothesized to impact sales growth and market-to-book ratio (more closely tied to externally-focused traits), and should be most responsive to the imbalance of these traits relative to Consistency.
Organizational Culture traits relate significantly to financial performance outcomes, with each trait explaining about 5% (Consistency) to 13% (Adaptability) of the variance in Sales Growth, and 13% (Consistency) to 18% (Adaptability) of the variance in Market-to-Book.
Interaction effects account for an additional 5% to 10% when predicting Market-to-Book ratio and an additional 5% when predicting Sales Growth
When other traits are low [high], Consistency has a negative or diminished [positive] effect on financial metrics.
Extends the research on balanced cultures (Cameron, 1986; Denison, 1990), variance as a moderator (Dawson & West, 2005; Schneider et al., 2002), and linkage research on culture and performance (Denison & colleagues; Kotter & Heskett, 1992)
Practitioners would do well to focus on improving other traits (e.g., Mission) before moving on to Consistency.
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