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Thesis outline


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Thesis outline

  1. 1. CREATING A COLLECTIVE CORPORATE CULTURE: A SMALL BUSINESS GUIDE TO MAXIMIZE PERFORMANCE A Thesis Presented to the Faculty of the School of Education University of San Francisco In Partial Fulfillment of the Requirements of the Degree of MASTER OF ARTS in ORGANIZATION AND LEADERSHIP by Wendy Jones December 14, 2012
  2. 2. CREATING A COLLECTIVE CORPORATE CULTURE: A SMALL BUSINESS GUIDE TO MAXIMIZE PERFORMANCE In Partial Fulfillment of the Requirements of the MASTERS OF ARTS in ORGANIZATION AND LEADERSHIP by Wendy Jones UNIVERSITY OF SAN FRANCISCO December 14, 2012 Under the guidance and approval of the committee, and approval by all the members, this thesis has been accepted in partial fulfillment of the requirements for the degree. Approved ____________________________ ________________ Chairperson Date ____________________________ ________________ Committee Member Date
  3. 3. ii Acknowledgements I would like to express my sincere gratitude to my family for their continued support and enthusiasm as I pursued my degree. I would like to extend a heartfelt thank you to my mother, father, stepmother, grandparents, siblings and especially, Brian. You have always believed in me and given me that extra nudge to pursue my dreams. I would not have been able to accomplish this without you and our pups by my side. I would like to recognize the faculty and staff at USF for their guidance and support as I made my way along this journey, specifically Dr. Mitchell for your insight and motivation. I would like to extend a final appreciation to my group of fellow scholars; Ashley Hanson, Jennifer Ta and Jane Hackman, without our cohort I might have given up a few times or stayed in bed on those early Saturdays. Thank you all for the amazing wall of support and love.
  4. 4. iii Abstract The purpose of this project was to determine which three traits of corporate culture are positively related to increased firm performance. Once the three winning traits were determined, based on reviewed studies and existing literature, a survey was created to measure the degree that the three specific traits exist in a current corporate culture. The researcher then created a reference guide to teach organizations how to adopt the three specific traits into their corporate culture in order to maximize firm performance. The three winning traits that are positively related to firm financial performance are collectivism, adaptability, and culture strength.
  5. 5. iv Table of Contents Acknowledgements ii Abstract iii Table of Contents iv List of Tables vi List of Figures vii Chapter I - Introduction 1 Statement of Problem 2 Background and Need 3 Purpose of Project 5 Project Objectives 6 Limitations 6 Ethical Considerations 7 Summary 8 Chapter II - Literature Review 9 Introduction 9 Defining Collectivism 10 Defining Corporate Culture 14 Measuring Corporate Culture 18 Corporate Culture and Ideal Culture Traits for Predicting Success 24 Measuring Performance 34 Limitations of Reviewed Studies 36 Chapter Summary 40 Chapter III - Methodology 41 Research Design 41 Instrumentation 42 Developing the Survey 43 Developing the Handbook 48 Summary 65 Chapter IV - Handbook 66
  6. 6. v Chapter V - Summary, Conclusion and Recommendations 93 Summary 93 Conclusion 94 Recommendations 95 Concluding Thoughts 97 References 98 Appendices 102 Appendix A: Peer Reviewers Handout 103 Appendix B: Measuring Collectivism, Adaptability and Strength 104 in Your Corporate Culture Survey
  7. 7. vi List of Tables Table 1: Major Domain Descriptors of Individualism and Collectivism 17 Table 2: Peer Reviewers’ Demographics 48
  8. 8. vii List of Figures Figure 1: Denison's Organizational Culture Model 22
  9. 9. 1 CHAPTER I Introduction The Hay Group, a global management consulting firm, states that due to globalization, climate change, demographic shifts and the rise of the digital lifestyle, organizations will be required to adopt new policies and ways of thinking to remain successful. The Hay Group's regional director, George Vielmetter states, "To thrive in the future, leaders will have to become more nimble and adaptable, guiding organizations to revolutionize their cultures, structures, systems and processes” (Hay Group Report, 2011, para. 2). One such organization that has remained successful through global changes is Hewlett Packard (HP); they have been consecutively ranked in the top 50 producing firms of Fortune 500 companies since 1988 ("CNN Money", 2011). According to Leo Apotheker, “technology is a brutal business, if you don’t innovate and reinvent yourself, you will become obsolete.” (Leo Apotheker as cited in Forster, 2011, p. 23). HP continuously reinvented itself in order to remain in the global technology race. In the 70 years since HP was founded, the company has seen numerous mergers and law suits, and has been led by a handful of deficient CEO's (Forster, 2011), but something has made this company outlast its competitors and has kept HP among the top 50 producing firms. Researchers agree that this is due to the corporate culture, known as The HP Way, which founders Dave Packard and Bill Hewlett based all operations on (Forster, 2011; Kotter & Heskett, 1992; Truskie, 1999). HP's success is attributed to their exemplary culture model, one that other organizations, not just in the technology field, can learn from. Organizational culture, also known as corporate culture, sets the tone for how an organization will operate and often dictates the generally accepted rules for daily conduct. Specific traits of corporate culture have been linked to varying degrees of financial success (Gordon & DiTomaso, 1992; Kotter & Heskett, 1992). In the 1980's, the success of many
  10. 10. 2 Japanese companies raised attention of American firms seeking to be as effective. Several researchers attributed the Japanese' success to certain humanistic values, "such as concern for the well-being of employees and an emphasis on consensual decision making" (Wilderom, Glunk & Maslowski, 2000, p. 195). Japanese corporate culture was defined as collective, where all employees shared a concern for the greater good of the factory rather than their individual achievements. Forsyth (2010) defined collectivism as a style "that emphasizes the primacy of the group or community rather than each individual" (p. 67). The behaviors, values and assumptions that make up the organization's culture have an impact on daily activities. Shared values and beliefs about daily practices held by all organizational members can impact how effective, or ineffective, the workplace is. HP was the subject of previous studies on corporate culture because they possess a strong corporate model (Chaw & Kirkbride, 1987; Forster, 2011; Kotter & Heskett, 1992). Japanese corporate culture in the 1980's, as well as The HP Way, are what separated these organizations from lesser producing ones. Statement of the Problem The corporate culture of an organization may undermine strategy and performance if not managed correctly. Executives, leaders and managers are interested in maximizing performance and profits. Corporate policies and processes must be supported by a strong culture that is aligned with the mission and vision statement of the organization to ensure success. New efforts were undertaken in the last several decades by researchers and scholars to define and measure corporate culture in order to determine the best practices in the workplace. A variety of industries were studied, ranging from insurance firms to technology companies, in order to better understand the components of a successful corporate culture. However, researchers do not agree on the best tool for measuring corporate culture, or which combination of traits supports long- term financial performance.
