Alternative Organizational Design and Its Impact on the .docx

Alternative Organizational Design and Its Impact on the Future
of Work
Jeffrey R. Mueller
National University
The pyramid has served as the principal organizational design
for over 4500 years. This paper highlights
the problems with pyramids and offers seven alternative designs
that remedy many of these problems. The
importance of design and its impact on organizational survival,
strategy, leadership, teamwork and the
future of work are reviewed with real-life organizational
examples. Cases are made for the replacement
of hierarchy with heterarchy (Cloke and Goldsmith, 2002).
Lastly, an appeal is made to CEOs to
abandon the practice of command and control in favor of a more
balanced life filled with shared
responsibility and wealth.
INTRODUCTION
This paper suggests a radical and widespread redesign of
organizational structure. For over four
thousand five-hundred years the pyramid has been the principal
shape of organizations regardless of

century, size, sector or industry. The monarch/CEO, highly
compensated for their tremendous
responsibility, dedication and lack of work/life balance, sits
atop several layers of subordinates – all who
react to the edicts from above. The centrality of power at the
foci, and exponential numbers of servant-
workers at each succeeding level, supported or alienated by
designated representatives called managers in
between, predispose a continuous source of disempowerment,
miscommunication and frequently
organizational failure (or at least ineffectiveness). Actual
pyramids of the ancient Egyptian variety were
built as monuments and homage to powerful kings and queens
circa 2500 BC. Are not modern
organizations still doing the same thing?
This fundamental design flaw has evolved into a pattern of
organizational beliefs and behaviors that
contradict principles of management and result in considerable
market loss and record numbers of
organizational extinction. The giant downfalls in the 1990s of
Citigroup, IBM, Proctor and Gamble and
Xerox, to name a few, were in large part due to organizational
design failures such as a weak reporting
and authority structure and an inability to build and leverage
global capabilities (Bryan and Joyce, 2007).
Certainly there are principles of effective organizational change
being widely ignored (Mueller, 2010) but
also, and more importantly, the underlying cause. The
assumption that a single person, even a benevolent,
altruistic and extraordinarily wise person, can command and
control exclusively and effectively from the
very top of the structure is no longer true, especially given the
increased complexity and electronic
connectedness of our 21st Century world.

This pyramid assumption needs to be challenged, changed and
championed by caring and concerned
organizational citizenry; leaders of a new breed, unafraid and
unencumbered by convention. Two such
business leaders made their mark on unconventional
organizational design to the expressed satisfaction of
their customers and coworkers; and with remarkable business
success. The first is Jan Carlzon (1987),
48 Journal of Strategic Innovation and Sustainability vol.
9(1/2) 2014
former CEO of Scandinavian Airlines (SAS) whose
revolutionary upside-down pyramid placed customers
on top and the employees who directly serve them immediately
underneath (with subsequent management
levels serving these key workers instead of vice-versa). Anyone
who can affect a 74 million dollar red-to-
black turnaround in one year needs to be more vigorously
studied and emulated (Mueller, 2010).
The second exemplar is maverick Ricardo Semler (1993, 2004),
the CEO of Brazilian marine
equipment factory SEMCO. His rotating, concentric circle
organizational design not only saved his
failing company and his failing personal health but also
spawned a dozen or so subsidiaries all of whom
epitomize employee empowerment. SEMCO, decades later, is
still a major player in several industries – a
testament to their unique, forward-thinking organizational
architecture. How soon will other companies
start to follow suit? What conditions are necessary to create

