Presentation  S I O P  Profiles Of  Organizational  Culture
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Presentation  S I O P  Profiles Of  Organizational  Culture Presentation S I O P Profiles Of Organizational Culture Presentation Transcript

  • 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
    • 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.
    • Organizational Culture
    • “ [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).
    • Adaptability & Mission  market share, sales growth (Denison Consulting, 2005)
    • Involvement & Consistency  quality, return-on-investment, employee satisfaction (Denison Consulting, 2005)
    Culture and Performance
  • 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
    • Consistency: the existence of organizational systems and processes that promote alignment and efficiency over time.
    • If the company is already characterized by Involvement , Adaptability , and a sense of Mission , then Consistency provides more leverage.
    • If the company is low on other traits, Consistency may be a liability.
      • Cultural content is more important than just having a ‘strong’ culture (Flynn & Chatman, 2001).
    • Other studies have shown nonlinear relations using similar concepts:
      • SD as a moderator (Dawson & West, 2005; Schneider et al., 2002)
      • Balance is good…? (Cameron, 1986; Denison, 1990)
      • Role of ‘strength’ depends on environment (Sorensen, 2002)
    Variable Effects of Consistency
    • 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.
    • 102 publicly-traded organizations representing 29 industries
      • Surveyed b/w 1997-2004
      • Surveys completed by 27 to 15,965 members per-organization ( M = 1,145) — responses aggregated to organization level
    • Denison Organizational Culture Survey (Denison & Neale, 2000)
      • 60-item survey measuring four culture traits: Involvement , Consistency , Adaptability , and Mission
      • Factor-structure confirmed by Dension, Janovics, Young, & Cho (2007), with scale α b/w .87 and .92
    • Organizational Performance: financial indices from Standard & Poor’s COMPUSTAT database
      • Sales Growth: % sales increase from one year to the next
      • Market-to-book Ratio: ratio of ‘book value’ of a share to ‘market value’ of a share
      • Three-year rolling averages created for each outcome to reduce impact of market volatility on results
    • Hierarchical Linear Modeling
      • Observations over time nested within organizations
      • Implemented via SAS Proc Mixed (e.g., Singer, 1998)
    • Hierarchical procedure utilized to test interactions
      • Controlling for all lower-order terms (main effects and 2-way interactions) prior to examining 3-way interactions
      • γ represents overall effect across organizations and time, analogous to β in regression context
    Analysis Strategy
    • Main effects
      • Market-to-Book:
        • Involvement ( γ = .82, F = 9.29, p < .01, R 2 = .08)
        • Consistency ( γ = .65, F = 5.26, p < .05, R 2 = .05)
        • Adaptability ( γ = 1.06, F = 14.04, p < .01, R 2 = .13)
        • Mission ( γ = .56, F = 7.76, p < .01, R 2 = .07)
      • Sales Growth:
        • Involvement ( γ = .25, F = 16.09, p < .01, R 2 = .14)
        • Consistency ( γ = .25, F = 14.85, p < .01, R 2 = .13)
        • Adaptability ( γ = .31, F = 22.30, p < .01, R 2 = .18)
        • Mission ( γ = .19, F = 16.60, p < .01, R 2 = .14)
    • No significant two-way interactions among culture traits.
    • However, three-way interactions provide general support for hypotheses.
      • Effects of Consistency on Market-to-Book and Sales Growth contingent on the levels of Adaptability, Involvement, and Mission.
      • Negative effects of Consistency when remaining traits are low, positive otherwise.
  • Results
  • Results
  • Results
  • Results
    • Summary
    • 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.
    • Implications
    • 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.
    Summary and Implications
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    • Gillespie, M.A., Denison, D.R., Haaland, S., Smerek, R. & Neale, W.S. (forthcoming, 2008). Linking organizational culture and customer satisfaction: Business-unit results from two companies in different industries. European Journal of Work and Organizational Psychology.
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