  11. 11. 3 Measuring and defining corporate culture is a difficult task due to the wide range of definitions and parameters that exist for the term "culture". Corporate culture cannot be properly managed and controlled by executives if they are unable to identify the term they are attempting to manage. Researchers were challenged with the task to best define and measure corporate culture, but not knowing which specific traits or characteristics to measure presented another obstacle. Researchers eventually identified a combination of culture characteristics to support the hypothesis that specific traits are linked to positive organizational performance. However, empirical evidence supporting the organizational culture-performance link vary in all aspects of the research: from population size of the sample firms, number of respondents and ranks within each firm, the performance measures, to the many different culture dimensions. Few studies agreed which characteristics of corporate culture were related to sustained performance. Only a handful of studies replicated previous research in order to confirm which culture traits supported performance. However, once the specific traits were identified, organizations were now faced with the problem of determining how to adapt their current culture to include the winning traits. There are a multitude of instructional materials to educate managers on how to become better leaders, but managers and leaders lacked a comprehensive guide instructing them on how to adapt their current culture to include the winning traits. Background and Need Executives and managers of companies participating in mergers and acquisitions became aware that opposing organizational cultures could have the ability to weaken performance and sought out ways to employ cultural change to improve cooperation. "Under these pressures for application, a variety of new efforts were undertaken to measure culture through survey research and quantitative analysis. These efforts were closely associated with increasingly formal
  12. 12. 4 typologies of culture and the correlation of cultural `types' to specific organizational pathologies" (Schulman, 2001, p. 238). According to Schulman (2001), less than half of all mergers met intended financial expectations. Incompatible cultures prevented the successful combination of two distinct cultures becoming one. In fact, organizations began performing culture audits to determine compatibility before making a commitment (Truskie, 1999). Varying culture types implies that there are strong cultures and weak cultures, as well as ineffective and effective cultures. Aligning the right culture with the goals of the organization will ensure productivity and support economic growth. A variety of measurement tools exist to measure different aspects of culture and a range of researchers presented solutions on how to best define and measure corporate culture. Most researchers agree that performance is easily measured by financial parameters and that culture can be measured by the degree that certain dimensions, or traits, are present within a culture (Denison, 1990; Denison & Mishra, 1995; Gordon & DiTomaso, 1992; Kotter & Heskett, 1992; Petty, Beadles, Lowery, Chapman, & Connell, 1995). The problem lies in that countless financial parameters and culture dimensions exist. One solution was to measure culture along the individualism-collectivism spectrum. The many cultural dimensions included in past research, such as involvement, consistency, adaptability, mission, strength of culture, teamwork and performance goals, inherently fall somewhere along the collectivism-individualism scale. Although the United States is traditionally individualistic in nature (Forsyth, 2010), 21st century corporate leaders are adopting collectivist styles, such as team-based work with an emphasis on group goals rather than on individual goals, into their corporate cultures because collective processes promote cooperation and productivity, and prevents destructive conflict and opportunism (Denison, as cited in
  13. 13. 5 Sackman 2006; Goncalo & Staw, 2005; McGrath, 1997). By identifying the advantages of a strong, collective culture, organizational leaders can make an educated decision on which traits and culture dimensions to adopt into their corporate culture. Significant questions arise from studies that demonstrate that certain culture traits lead to stronger financial performance, such as which traits are more likely to lead to success and how to implement these traits. This project reviewed the relationship between collectivism, adaptability and culture strength and their impact on an organization's performance. Managing and understanding corporate culture is another tool for managers to apply to ensure a firm's success. While most empirical studies examined in this paper presented evidence that supported why specific traits were positively related to sustained performance, specific guides and instructions on how to adopt these traits were missing from the literature. Therefore, an extensive review of scholarly writing on how to increase collectivism, adaptability and culture strength was undertaken. Through specific activities and exercises, both in the workplace and out of the workplace, managers and executives can implement steps to ensure their culture is operating at maximum efficiency. Purpose of the Project The purpose of this project was to identify and validate the traits of corporate culture, specifically those collective in nature that can be adopted to enhance firm performance. Through a review of empirical studies on the corporate culture-organizational performance link, the researcher identified which characteristics of corporate culture are related to sustained, or increased, levels of profitability. The researcher then created a survey tool to measure the extent that an existing corporate culture possessed elements of collectivism, adaptability, and the degree of culture strength to determine which of the three traits were absent. Next, a handbook with guidelines demonstrating how to implement these traits into a culture was developed. The
  14. 14. 6 theoretical foundation and framework for this study was grounded in Shulruf, Hattie and Dixon's (2003) model of collectivism which defines the major domain descriptors of individualism and collectivism. Shulruf et al. (2003) presented eight descriptors of collectivism: related, belong, duty, harmony, advice, context, hierarchy and group. If an organization values the eight descriptors and attempts to include them in their daily operations, then they can be said to have a collective culture. Shulruf et al. (2003) created the Auckland Individualism Collectivism Scale (AICS), a reliable survey tool that served as the reference for the survey. After an extensive literature review, the researcher then created a handbook that presented guidelines on how to create a corporate culture that embraces these characteristics. In discovering which corporate culture characteristics are predictors of firm success, future organizations can effectively make a decision on which corporate culture model best suits their goals in order to be as successful as possible in their industry. The collectivism versus individualism distinction has profound implications for the culture identity which organizations develop and are defined by. Project Objectives The researcher created a measurement tool and a handbook to guide 21st century organizations in creating a collective culture. The researcher answered the following questions to aid in the creation of the survey and handbook: 1. How is corporate culture best defined and measured? 2. What traits of corporate culture are related to productivity and firm effectiveness? 3. How would an organization adopt these traits into their corporate culture? Limitations Several limitations of this project should be mentioned. The first limitation is in the survey method; the quantitative method does not allow for in-depth discoveries on the
  15. 15. 7 underlying assumptions of employees surrounding beliefs, values and norms. In order to achieve the most accurate description of an organization's culture, both quantitative and qualitative methods should be combined (McMillan, 2012). In addition, the survey questions could prime employees to be in a certain mind set, and therefore respond in a specific manner. Another limitation is with the research design; the survey was not field tested for validity. A third limitation of this study is that this project does not discuss the role of the leader in the formation of a new corporate culture. Through the literature review, it became apparent that possessing a strong leader was not one of the predominant traits that was linked to corporate success. However, a strong leader is still essential to the process of altering the current culture. The survey and handbook require that the leader of the organization be well prepared, respected, experienced and capable of taking his or her organization into a new era. If the leader of the organization is not considered effective, then an outside consultant or another manager would need to implement the changes. Collins (2001) stated that great companies are lead by modest, devoted leaders who strive to do better every day. Modest, competent leaders can lead their organizations successfully. However, an ill prepared, incompetent leader could fail to properly administer the survey or implement the activities laid out in the handbook, and therefore would impact the efficiency of the survey and guide. Ethical Considerations When conducting the research for this project, the researcher adhered to established ethical guidelines for conducting studies (McMillan, 2012). The local Internal Review Board was not contacted because the scope of this project did not include interaction with or an intervention with humans (McMillan, 2012). Neither the survey nor handbook were distributed to participants; therefore, due to the lack of interaction, IRB approval was not required.
  16. 16. 8 However, risks to the peer reviewers were minimized by using aliases and ensuring confidentiality. The purpose of the peer review was clarified to the reviewers, and the reviewers were protected from any physical or mental discomfort, harm and danger. Participation as a peer reviewer was also voluntary. Summary A firm can maximize their performance if their corporate culture emphasizes beliefs and values that align with their corporate goals. Past research found a positive relationship between certain traits of corporate culture, specifically collectivism, adaptability and culture strength, and increased levels of profitability (Denison & Mishra, 1995; Gordon & DiTomaso, 1992; Jain, 1998; Kotter & Heskett, 1992). By adopting collective practices that support an adaptable and strong culture, an organization can maximize their performance. Due to the fact that past research did not agree on one universally accepted tool to measure corporate culture, the researcher created a new tool, specifically aimed at measuring the degree of each of the three winning traits: collectivism, adaptability and culture strength. The survey tool will allow managers to determine which of the three traits are missing in their current culture. The researcher then created a guide that managers can reference in order to learn how to adopt the missing traits into their current culture. In Chapter two, the researcher presented the published literature on research linking corporate culture to performance, as well as reviewed studies that found a relationship between specific traits and increased performance. Chapter three discussed the methodology and the steps in creating the survey and the handbook. Chapter four presented the handbook. Finally, chapter five discussed the summary, conclusion and recommendations for future research.
  17. 17. 9 Chapter II- Literature Review Introduction A great deal of the existing literature on corporate culture suggests that identifying the cultural identity of an organization can be a key component in predicting the future success and performance of that corporation (Denison, 1984; Denison & Mishra, 1995; Gordon & DiTomaso, 1992; Jain, 1998; Kotter & Heskett, 1992). A portion of the research in the 1980's was concerned with developing the instruments to measure, as well as to define, corporate culture (Hui, 1988; Wagner & Moch, 1986). Since the 1980’s, research shifted focus to explore the relationship between corporate culture as a measure of future performance levels of an organization (Denison, 1984; Gordon & DiTomaso, 1992; Kotter & Heskett, 1992), as well as updating the established instruments to reflect the changing times (Shulruf et al., 2011). The literature review will define collectivism, define corporate culture and review how corporate culture has been measured in past research. Through the literature review, it will become apparent which traits of corporate culture are ideal for predicting future success; this section will also review how performance and success was previously measured. Finally, the chapter summary will review the literature on culture as a predictor of firm performance. Hofstede (1980) identified five dimensions of culture: power distance, uncertainty avoidance, individualism, masculinity and long-term orientation. Several researchers argued that the individualism-collectivism dimension is the most important distinguishing dimension among cultures (Hui & Triandis, 1986; Triandis, 1995). The individualism-collectivism dimension reflects the degree to which an individual is inclined towards team work and accommodating of other's views. This dimension plays a role in conflict resolution more so than the other dimensions. Researchers recognized that corporate culture can be measured on degrees of collectivism