these revolutionary redesigns? How will
alternative organizational design affect the way we work? These
questions, as well as Peter Drucker’s
prediction that the future organization will be patterned after
symphony orchestras, and Cloke and
Goldsmith’s (2002) “organizations as organisms” designs
(originally introduced by Morgan, 1997, the
metaphor master), will be expounded and explored.
THE IMPORTANCE OF ORGANIZATIONAL DESIGN
Organization design is concerned with constructing and
changing an organization’s structure to
achieve the organization’s goals (Robbins, 1990) yet little has
changed in thousands of years. Greenwood
and Miller (2010) stated the study of organizational design has
been unduly neglected in spite of its
critical importance for organizational performance. Perhaps
they ignored or were not influenced by the
work of Kesler (2011, 2009), Kates (2011, 2007), Schuster
(2009), Strikwerda and Stoelhorst (2009) and
Galbraith (2009, 2007) which described organizational design as
a core leadership competency and
offered several design considerations including the matrix.
Senge (1990) added that “the neglected
leadership role is the designer of the ship. No one has more
sweeping influence than the designer”.
Anecdotally, I wonder if the captain of the Titanic would agree.
Had sufficient emergency boats been
added to the design of an iceberg-proof hull and an advanced
guidance system would we be watching just
another documentary instead of an ill-fated drama?
In any case, design is one of those things that we all take for
granted yet it influences everything we

do. Consider the design your own physiology (if you are
spiritual) in the hopefully comfortably-designed
chair you sit in at the soon-to-become obsolete keyboard that
you plunk away at (will be replaced with
marvelously designed and efficient voice recognition software)
to design the syllabi your students ignore
or embrace, in the office or home, building, neighborhood and
city that were all designed by architects
and urban planners. Design is interdependent and central to
everything. Peters (1994) put it this way:
design is…the fact that you sometimes buy books for the cover
and wine for the
label...color...poetry…equations like e = mc2…usable
instruction manuals…business
cards…what you most remember about what you’ve
produced…why you love or hate
things…[should be] part of everyday vocabulary throughout the
organization, in the
training department as well as in engineering and
research…[should be] the formal
position of the chief designer on the corporate organization
chart…a visceral
understanding that design is the primary way to differentiate a
product or service…
Organizational design is no exception. Classical organizational
design theorist Henry Mintzberg
(2009, 1990, 1981, 1979) offered eight design configurations
(professional, missionary, machine,
diversified, network, political, autocratic and charismatic) based
on five elements of an organization
(technostructure, support staff, operating core, middle line and a

strategic apex) (summarized in
Matheson, 2009). All of these configurations have a top, where
the power is, a middle and a bottom.
Peters has argued since 1987 that organizations need to be
flattened to no more than five levels with a
span of control of up to 200:1 (and cited the 800 million-
member Catholic Church as an exemplar). Yet a
Journal of Strategic Innovation and Sustainability vol. 9(1/2)
2014 49
flattened pyramid is still a pyramid with all its inherent
structural and behavioral flaws. Oshry (2007)
decried the systemic nature of this top-middle-bottom design
and illustrated it this way:
Tops are burdened by what feels like unmanageable complexity;
Bottoms are oppressed
by what they see as distant and uncaring Tops; Middles are torn
and confused between
the conflicting demands and priorities coming at them from the
Tops and Bottoms.
Customers feel the nonresponsive delivery systems.
Top “teams” are caught in destructive turf warfare; Middles
peers are non-cooperative
and competitive; Bottom group members are trapped in stifling
pressures to conform.
Tops are fighting fires when they should be shaping the future.
Middles are isolated from

one another when they should be working together. Bottoms’
negative feelings toward
Tops and Middles distracts them from putting their creative
energies into the delivery of
products and services; Customers’ disgruntlement with the
system keeps them from being
active partners in helping the system produce the products and
services they need.
Throughout the system there is personal stress, relationship
break-downs and severe
limitations in the system’s capacity to do what it intends to do.
Economic historian Alfred Chandler (1962) offered the dictum
that organizational design depends on
strategy but I think it is the other way around or at least
interdependent. The reversal was also echoed by
Tom Peters in an academic article (1984). Consider the
chessboard with its little squares and rules for
each chess piece. Organizations, for thousands of years, have
been characterized metaphorically by a
multi-level board in which chess players advance or retreat their
chess pieces to conquer or be conquered
in the protection of the king. The majority are expendable
pawns. The knights, bishops, castles and queen
have expanded roles and mobility but are still expendable and
directed in the protection of the king. Of
course the chessboard and its pieces can be redesigned but it
will no longer be chess. Don’t just change
the rules, change the game!
PYRAMIDAL PRECEDENCE, POWER AND PROBLEMS