  18. 18. 10 or individualism, and that the degree to which an organization relates to either end of the spectrum can assist in defining the corporate culture of that organization (Denison, 1984; Goncalo & Staw, 2004; Gordon & DiTomaso, 1992). Several instruments for measuring collectivism and individualism developed over the last several decades include: IND-COL (Hui, 1988), the Horizontal-Vertical Collectivism-Individualism scale (Singelis & Triandis, 1995), Self-Construal Scale, or the SCS, (Singelis, 1994) and the Auckland Individualism and Collectivism Scale, or the AICS (Shulruf et al., 2007). While all of these measurements were applied to individuals across a variety of cultures, only a few were applied to individuals within a single corporation in order to assign a level of collectivism or individualism to that organization. The organizations involved in past studies on the subject included a variety of industries, from insurance firms (Gordon & DiTomaso, 1992) to janitors and craftsman (Wagner & Moch, 1986). It was speculated that HP’s exemplary corporate culture, The HP Way, was a predictor of the company’s long-term success (Forster, 2011; Kotter & Heskett, 1992). Due to the ever-evolving nature of technology and the intricacy of globalization, empirical studies on the transformation of corporate culture will always have a valid place in the realm of research. Defining Collectivism According to research, US organizations are adopting more collective based practices in the 21st century, thus requiring employees to understand how to meet the demands of a cooperative environment (Day, Gronn, & Salas, 2006). A shift occurred, demanding organizations adopt a collective mindset to productively work in this new environment, away from traditional individualistic ways of thinking. Day et al. (2006) stated that the trend towards forming collective identities in teams and recognizing more collective forms of leadership is becoming more widespread. Research found that cooperative efforts reduce social loafing and
  19. 19. 11 increases cooperation, resulting in stronger identification with the work group (Denison, as cited in Sackman, 2006; Goncalo & Staw, 2004). However, the researchers go on to state that collectivist values can sometimes stifle creativity. Collective members define themselves as part of the group, and they value harmony and long-term relationships (Truskie, 1999). Members of collective groups feel like they belong and share positive emotions such as closeness and acceptance. There is more concern for the collective interests of the group. The foundation of the cooperative culture is "trust, caring for one another, helping one another, and sharing" (Truskie, 1999, p. 8). Developing lasting relationships is a concern for collective members. They are more focused on creating a safe, friendly environment and maintaining a relationship than with immediately accomplishing tasks. Interpersonal conflicts are dealt with openly and cooperatively. Collective team members value information sharing and participative decision making. The practiced collective team realizes the value in diverse opinions and constructively uses the differing viewpoints to add value to their team. Collective teams form a bond with their organization and in return cooperative organizations have a deep commitment to their members (Truskie, 1999). Collective members value kindness and generosity, tend to be tactful and cooperative, and show concern for the welfare of other group members. Work groups that operate with collective tendencies are more effective than those that value individualism (Denison, as cited in Sackman, 2006; Petty et al., 1995; Sheridan, 1992). Researcher Swaidan (2012) used Hofstede's model of culture and Muncy and Vitell's (as seen in Swaidan, 2012) consumer ethics model to prove that peopled who scored higher on the collectivism dimension were more likely to hold higher ethical standards. The participants of Swaidan's (2012) study were 761 African American consumers who received a written survey at
  20. 20. 12 different shopping centers. The researcher asked questions to determine the participant's cultural description along the level of collectivism-individualism, masculinity, power distance and uncertainty avoidance. Swaidan found significant differences in ethics between consumers who scored high on Hofstede's cultural dimensions versus those who scored low. Swaidan (2012) found that "consumers who are high in collectivism, high in uncertainty avoidance, low in masculinity, and low in power distance reject questionable activities more than consumers who are low in these areas" (p. 210). This study supported the hypothesis that people who measured high in collectivism were more sensitive to ethical dilemmas. It follows that these individuals would be more honest because they would be more likely to reject questionable activities. Goncalo and Staw (2004) defined people in collectivistic cultures as those who "view the self as inherently interdependent with the group to which they belong" (p. 97). In collective cultures, the primary goal of the individual is to promote the interests of the group above all personal wants and desires. "There is a greater emphasis on meeting a shared standard so as to maintain harmony in one's relationship to the group" (Goncalo & Staw, 2004, p. 97). Individuals in collective work groups are not motivated to gain attention by competing and standing out from the group, but strive for self-improvement through the well being of the larger group. Degrees of collectivism and individualism can vary within the same culture but across different social units. The same can be said for the cultures adopted by organizations. An organization within an individualistic society can adopt collective practices. Chatman and Jehn (as seen in Goncalo & Staw, 2004) studied collective firms and found them to place greater emphasis on organization- wide objectives rather than at the individual level, resulting in greater efforts for cooperation among employees in achieving the collective goals. Goncalo and Staw (2004) stated that creativity offers a competitive edge in business and
  21. 21. 13 should be encouraged. However, creative ideas are often novel ideas that may stray from the group's original vision. Therefore, creativity can be viewed as deviant and receive negative evaluations in a collective culture. To test the impact of collectivism on levels of creativity in groups, Goncalo and Staw (2004) designed a study with 204 students from an American University split into 68 groups with three members each. In the first part of the study, the group participated in a survey that primed them for either a collective or individual mindset. In the second part of the study, the group was asked to brainstorm as many solutions to a problem as they could think of and were instructed to either be creative or practical. In the third stage of the study, the group chose the most creative or practical solution. Blind coders were then asked to rate each group on their degree of collectivism or individualism based on their survey responses and their corresponding levels of creativity based on the number of divergent ideas generated in part two of the study. Goncalo and Staw (2004) found that individualistic groups were more creative when instructed to be. However, there was no difference in the number of generated results for practical solutions between the collective and individual groups. According to Goncalo and Staw’s (2004) study, collective work groups would be better suited for tasks requiring practical, not creative, skills. Although collective groups result in greater cohesion and commitment to group goals, when faced with a task that requires creativity, an organization would benefit from adopting individualistic processes to successfully complete the task. Summary Collectivism has been defined in many ways; originally as a descriptor of a culture trait by Hofstede (1980), it can now be applied as a descriptor of organizational culture. Collective cultures, both globally and within an organization, operate more efficiently by placing the group's goals above their own interests, thus accomplishing group-oriented tasks more
  22. 22. 14 effectively. Collective individuals are more sensitive to ethical dilemmas and are more committed to their organization. Collective members value traits such as inclusion, harmony, caring, trustworthiness, and seek to form lasting relationships with those around them. Jain (1998) found that organizational cultures that were characterized by traits often associated with collectivism, such as collective decision making, shared values and shared purpose, were among the characteristics of high performing cultures. Defining Corporate Culture Corporate culture is often implicit and the norms that develop in the workplace can be hidden to an outside view. Therefore measuring an intangible object became the task of researchers. To develop a means of measuring the varying degrees of corporate culture, first researchers had to define the terms they were set out to measure. Denison (1984) defined “corporate cultures…as the set of values, beliefs, and behavior patterns that form the core identity of an organization” (p. 5). Van den Berg and Wilderom (2004) preferred the term organizational culture, rather than corporate, and defined the term as the shared perceptions of work practices that can differ between levels, departments and organizations. Corporate culture develops over time as organizations discover best practices for operations. The embedded culture of the organization sets the tone for everyday decisions and processes, and is understood by all employees. Through training, social learning, socialization and observations, new employees begin to understand the culture that is shared among co-workers as they realize the behavior patterns that are acceptable in the workplace. The culture of an organization shares normative information; meaning and value are placed with objects to reinforce the way people behave and think (Cooke & Rousseau, 1988). Employees derive meaning from observed patterns in the work place. The development of a
  23. 23. 15 single culture is a top down process; the leader of the organization determines which values and beliefs they wish to be present in their operations. Through the leader's behaviors and policies, employees learn what is expected of them and how they will be rewarded for positive behavior (Cooke & Rousseau, 1988). Subcultures are a natural development due to the tendency for organizations to operate across different departments and levels. Subcultures hold the same beliefs and values as the dominant culture, but may have different practices for behavior (Cooke & Rousseau, 1988). A production department often has a different culture from the sales department; the production employees value technical efficiency and inter-dependency, whereas sales employees often value fast paced output and individual profitability (Cooke & Rousseau, 1988). A leader who values individualism and encourages individual goal setting will create a culture of competition among his or her employees as each person is set out to accomplish their goals to maximize personal gain. While Hofstede (1980) differentiated among global cultures based on differences in values, organizational culture was defined more among differences in practices (Hofstede, 2001; Van den Berg & Wilderom, 2004). Several empirical studies defined corporate culture in terms of the degree that the culture emphasizes individualism or collectivism in daily operations and goal achievement (Shulruf et al., 2011; Wagner & Moch, 1986), other studies used descriptors of individualism or collectivism to describe the corporation's identity (Denison, 1984; Gordon & DiTomaso, 1992). Shulruf et al. (2011) associated "independence, goals, competition, uniqueness, private, self-knowing, and direct communication" (p. 174) as relating to individualism and "relatedness, belonging, duty, harmony, advice seeking, context dependent, hierarchical, and group oriented" (p. 174) as relating to collectivism. Wagner and Moch (1986)
  24. 24. 16 differentiated between individualism and collectivism in the corporate world by defining individualism as any action which "presumed the importance of self-interest... (and) cooperation is motivated by the contingent satisfaction of personal interests" (p. 281). According to Wagner and Moch (1986), performing a task in a group solely to earn an individual reward would not constitute a collective environment. The researchers defined collectivism as "a condition in which cooperation stems from the pursuit of interests shared among the members of a collectivity" (Wagner & Moch, 1986, p. 282). In their study on corporate culture, Gordon and DiTomaso (1992) rated participants on levels of shared goals, decision making, communication, risk-taking, accountability, action orientation, fairness of rewards, and development and promotion from within. Fundamentally, the degree to which a person agrees with or feels strongly about the actions which fall in the mentioned categories can determine if an individual's preferences tend to be more about their self gain or more towards the collective group. If an individual values independence, competition and prefers self sufficiency, they would rate high on the individualism scale. However, if the person values a sense of belonging and harmony and enjoys being part of a group, they would rate higher on the collectivism scale. Table 1 displays the key word descriptors reported by Shulruf et al. (2003) when developing a new measurement tool for individualism and collectivism. They used eight domains to describe collectivism and seven domains for the individualism descriptors. The sample items were designed to be straight forward and not double ended. The eight collectivism domains were based on established traits that define collectivism and were based on Hofstede's (1980) culture model.
  25. 25. 17 Table 1 Major Domain Descriptors of Individualism and Collectivism (Shulruf et al., 2003) Individualism Domain name Description Sample Item Independent Freedom, self-sufficiency, and control over one’s life I tend to do my own thing, and others in my family do the same. Goals Striving for one’s own goals, desires, and achievements I take great pride in accomplishing what no one else can accomplish. Compete Personal competition and winning It is important to me that I perform better than others on a task. Unique Focus on one’s unique, idiosyncratic qualities I am unique—different from others in many respects. Private Thoughts and actions private from others I like my privacy. Self-know Knowing oneself; having a strong identity I know my weaknesses and strengths. Direct communicate Clearly articulating one’s wants and needs I always state my opinions very clearly. Collectivism Domain name Description Sample Item Related Considering close others an integral part of the self To understand who I am, you must see me with members of my group. Belong Wanting to belong to and enjoy being part of groups To me, pleasure is spending time with others. Duty The duties and sacrifices being a group member entails I would help, within my means, if a relative were in financial difficulty. Harmony Concern for group harmony and that groups get along I make an effort to avoid disagreements with my group members. Advice Turning to close others for decision help Before making a decision, I always consult with others. Context Self changes according to context or situation How I behave depends on who I am with, where I am, or both. Hierarchy Focus on hierarchy and status issues I have respect for the authority figures with whom I interact. Group A preference for group work I would rather do a group paper or lab than do one alone.
  26. 26. 18 Summary Corporate culture is an implicit development overtime and thus presented a challenge to define. Researchers defined organizational culture in terms of characteristics that the culture possesses as well as in terms of the degree of individualism or collectivism present in the organization. Different organizations were characterized by the values they hold as important, as well as differences in daily practices. Due to the large database of traits, researchers have not always agreed on the best definition of corporate culture. A reoccurring theme present in the literature defines corporate culture as the accepted beliefs, values and norms that lead everyday interactions and processes in the work place. Measuring Corporate Culture As there are a multitude of definitions of corporate culture, a generally accepted framework does not exist to measure and compare cultures comprehensively (Wilderom et al., 2000). Researchers studying organizational culture often combined existing tools of measurement to create a new instrument to measure corporate culture specific to their study. While there are a handful of reliable measurement tools that are known worldwide, such as Cooke and Rousseau's (1988) Organizational Culture Inventory (OCI) and Denison's (as cited in Sackman, 2006) Organization Culture Model, researchers become adept at combining methods to produce new tools to measure corporate culture. Van den Berg and Wilderom (2004) asserted that to enhance the opportunity for comparison between cultures, "one may better focus on the degree of sharing certain aspects of employees’ day-to-day organizational work practices" (p. 573). Truskie (1999) stated that a culture can be measured by studying the organizations artifacts, such as the dress code, workplace layout, the value of the members and their underlying assumptions. While Truskie's (1999) first method was more time consuming and complicated, he
  27. 27. 19 stressed the L4 model assessment as a more viable option. The first step of the L4 Model was to conduct interviews and discussions to determine the extent that leaders and members felt that the elements of each of the four cultural patterns, cooperation, inspiration, achievement and consistency, were present within their organization. Members stated the extent that each trait was present on a Likert scale, from "a very great extent to a very little extent" (Truskie, 1999, p. 48). The second step to Truskie's cultural assessment was to verify the cultural patterns reported by employees. Mechanisms included reviewing "organizational design and structure, systems and procedures, and programs and processes" (Truskie, 1999, p. 48). Leaders then compared steps one and two to see if there was agreement between the sources. Truskie asserted that recognizing which culture pattern was absent could assist the leader in creating a counterbalance strategy. Researchers argued that quantitative descriptors of organizational culture are less effective than qualitative methods involving observations, archived materials and field experimentation (Van den Berg & Wilderom, 2004). However, Petty et al. (1995) asserted that measuring culture is better done by combining qualitative and quantitative methods, through descriptions and categories as well as through observations and questionnaires. Cooke and Rousseau (1988) agreed that the best tool combines both methods as they are complimentary approaches. Qualitative methods create rich descriptions of a particular phenomenon as described by the members of the organization. Quantitative methods allow for cross sectional comparisons and assessments (Cooke & Rousseau, 1988). The Repertory Grid Technique is one such measurement tool that combined qualitative and quantitative methods (Krafft, as cited in Sachman, 2006). This technique provides a framework for conditions that are needed for an effective change program. However, the Repertory Grid Technique creates an individualized picture for the surveyed organization and does not allow for generalizing across industries.
  28. 28. 20 Wagner and Moch (1986) used Breer and Locke’s 83-item questionnaire as a conceptual basis to create their own hybrid instrument to measure the varying degrees of individualism- collectivism in four non-academic organizations in a Midwestern University. Similar to Breer and Locke (as seen in Wagner and Moch, 1986), the new instrument measured beliefs, values and norms, but adjusted the items on the 7-point Likert scale questionnaire to include 34 questions. The questionnaire instructed participants to state their position on how their organization handles every day interactions and processes in order to assign a degree of individualism or collectivism to each organization. Wagner and Moch (1986) validated their results by comparing expected values of inter-item correlations with the actual observed correlations. This study found that many employees in the maintenance and craft associations held individualistic values, but not necessarily individualistic beliefs and norms. However, craftspeople viewed their association on the whole as more collective (Wagner & Moch, 1986). Petty et al. (1995) combined quantitative and qualitative methods to develop a 55-item survey to measure corporate culture. They first collaborated with employees to discover what behaviors they believed should be occurring in their environment and were reflective of the company's core values. Sackman's (2006) Culture Assessment also used employee focus groups to determine defining characteristics of the existing culture. Petty et al. (1995) administered their survey to 832 employees in 12 organizations in the electric utility industry; the same survey was administered one year later to 842 employees in the same 12 organizations. The survey measured culture along four dimensions: teamwork, trust and credibility, performance and common goals, and organizational functioning (Petty et al., 1995). Sackman's (2006) data collection consisted of interviews and workshops with top managers, analysis of documents, monitoring and informal talks with all levels of employees. Petty et al. (1995) asked employees to rate their extent of
  29. 29. 21 agreement on observed behavior representing the four dimensions, from strongly agree to strongly disagree. Responses were averaged for each organization and compared to performance data from year one and year two. Sackman's (2006) Cultural Assessment recognized areas in need of improvement, and aided in creating an action plan. Like the Repertory Grid Technique, the Cultural Assessment model does not allow for comparisons because the descriptors were developed specifically for the surveyed organization. Cooke and Rousseau's (1988) Organizational Culture Inventory, the OCI, is a self- scoring, multilevel diagnosis tool based on 12 thinking styles. Cooke and Rousseau's (1988) 12 interpersonal and task-related styles are humanistic-helpful, affiliative, approval, conventional, dependent, avoidance, oppositional, power, competitive, competence/ perfectionist, achievement, and self actualizing. Surveyed participants were asked to rate the level that each behavior on the scale would help them "fit in and meet expectations in their organization" (Cooke & Rousseau, 1988, p. 257). Like Denison's Organizational Culture Model (Denison, as cited in Sackman, 2006), the OCI is a circumplex model representing the degree that surveyed employees feel each trait is important in their organization's processes. The extent that surveyed employees shared consensus among the indexes suggests the strength of the culture; substantial member agreement suggests a strong culture. A stronger culture would be indicative of employees who agree on the same specific indexes that are key to fitting in and meeting expectations. The results of employee perceptions were compared to the OCI of desired traits for the organization. The OCI assisted managers in clarifying their future direction and expressing their vision for change. Denison's Organizational Culture Model (Denison as cited in Sackman, 2006) is perhaps one of the clearer and reliable methods for measuring culture. This method was used in over 6,000 organizations worldwide. Denison and his team found four traits that were consistently
  30. 30. 22 associated with higher performing organizations: adaptability, mission, involvement and consistency. Each trait was characterized by three indexes, resulting in a total of 12 indexes. Denison (as cited in Sackman, 2006) created a 60-item survey to measure the extent that each of the 12 indexes were present in a corporate culture. Responses were averaged to present an index score, as seen in Figure 1; the numbers represent the percentage of surveyed companies who scored lower than the subject company in each index. According to this sample, two of the three measures for adaptability are low, customer focus and creating change, two of the three indexes for involvement are low, and all three indexes for mission are below 50%. Capability development, a trait of involvement, is the lowest scoring index, and organizational learning is the highest. According to the Organizational Culture Model, there are a number of symptoms present in this corporate culture that require attention to maximize organizational performance. Figure 1. Denison's Organizational Culture Model (Denison, as cited in Sackman, 2006)