Hierarchy, with its centralized peak of power (the owner/CEO
(board of directors notwithstanding), a
“privileged class of overseers” (managers) and “indentured
servants” (workers) has been the model of
organization for 4500 years. The word hierarchy comes from
the Greek root hieros, meaning “holy” as if
those “in charge” were somehow omnipotent and omniscient.
Hierarchy forces human relationships to
conform to patterns that run counter to their natural direction
thereby generating resistance. To overcome
the resistance, hierarchies exclude those who resist from
participating in decision-making, resulting in
top-down autocratic leaders (Cloke and Goldsmith, 2002). As to
the benefit of the hierarchical design,
Malone (2004) summarized it nicely: “This, then, was the
profound organizational choice our ancestors
made to give up the freedom they enjoyed as hunters and
gatherers in order to obtain all the economic and
military benefits offered by large, centralized hierarchies”.
Babylonian King Hammurabi (1792 BC – 1750 BC) was the first
recorded to illustrate the concept
that ownership and management meant top-down responsibility.
Among his 282 laws, “The Code”,
inscribed in stone and displayed in public so all [literate] could
see, was the edict “if a builder builds a
house, and that house collapses and kills the owner’s son, the
builder’s son will be put to death”. The
legacy, minus the death penalty, has remained a constant
throughout history and is echoed by Drucker’s
statement that “management is responsibility”. Even though
Drucker has consistently argued for
decentralized organizational structure and self-management
since 1947 the pyramid and all its
implications remain.

9(1/2) 2014
Managerial miscommunication in a hierarchy is rampant. Cloke
and Goldsmith (2002) reported that
hierarchies create unnatural inequalities in power, privilege and
status between managers and employees
which transform organizational communications into a one-way
street that results in dead end messages
not getting to their intended targets causing enormous
unnecessary damage. The filtering of messages up
and down the ladder predictably produces animosity, hostility,
feelings of rejection and disapproval,
resistance to change, distrust, unresolved conflict, rumor and
gossip. This, in turn, feeds a demotivated
workforce and managerial-customer disconnection that may
reflect in decreased level of service to
customers causing their eventual exodus and ultimately
organizational death (Fig. 1) evidenced by record
numbers of company closures in 2012.
FIGURE 1
PYRAMIDAL SPIRAL DISINTEGRATION
(adapted from Cloke and Goldsmith, 2002)
One-way and Dysfunctional Communication
▼
Demotivation

▼
Customer Dissatisfaction and Disappearance
▼
Organizational Decline and Dissolution
I call this compounding series of miscommunication and lack of
listening progressive disconnection.
Workers become alienated or inherit alienation from
management, who are separated from the reality of
customer contact, which results in customers buying from
someone else who meets their needs. Gray
(2012) made a compelling case for turning a death spiral (Fig.1)
into a growth spiral by reconnecting
customers and employees to companies through increased
feedback, trust, transparency, experimentation
and redesign. “Connected companies are not hierarchies,
fractured into unthinking, functional parts, but
holarchies [Koestler, 1967]: complex systems in which each
part is a fully functioning whole in its own
right… it’s podular”. This and other organizational design
options are expounded in the next section.
ALTERNATIVE ORGANIZATIONAL DESIGN
Matrices emerged in the 1970s and featured the flexibility of
multidisciplinary teams that purportedly
enabled multiple project, program and product management. It
changed unity of command into dual chain
of command and facilitated the [arguably more] efficient
allocation of specialists while maximizing