  31. 31. 23 Unlike Wagner and Moch (1986), who applied an existing tool to measure corporate culture, Shulruf et al. (2011) attempted to identify the most efficient tool for measuring individualism and collectivism. Shulruf et al. (2011) performed reliability tests on existing measurement instruments to establish the most reliable test to adapt to organizations, rather than individuals. The researchers assessed the existing instruments before choosing the AICS developed by Shulruf et al. (2007) as the most reliable, and therefore most appropriate to use in organizations when measuring degrees of individualism or collectivism. Shulruf et al. (2011) pointed out the faults in the other established measurements of individualism and collectivism; the IND-COL(Hui, 1988) did not have high levels of reliability (α ~.60), reliability could not be replicated in the SCS (Singelis, 1994), and the researches stated that the Horizontal-Vertical Collectivism-Individualism scale (Singelis & Triandis, 1995) had been widely used but an acceptable level of reliability had not been reported. The AICS had the highest level of reliability, α >.70 (Shulruf et al., 2011). Across the varying tools to measure collectivism or individualism, the instruments required individuals to rate how much they agree with, or associate with, domains relating to either collectivism or individualism. The results were either reported for the individual or generalized to a larger group or organization. Summary There are a multitude of measurement tools to measure an existing corporate culture. Several well respected and valid tools include the OCI, Denison's Organizational Culture Model and the AICS. While qualitative methods of measuring culture, such as surveys, are easily accessible and financially feasible, researchers agreed that in order to develop a rich, clear description of the culture, a combination of qualitative and quantitative methods should be used. Through surveys, interviews, observations and focus groups, researchers can develop both a
  32. 32. 24 description of the perceived culture, as well as a description of the actual culture. Corporate Culture and Ideal Culture Traits for Predicting Success Once corporate culture was defined and researchers possessed a reliable tool to measure the differences in corporate culture, researchers then moved to detecting a relationship between corporate culture as a predictor of performance. Denison and Mishra (1995) combined both quantitative and qualitative measurements in their study on the culture-performance link. They examined 764 organizations and CEO perceptions to link involvement and adaptability as indicators of organization effectiveness (Denison & Mishra, 1995). They first performed case studies involving five firms in order to identify the four most dominant traits that are linked to effectiveness. A quantitative study was then used to analyze the degree to which the CEO’s in the 764 organizations felt their corporation’s culture exemplified each trait. Finally, Denison and Mishra noted the corresponding financial performance of each organization. Denison and Mishra (1995) found that the level to which organizations possess certain traits can predict profitability, specifically involvement, consistency, adaptability and mission. Involvement and consistency had the strongest positive relation to performance, but varied on the effectiveness of short and long-term duration. Corporate culture was one of Joyce, Nohria and Roberson's (2003) primary traits for business success in their 4+2 Model. They maintained that a performance oriented culture was the best indicator for firm performance. In their study involving 40 industries, companies that possessed and excelled in each of the four primary traits, strategy, execution, culture and structure, and at least two of the secondary traits, talent, innovation, leadership, and mergers and partnerships, were 90% more likely to be considered a winning company (Joyce et al., 2003). Winning companies outperformed the competition in every financial measure from total return to
  33. 33. 25 shareholders, sales, assets, operating income and return on invested capital during both the first and second five-year periods. In the decade-long study, investors in the winning companies "saw their money multiply nearly tenfold, with total return to shareholders of 945 percent" (Joyce et al., 2003, p. 15). Joyce et al. found that there is a winning combination of traits that a successful organization must possess; when a company lacked any one of the four primary or two secondary traits, the researchers saw the organization's stocks and financial measures plummet. Joyce et al. (2003) discovered the 4+2 model traits through empirical research based on surveys, in-depth studies and extensive data collection. However, the researchers did not find a correlation between the different categories of culture; the winning companies did not consider themselves predominantly hierarchal, cooperative, or competitive. Winning cultures were instead defined by four mandates: inspiring all to do their best, rewarding achievement with praise and pay, creating a challenging and satisfying work environment and establishing and abiding by clear company values (Joyce et al., 2003). Winning companies "constantly sought to design and support a culture that promoted high levels of individual and team performance, and that held employees, not just managers, responsible for corporate success" (Joyce et al., 2003, p. 137). The researchers found that the ideal culture nurtured feelings of loyalty towards employee teams and the company as a whole. Although the winning organizations might not have defined themselves as collective, they possessed and valued collective tendencies. Collectivism Denison (as cited in Sackman, 2006) stated that effective companies build their organizations around teams and one of the four traits linked to effective organizations was involvement. The involvement trait was measured by three indexes, one of which was team orientation, defined as "value placed on working cooperatively toward common goals for which
  34. 34. 26 all employees feel mutually accountable. The organization relies on team effort to get work done" (Denison, as cited in Sackman, 2006, p.14). The degree that organizations utilize team work and other collective practices was related to increased performance across a variety of industries. Denison (as cited in Sackman, 2006) found that involvement was positively linked to short and long-term performance. In the two year correlational study performed by Petty et al. (1995) between organizational culture and performance, the researchers discovered that team work was positively related to organizational performance. The items associated with teamwork were those behaviors which included "sharing information, helping others with their work, seeking ways to help the work group meet its goals, involving those affected by a course of action, sharing resources, making sacrifices for the good of the group, and being rewarded for working as a team" (Petty et al., 1995, p. 488). While the other three dimensions, trust and credibility, organizational functioning, and employee safety and health, also proved to have a positive correlation to performance in year one, only team work was positively related to performance at both time periods. Truskie asserted that the ideal culture is well defined, balanced and combines the positive elements from family, social institutions, the scientific community and the military/law establishments. In Truskie's (1999) L4 Model for an organizational leadership strategy, the positive elements of family included collective practices, such as caring, sharing and teamwork. According to Truskie (1999), “a balanced culture exerts positive influence on the behaviors of its employees" (p. 6). The collective practices, those related to the family element, need to be present for a culture to be considered balanced. Truskie (1999) asserted that a culture that possessed a combination of each of the four units would have the best chance for success.
  35. 35. 27 In Sheridan's (1992) study involving six international accounting companies, he found that cultures varied among firms belonging to the same parent company and that firms that valued team work experienced higher employee retention rates. Three of the six firms were characterized by a culture that valued interpersonal relationship principles of team orientation and respect for people. The other three firms were characterized by having work task values of details and stability (Sheridan, 1992). Sheridan's (1992) report stated, "Professionals hired in the firms emphasizing the interpersonal relationship values stayed 14 months longer than those hired in the firms emphasizing the work task values" (p. 1050). For the accounting firms, Sheridan estimated the loss at $9,000 to replace en employee who had been with the firm for one year but to replace an employee who had been with the firm for three years or more, the loss rose to $47,000. The cost to organizations due to low employee retention is substantial; to decrease this loss, firms are encouraged to adopt cultures that value team orientation and respect for people. Adaptability Researchers Kotter and Heskett (1992), Touminen, Rajala and Moller (2004), and Smith (2002) found adaptability to be a strong predictor of firm success. Smith (2002) referred to adaptability as organizational change, what he defined as "any intentional change in the way the organization does business that affects the strategic position of the organization vis-à-vis its competition" (p. 26). Touminen et al. (2004) referred to adaptability as a firm's ability to capitalize on changing market and technological opportunities. Firms are required to adapt their processes after a variety of events, including mergers, acquisitions, business expansion, development of new technology systems, process improvement, and restructuring or downsizing of firm size. A firm's ability to successfully adapt to changes in their environment is extremely difficult; Smith (2002) cited a 30% success rate for organizational change programs among 140
  36. 36. 28 organizations. An organization's ability to adapt to changes in their internal and external environment, whether strategically planned or forced, is positively correlated to high financial returns (Smith, 2002). The firms that successfully implemented and followed through with their change programs showed increased profitability over a ten-year period (Smith, 2002). Touminen et al. (2004) conducted a study with 140 managing directors from 142 firms through a questionnaire that measured the degree of their firm's adaptability and innovativeness. "The adaptability construct was operationalized by using previous measurement items, such as deployed mode of technology, customer intimacy and competitor emphasis, structural arrangements and managerial systems in combination with variables developed for this inquiry" (Touminen et al., 2004, p. 498). The researcher's survey contained 23 items, based on a five- point Likert-type scale ranging from poor to excellent. The 23 items presented an overall perception of degree of adaptability for each firm as reported by their managing directors. The researchers found that adaptability had a strong positive correlation with a high level of innovativeness (Touminen et al., 2004). Customer relationships and technology sharing were the two strongest factors of adaptability that influenced the degree of firm innovativeness. The researchers suggested the need for a longitudinal study to replicate the correlation between adaptability and innovativeness. Roi (2006) also found a positive, significant relationship between firms with adaptive cultural norms and net income performance, r =.355, .373. Roi's participants consisted of 271 executives from 94 corporations; his study measured net income growth over a ten-year period. Denison (1984) used a survey type index to collect data on corporate culture that permitted him to hypothesize which traits supported sustained performance across industries. Denison’s survey technique allowed individual employee perceptions to characterize the general
  37. 37. 29 culture of each organization. Denison’s (1984) instrument questionnaire, the Survey of Organizations, was created to measure culture along four dimensions: involvement, consistency, adaptability and mission. Denison’s questionnaire was distributed to 43,747 participants across 34 companies in 25 industries. The responses of the questionnaires were averaged in order to assign a single score for the entire organization in each of the four indexes. Gordon and DiTomaso (1992) measured adaptability and stability in insurance organizations by measuring participant-reported answers on levels of action/orientation and innovation/ risk taking. They found that "industries perform best when their culture fosters adaptability rather than stability" (Gordon & DiTomaso, 1992, p. 794). Koberg and Chusmir (1987) also found that innovative culture was positively related to job satisfaction and negatively related to the propensity to leave among a survey of 165 managers. Innovative cultures were described as creative work environments where challenge and risk taking were the norm. Additionally, according to Koberg & Chusmir (1987), ambitious employees thrived in an innovative environment. Culture Strength Companies with strong cultures outperform organizations with weak cultures (Deal & Kennedy, 1982; Kotter & Heskett, 1992; Gordon & DiTomaso, 1992; Sorenson, 2002). Roi (2009) defined a strong culture as one "where most managers share a set of consistent values and practices for conducting business" (p. 19). One of the earlier studies on culture strength, performed by Deal and Kennedy (1982), examined 80 companies over six months and found that the 18 with strong cultures were uniformly outstanding performers. They also found that strong cultures inspired loyalty. Of the outstanding organizations, Deal and Kennedy (1982) found that all had a "rich and complex system of values that were shared by the employees" (p. 14). In their
  38. 38. 30 research, Deal and Kennedy (1982) found that strong cultures allow employees to understand exactly what is expected of them. They estimated that a company with a strong culture could gain up to two hours of productivity per employee per day. Strong cultures remove much of daily uncertainties that employees suffer from because they "provide structure and standards and a value system in which to operate" (Deal & Kennedy, 1982, p. 16). Deal and Kennedy (1982) also asserted that a strong corporate culture is the key to corporate success. Similar to Denison and Mishra (1995), who studied the phenomenon of culture strength as a predictor of performance across a variety of organizations, Kotter and Heskett (1992) performed a ten-year long study involving 207 US public firms in 18 industries to explore this relationship. The researchers hypothesized that the presence of a strong culture, represented by the degree to which the members of a firm all share the beliefs and values which constitute their culture, should be associated with higher goal alignment among organizational members and promote an unusual level of motivation among employees. Kotter and Heskett (1992) collected data from the top six officers or managers of the firms rather than employees across ranks and used both quantitative and qualitative measurements. The researchers administered questionnaires to their participants who used a self-report method to define their organization's culture. To confirm the reliability of their measurement tool, Kotter and Heskett (1992) used a more qualitative approach by interviewing 22 select organizations of the original 207 firms in order to validate their results. They found a positive correlation between perceived culture strength and long-term economic performance during the ten-year study. However, it was noted that stronger correlations existed when the corporate culture stressed the importance of adaptability and change. Kotter and Heskett (1992) found that strong culture played such a significant role in the lasting performance of an organization that 90-95% of the firms in their
  39. 39. 31 study failed to have a strong enough corporate culture that enhanced economic performance. Sorenson (2002) tested the hypothesis that strong cultures can be a reliable predictor of firm performance using the data that Kotter and Heskett (1992) collected. Sorenson used performance data from the COMPUSTAT database and measured performance on the yearly return on invested capital for the three years following Kotter and Heskett's (1992) original study. Sorenson (2002) discovered that widespread agreement regarding acceptable work behaviors and values increased behavioral consistency and resulted in higher firm performance. Although Sorenson confirmed that organizations with strong cultures are more likely to experience positive financial growth, he found that in volatile markets, strong cultures did not outperform weak ones. Sorenson (2002) did not differentiate between management levels, but asserted that a strong culture is one where the norms and values are widely shared and strongly held throughout the organization and across all hierarchal levels. Sorenson (2002) claimed that strong cultures prosper from "enhanced coordination and control within the firm, improved goal alignment between the firm and its members, and increased employee effort" (p. 71). Sorenson (2002) asserted that strong cultures enhance the reliability of firm performance as long as organizational routines are consistent and the processes are well adapted to change in order to meet the demands of the environment. If heterogeneity in beliefs exists within the culture, then employees will spend more time debating their options for behavior and task accomplishment rather than achieving their goals (Sorenson, 2002). Gordon and DiTomaso (1992) investigated the degree that culture strength and culture values predicted performance in 11 US Insurance companies. Unlike Denison (1984), who included participants across industries, researchers Gordon and DiTomaso (1992) concentrated on one field over a five-year period. Similar to Kotter and Heskett (1992) who surveyed
  40. 40. 32 managers, Gordon and DiTomaso (1992) examined the questionnaire responses of participants from the top four-to-five levels of management in 11 insurance firms. The researchers used Hofstede's (1990) measurement of organizational culture, but adapted it slightly to construct the measurement specifically for an organization rather than the individual. Comparable to Kotter and Heskett (1992), Gordon and DiTomaso (1992) measured culture strength on the consistency of answers and level of agreement among the managers on types of values that define their organization. Gordon and DiTomaso (1992) found that strong cultures, those in which managers closely agreed on values and practices, were related to high financially performing firms. Gordon and DiTomaso (1992) reported that, "the greater the culture strength, the stronger the firm's financial performance will be in subsequent years" (p. 787). Of the 11 participant organizations, the more consistent responses of strong culture were positively related to organizational performance. Strong cultures offer the support and tools that allow employees to work at maximum efficiency, as well as guide lower level decision making to align with corporate goals. Denison (1984) only reported the results of two of the 22 indexes measured in his study, organizations of work index and decision making practices, and the resulting predictions they presented on the long-term success of the participant corporations. Both index terms refer to management systems, and both are better predictors of long-term success than the other 20 indexes measured (Denison, 1984). Organizations with employees who reported having a well- organized work environment experienced significantly higher return on investments, often twice as high as the companies with the lowest level of organized work environment. The results of decision making practices had a similar, positive correlation; however it was more gradual over time. The degree that a company possessed a higher organized work index, as well as consistent decision making practices directly related to the strength of their culture. Overall, the system-
  41. 41. 33 level attitudes were the best predictors of performance, specifically long-term performance (Denison, 1984). Although Denison (1984), Gordon and DiTomaso (1992), Kotter and Heskett (1992), and Sorenson (2002) found culture strength to be positively related to financial performance, Van den Berg and Wilderom (2004) argued that culture strength is too limited a variable because it only hints at employee consensus. When the majority of employees value the same behaviors and practices in their organization, that organization can be said to possess a strong culture. Cooke and Rousseau (1988) suggested that the absence of a strong culture was a disadvantage. "We believe that the absence of strong or consistent norms is an attribute of change or instability" (Cooke & Rousseau, 1988, p. 251). Summary Researchers agreed on three ideal traits that when present in an organization's culture are reliable means to predicting the firm's future success. Collective practices, such as team work, increased performance across multiple time periods, not solely at one point in time (Petty et al., 1995). Denison (as cited in Sackman, 2006) found that more effective organizations embraced involvement tendencies, characterized by collective practices, which were also positively linked to short and long-term performance. Collective organizations experienced higher employee retention rates than less collective organizations from the same parent company (Sheridan, 1992). Adaptability was the second trait that was positively linked to organizational performance. An organization's ability to adapt to changes was related to higher financial returns (Smith, 2002). Adaptability had a strong positive association with a high level of innovativeness and net income performance, and was positively related to job satisfaction (Koberg & Chusmir, 1987; Roi, 2006; Touminen et al., 2004). Culture strength was the third trait that was positively
  42. 42. 34 related to organization performance. Strong cultures outperform organizations with weak cultures; employees from strong cultures are more loyal to their organization and experience more productivity throughout the work day (Deal & Kennedy, 1982). Strong cultures are positively related to long-term economic performance (Gordon & DiTomaso, 1992; Kotter & Heskett, 1992; Sorenson, 2002). Measuring Performance Studies on the relationship between corporate culture and performance used a variety of measurements for performance, often employing methods that are specific to the surveyed industry. Several researchers performed longitudinal studies ranging from two-year to ten-year- long studies. Denison (1984) measured performance in organizations with a variety of financial ratios, such as return on investment (ROI) and equity and sales, and averaged the figures over six years. Sorenson (2002) also measured performance on both return on invested capital and ROI, as well as return on sales (ROS) and net income growth. Denison (1984) recognized that financial ratios were not always the best indicator of corporate performance, but settled on income/investment and income/sales ratio as measures of performance. The financial ratios were used to predict performance for the five years following the distribution of Denison's (1984) questionnaire. Kotter and Heskett (1992) used return on investment like Denison (1984), but also averaged the yearly increase in net income and yearly increase in stock price. Researchers Gordon and DiTomaso’s (1992) study measured performance in an unusual method because of the "unique ownership structure" (p. 790) of the insurance firms which ruled out using traditional measures of performance, such as ROI and ROS. Rather, the researchers measured performance based on growth of assets and growth of premiums over six years. The tools for measuring performance in the mentioned studies were organization-specific; a single tool could not
  43. 43. 35 generalize performance across industries. In their study of 12 organizations, Petty et al. (1995) used a summary of five objective measures for performance: operations, customer accounting, support services, marketing and employee safety and health. Participant companies received a score out of 1,000 in each category as well as a combined overall financial score. All five measures were developed internally in each company for the purpose of evaluation, not by the researchers, and prohibited generalizing to other organizations. A strength of this study was that Petty et al. (1995) correlated the data for each of the five categories at two points in time, approximately one year apart. In their study of 160 companies from 40 different industries, over a ten-year period, 1986-1996, Joyce et al. (2003) measured performance by total return to shareholders, TRS. The researchers compared the TRS of the participant companies against the TRS of other firms within the same industry. The researchers found that "an individual organization's TRS sometimes reflects not its own performance so much as the state of its industry" (Joyce et al., 2003, p. 9). To compare organizations within the same industry, the researchers ensured that participant organizations were roughly similar in their size, scope, financial numbers, TRS and future prospects. According to Wilderom et al. (2000), multidimensional performance measurements, including nonfinancial and perceptual indicators are the most effective means to measure performance. Purely financial ratios, such as ROI, return on sales, and return on equity, while being easily accessible, are not the most effective measures for performance (Wilderom et al., 2000). Due to the lack of consistency in accounting measures, as well as their proneness to manipulation, Wilderom et al. (2000) suggested using multidimensional measures that address all stakeholders. According to this approach, "an organization is considered effective if it
  44. 44. 36 balances the competing claims of various relevant organizational stakeholders and thus ensures their continuing cooperation" (Wilderom et al., 2000, p. 203). Financial performance is only one measurement of firm effectiveness and is only an indicator of short-term performance, whereas stakeholder satisfaction is viewed as an indicator of long-term performance (Wilderom et al., 2000). Summary Researchers used a variety of financial ratios to measure the performance of organizations. Several studies measured performance at one point in time, others measured it over a span of five or ten years. However, researchers agreed that organizations may strive for more than financial gain. Therefore, to accurately measure performance, both financial and multidimensional measurements should be used. These include return on investment, return on invested capital, return on sales, net income growth, and total return to shareholders. Measuring stakeholder satisfaction in accordance with financial ratios will present the most accurate measurements of firm performance. Limitations of Reviewed Studies There are several limitations of the studies discussed in the literature review. Studies which failed to find a link between organizational culture and performance are underrepresented in this review. Several factors in each reviewed study pointed to problems with generalization. There were issues with construct validity of defining and measuring culture and performance and the inclusion of intraorganizational participants who were not representative of the entire organizational culture. Additionally, both the independent variable, corporate culture, and the outcome variable, organizational performance, were defined by different terms across the studies leaving less room for generalization. Gordon and DiTomaso (1992) did not specify how many
  45. 45. 37 managers were involved within the top four-to-five levels of management, only the mean number of participants from each firm was reported. Both Gordon and DiTomaso (1992) and Kotter and Heskett (1992) used the opinions of managers or CEO’s in order to define the corporate culture of each participant organization. It is crucial to recognize that the views of managers do not always represent the views of the entire employee population. In order to achieve an accurate depiction of corporate culture which can be generalized to the entire organization, a random sample of all employees across all hierarchal divisions would supply the most precise description (McMillan, 2010; Wilderom et al., 2000). Additionally, as Gordon and DiTomaso (1992) recognized, their study measured corporate culture at one single point in time, but evaluated the performance over a five-year span, from 1982-1987. Likewise, Kotter and Heskett (1992) measured the performance of their sample firms over 10 years, but only accounted for the corporate culture measured at one point in the 10 years. Neither study considered the possibility of the corporate culture of the participant organizations changing over the span of their research. The nature of advancement in industries and technological progress dictates that organizations grow and change over time. Additionally, the variables measured in Gordon and DiTomaso’s (1992) study were specific to short-term company performance predictors. These variables have not been proven to have long-term effect on performance, suggesting more research would be needed to validate the results. The reviewed studies also lacked consensus if the dimensions found to be positively related to firm performance stood true for short-term or long-term performance. While Truskie (1999) presented four types of dominate cultures, he stated that the leaders must find an adaptive balance among the four: cooperation pattern, consistent pattern, achievement and inspiration pattern. "Not one culture can lead to long-term success for the
  46. 46. 38 organization" (Truskie, 1999, p. 13). The ideal corporate culture is one that combines degrees of individualism and collectivism to meet the needs of the employees and align goals with the mission and value statement. Truskie (1999) stated that not one culture trait is more beneficial to the organization, but the ideal model adopts the positive elements from each of the inspiration, achievement, cooperation and consistent cultures. Truskie went on to state that adopting just one of the four traits is simply a strategy for short-term success or change. Although the reviewed studies argued that collective work practices will lead to a more profitable organization, Truskie (1999) claimed other traits must be present in the culture as well. "Organizations that strive to achieve integrated and balanced cultures are more successful, more adaptive, and thus better able to sustain over longer time periods than organizations whose cultures are incomplete and out of balance" (Truskie, 1999, p. 21). A culture that values collectivism and does not include other traits can become unbalanced. Management by committee can occur, leaders may hesitate when making decisions before consulting a team, or the leaders can be viewed as indecisive. Too much attention can be placed on creating a team or committee to deal with every new situation, thus taking away time spent on creating solutions (Truskie, 1999). Another limitation to this study lies in the possibility that when in work groups members may fall prey to what is known as the Ringlemann Effect (Forsyth, 2010). According to Forsyth (2010), members have a tendency to become less productive when working with others. Creating a collective work group may not always be the best option. Several studies found that collectivism can inhibit certain characteristics that a firm might want present in their corporate culture (Goncalo & Staw, 2004). When a leader desires creativity from his employees, a collective team operates below par compared to other teams that are not as collective in nature.
  47. 47. 39 Therefore, it is up to the leaders of an organization to choose when to adopt collective tendencies to maximize performance. Denison (as cited in Sackman, 2006) referred to a significant limitation in the contradiction between adaptable yet consistent processes. Values and behaviors are at the surface of corporate culture; traits impacting both can be measured and compared. However, underlying assumptions and beliefs of employees are much harder to compare and form generalizations about. Truskie (1999) asserted that the challenge to creating a strong, adaptive, collective culture is to balance opposing forces. This allows the firm to remain adaptive and utilize the strengths of opposing strategies. An organization must remain consistent with policies and practices, but have the self awareness to understand when adoption of new practices would maximize profits. According to Deal and Kennedy (1982), "strong cultures are not only able to respond to an environment but they also adapt to diverse and changing circumstances" (p. 195). Strong, consistent cultures adjust to new challenges and change by referring to their values and established rituals which continue to guide their actions towards a successful path. Achieving this balance between opposing strategies is a key challenge to an experienced leader. A final limitation is that the reviewed studies neglected to state to what degree the beliefs and values must be shared among all employees in order for the culture to be considered strong. The distinction is unclear, whether having 50% agreement among employees constitutes a strong culture or if that number must be above 85%. This holds true for the other dimensions; at what point is a company adaptable, or strong enough, or collective enough for it to operate at maximum performance? The reviewed studies failed to build upon previous research in order to determine the most accurate and appropriate measurement of culture and performance, therefore the studies leave room for further research in this area.
  48. 48. 40 Chapter Summary Across 30 years of research, corporate culture was defined in many ways using a multitude of descriptors. Whether it was defined in terms of individualism or collectivism, or by the characteristics that are present in work group processes, empirical research found that the degree to which employees identify with either individualism or collectivism is a significant predictor of the firm’s future success. Goncalo and Staw (2004) found that “organizations should adopt collectivistic values because they promote cooperation and productivity” (p. 96). Kotter and Heskett (1992) linked the strong corporate culture to HP’s lasting productivity from the start of the corporation through the late 1990's. One can infer that the creation of a strong corporate culture, one with collective practices and high in adaptability, will allow the organization to experience increased effectiveness and higher productivity.
  49. 49. 41 Chapter III- Methodology Introduction In order to further develop or improve one's corporate culture, an organization would benefit from adopting certain practices that have been known to support firm success. Empirical research supports the hypothesis that an organization’s corporate culture, specifically a strong culture which emphasizes adaptability and contains elements of collectivism, can be a strong predictor of the future performance of a firm (Denison, 1984; Denison & Mishra, 1995; Gordon & DiTomaso, 1992; Kotter & Heskett, 1992). Therefore, a firm that wishes to experience long- term profitability would benefit from adopting a corporate culture that incorporates these elements. Previous research recognized that the established tools to collect data on corporate culture and performance involved both qualitative methods, such as open-ended questionnaires and employee focus groups to determine the specific culture of an organization, as well as quantitative methods such as tracking financial measurements (Denison, 1984; Gordon & DiTomaso, 1992). After reviewing the advantages of each method, the researcher carefully selected the research design and instrumentation based on design appropriateness to answer the research questions. The following research questions were addressed in this study: 1. How is corporate culture best defined and measured? 2. What traits of corporate culture are related to productivity and firm effectiveness? 3. How would an organization adopt these traits into their corporate culture? ResearchDesign This project developed a survey for United States-based small to medium organizations that seek to maximize their firm's performance. Using research and development design, a 35 item questionnaire and accompanying handbook was created to guide corporations in adopting a
  50. 50. 42 more collective and successful corporate culture. The survey questionnaire was designed to measure the existing culture to determine if a company lacked elements of collectivism, adaptability and culture strength and would benefit from adopting new policies and practices. The final stage of the project was to create a handbook that would offer executives, leaders and scholars an applicable tool to refer to in order to maximize their current corporate culture. The handbook was created to answer research question #3, how would an organization adopt these traits into their culture. Neither the survey nor handbook were field tested due to time and funding limitations; although the survey was peer reviewed for ease of use and comprehension. Both instruments bridge the gap in literature on the culture-performance link. The decisions regarding the development of the handbook and survey are discussed in the following sections. Instrumentation The non-experimental research utilized for this project could be classified as analytical. The corporate culture-performance link was investigated by analyzing documents, records, and other research to determine the best means of answering the research questions. The most effective way to measure corporate culture, as revealed in the literature review, is through qualitative and quantitative methods. Quantitative methods of collecting data to measure corporate culture are less expensive and can cover large sample populations. Quantitative methods also allow the possibility for generalization and comparison across industries and tend to allow greater objectivity (McMillan, 2012). Qualitative methods, such as employee interviews and observations are more costly and require a greater amount of time to collect data. Therefore, to ensure ease of use by executives or leaders in an organization, a quantitative survey, titled "Measuring Collectivism, Adaptability and Strength in Your Corporate Culture Survey", was created for this project. The next step involved extensive research, this included defining traits
  51. 51. 43 that an organization would want to incorporate into their culture, and determining when a corporation needed to update their current culture. Next, the researcher developed a preliminary survey and requested peer feedback for accuracy and appropriate fit. Finally, preliminary product revisions were made based on the reviewer's feedback. Based on the literature review, a respected and reliable tool to measure culture is the AICS. A comprehensive tool does not currently exist that measures collectivism, adaptability and culture strength, thus requiring the adaptation of standardized tools. After reviewing the established tools to measure culture, the researcher combined the AICS and Shulruf's et al. (2003) model of collectivism to create a new survey tool to measure the degree of collectivism, adaptability and strength present in a culture. This survey accomplished the project objectives by creating a tool to best measure the three traits of corporate culture that were linked to higher financial performance. The second phase of instrumentation was the creation of the handbook, "Creating a Collective Corporate Culture: A Small Business Guide to Maximize Performance". The handbook was designed to be a resource guide for executives to refer to in order to ensure their current culture was operating at maximum efficiency. The handbook entailed extensive research on how to adopt the three traits that contribute to increased firm performance, as well as which activities and exercises could be implemented in the workplace to increase the level of collectivism, adaptability and culture strength. Developing the Survey The purpose and objective of the survey was to measure three specific traits of corporate culture, collectivism, adaptability and strength, as these traits have the strongest predictors of financial performance (Denison, 1984; Gordon & DiTomaso 1992; Kotter & Heskett, 1992). The
  52. 52. 44 target population of the survey was small businesses with fewer than 1,500 employees. According to Kraft and Roth (as seen in Sackman, 2006) medium sized enterprises are the most profitable based on the OASIS (Organizational and Strategy Information Service) model of culture that compares market environment and organization strategy with various performance measures, such as ROI. Kraft and Roth (as seen in Sackman, 2006) stated that "the highest profitability would be expected for small enterprises (<1,500)" (p.10) due to less bureaucracy and fewer hierarchy levels, resulting in less political intrigues. Therefore, the survey was designed for use in businesses with fewer than 1,500 employees. The questions were worded carefully to be clear, understandable and unbiased (McMillan, 2012). The survey was designed to be aesthetically pleasing, using at least 10-point font. The survey included directions for executives administering the survey, as well as instructions for participants taking the survey. The directions were clear to prevent any ambiguity of where or how to respond, and what to do when complete with the survey. The survey included less than 40 items to prevent participant fatigue, and to help ensure at least a 70% response rate, a rate which McMillan (2012) states is adequate to allow for generalizing. Self-report surveys permit employees to report on their perceptions of reality, which leads itself to internal credibility because employees are more likely to accept the results of the survey (Ashansky, Broadfoot, & Falkus, 2000). The survey included questions about daily operations in the work place, values, behaviors and other relevant questions in order to assign a level of individualism or collectivism at the corporate level. Ashansky et al. (2000) stated that "organizational culture may be rooted in perceived practices" (p. 133), therefore the survey was designed to measure the perceptions of employees from all hierarchal levels of the organization. The survey was predominantly
  53. 53. 45 designed based on the AICS; the researcher reviewed the items from the AICS that corresponded to collectivism and modeled the collectivism items on the survey after the AICS dimensions (Shulruf et al., 2007). The AICS was used as a reference for the survey because it boasted the highest level of reliability, α >.70, was used across a range of populations, and the test is publically available (Shulruf et al., 2011). The researcher also reviewed the Principle Component Analysis of Adaptability Survey created by Tuominen et al. (2004). The adaptability items on the survey were modeled after the Principle Component Analysis of Adaptability Survey (Tuominen et al., 2004), but were adapted to specifically measure innovation and change programs, rather than product-specific items. By using reliable and established measurement tools for collectivism and adaptability as a basis for the survey the researcher attempted to establish validity for the questionnaire (McMillan, 2010). As the survey was not field tested for use, the reliability of the created survey was not applicable; however the validity of the inferences created from the instrument was strong based on the fact that the items are comparable to the items from standardized instruments. It can be expected that scores from the created instrument will correlate highly with the AICS as a measurement of collectivism, resulting in construct validity (McMillan, 2012). The created survey is therefore an appropriate and reasonable instrument to evaluate the degree that a culture possesses collective, adaptable and strong traits. All ten peer reviewers stated that the survey adequately appeared to measure the target variables, resulting in face validity. Based on the fact that the survey measured the three traits that an organization needs to be effective, the survey is considered an effectiveness profiling instrument (Ashansky et al., 2000). Although several studies used managers’ perceptions of work practices to determine the current culture (Gordon & DiTomaso, 1992; Kotter & Heskett, 1992), in order to achieve the
  54. 54. 46 most accurate representation of the current culture, the survey was designed to measure a range of employees at different hierarchal levels in the organization. The survey was intended to be distributed via paper or electronically. The survey was designed to offer executives the opportunity to measure the degree of consensus among employees on daily practices, beliefs and values that are observable and reportable. The survey items that measure each of the three traits were adapted from existing instruments for measuring each aspect of culture (Shulruf et al., 2007; Tuominen et al., 2004). Fifteen items measured collectivism (1, 2, 4, 5, 8, 10, 13, 15, 16, 17, 18, 22, 24, 26, 33); items 1, 13, 17 and 22 measured employee's perceived opinion that their organization sets group goals and emphasized team work. Items 10, 24 and 22 measured perceived collective efficacy in the workplace, and items 18 and 26 measured the perceived level of esprit de corps present in the organization's culture. Ten items measured perceived adaptability of the organization (3, 6, 11, 14, 19, 21, 23, 27, 30, 34). Items 6, 21 and 34 measured the degree that employees felt that their organization and leaders initiate a proper change program; items 11, 14, 21 and 30 measured the degree that employees perceived that their organization and leaders encourage utilizing innovative technology in the workplace. Ten items measured culture strength (7, 9, 12, 20, 25, 28, 29, 31, 32, 35). Items 9, 12 and 25 measured the employee's perceived level that their leaders and organization are consistent with all processes, and items 7 and 29 measured the perceived degree that the mission statement aligns with their individual and group goals. Each item is rated on a 5-point Likert scale. The Likert scale is one of the more widely used response scales on surveys (McMillan, 2010). Items measuring each of the three main traits, collectivism, adaptability and culture strength, were randomized to minimize respondent bias. The final step in the design of the survey was to create the "Scoring the Collectivism,
  55. 55. 47 Adaptability, and Strength in Your Corporate Culture Survey", located in Appendix B. The scoring the survey handout was designed to be used in connection with the survey. It clearly states how to add up scores for all participants to determine the degree that each trait is present in an organization's culture. If the average scores for each trait falls in the medium, low or nonexistent category, then managers are encouraged to consult the handbook to learn what exercises to implement in the workplace to raise the degree of each trait. Once the first draft of the survey was completed, it was then reviewed by a peer review panel comprised of ten individuals for ease of comprehension, appropriate content and overall opinion. The reviewers were selected through convenience sampling and had to meet certain criteria; they needed to have at least two years work experience in a corporate or small business setting. The peer reviewers were not required to possess expertise in collectivism because the survey was designed to be appropriate for organizations that lack knowledge about collectivism, adaptability and culture strength. The ten peer reviewers were asked via email to review the assessment for content validity, on relevancy, if the survey had adequate means to measure each of the three traits, for clear and comprehensive language, and were asked if any of the questions were leading or biased. The Peer Reviewer Handout is located in Appendix A. The reviewers responded to three open-ended questions to discover the strengths, weaknesses and areas in need of improvement for the survey. The reviewers were also asked to review the "Scoring the Survey" handout for accuracy and ease of comprehension. On the basis of the reviewer's comments, revisions to the survey were made. Reviewers suggested bolding or italicizing certain sections of the survey to ensure the format was aesthetically pleasing. Peer Reviewer #2 suggested defining "esprit de corps" in question #26; however, it was not mentioned by any other peer reviewers. Therefore, the researcher maintained
  56. 56. 48 the verbiage used in item # 26. Both peer reviewers # 2 and # 3 suggested having a "not applicable" option as a response to each item. Reviewer # 3 also suggested offering open-ended questions to allow the respondents to elaborate or clarify their responses. However, because the purpose of the survey was meant to be used in a corporate setting by an employee who would not necessarily be trained in analyzing responses, the open-ended options were omitted. Table 2 displays the peer reviewers' demographics, including their occupation and the number of years of work experience. Table 2: Peer Reviewers' Demographics Occupation Number of Years in Current position Peer Reviewer # 1 Administration 4 Peer Reviewer # 2 Sales Administration 5 Peer Reviewer # 3 Vet Technician Supervisor 7 Peer Reviewer # 4 Loan Officer 5 Peer Reviewer # 5 Office Manager 4 Peer Reviewer # 6 Sales Representative 2 Peer Reviewer # 7 Office Manager 4 Peer Reviewer # 8 Web Developer 5 Peer Reviewer # 9 Project Manager 4 Peer Reviewer # 10 Administrative Assistant 3 Developing the Handbook Once final revisions to the survey were completed and organizations had a tool to evaluate and measure the degree that each of the three traits were present in their culture, a