economies of scale. Yet criticism of the matrix is perhaps best
summarized by Strikwerda and Stoelhorst
(2009) who said, “executives associate the matrix organization
with unclear responsibilities, a lack of
accountability, and political battles over resources, resulting in
risk-averse behavior and loss of market
share”. Note use of the word “executive” in the above criticism
denoting that matrix organizations are of
course hierarchical with all the aforementioned problems with
pyramids.
Nevertheless, these Danish authors extolled and cited the
popularity of what they called
multidimensional design and counted IBM, Microsoft and
Pricewaterhouse Coopers as examples.
Multidimensional organizations share products, regions and
customers but not employees. The customer-
based approach allows multidimensional organizations to
“eliminate information asymmetries and
transfer pricing…”. While this approach is based on the sound
business principle of giving customers
what they want (Peters, 1987) it is not clear to me what the
multidimensional design looks like. They
stated, “it is based on design principles that facilitate the
creation of synergies across units to serve
increasingly fragmented markets” yet they offer no illustration
save an allusion to a network. Therefore, I
am unable to comment further on the concept.
2014 51

In the 1980s legendary Swedish CEO Jan Carlzon acknowledged
the importance of his customers,
airline passengers at Scandinavian Air Systems (SAS), and
prominently placed them on top of his radical
organizational redesign: the inverted pyramid. Next in line were
the ticket agents, flight attendants and
baggage handlers all of whom were empowered to make
operational decisions that were normally
reserved for management, in favor of the passengers, mainly
European business travelers. This changed
the role of the supervisor to support the line staff (instead of
vice versa). It also changed the role of the
executive team to be one of support to the manager. Carlzon
(1987) argued,
Although these people are called middle management they are
actually not managers at
all if by manager we mean someone who makes his own
decisions within a sphere of
responsibility. In reality, they are just messengers who relay
decisions made higher up in
the corporate pyramid.
Eleven of fifteen vice presidents could not adapt to their new,
“power-shared” position and were
fired. The phenomenal result of the inverted pyramid design was
a $74 million turnaround (-$20M to +
$54M) in one year (Robbins, 1990; Carlzon, 1987).
A December 2012 email query to the Head of Press Relations at
SAS asked these three questions: 1)
Does SAS still feature an inverted pyramid organization design
initiated by Jan Carlzon in the 80s? 2) If

so, how well is the design working in terms of decision-making,
employee engagement and
empowerment? 3) If not, is there any speculation as to why it
was abandoned and what replaced it? While
a response was not received in time for the impending deadline
of this paper, it should be noted that SAS
was on the brink of bankruptcy as of the end of 2012
(https//gulfnews.com/business/economy), hardly a
testament to the legacy of the inverted pyramid if it indeed still
exists at SAS.
More importantly, given the phenomenal success of the design
in the 80s, why has the inverted
pyramid not been emulated elsewhere in the world? Could it be
that CEOs and their executive teams lack
the courage to let go of their power? Savvy advice from the late
Peter Drucker indicated “unfortunately I
know of no procedure or checklist for managerial courage”. Or
is the design unsustainable for some other
reason(s)? These questions certainly beg additional research
from organizational behavior and social
psychological specialists but they are partly answered by
maverick CEO Ricardo Semler (2007, 2005,
2004, 1993), the creator of the fourth organizational design
model reviewed in this writing, the concentric
circle. Wrote Semler (2007)
It’s an organizational design that no longer has to prove its
worth. It has not only
weathered Brazil’s cycles of deflation and hyper-inflation plus
political swings to the
right and left, but actively prospered 30 – 40% per year now
employing 3500.

The concentric circle design consists of three circles although
Semler argued “SEMCO has no official
structure” (2004). The inner circle, the board, consists of
approximately eight strategists called
Counselors; and the CEO (not Semler) is rotated out every six
months. That way, “the acting CEO cannot
be blamed or credited for the company’s performance” (Semler,
2004). The other Counselors consist of
Semler, three senior executives, two rotating senior managers,
and two first-come, first served workers.
The rotating Counselor positions are from the middle circle,
five to sixteen business unit leaders called
Partners, who are elected, not selected, by all remaining
employees called Associates. The business units
are quite diverse and include high tech mixing equipment,
cooling towers, facility management,
environmental consulting, HR outsourcing and inventory
control. They have three criteria when
considering a new venture: highly engineered complexity (an
entry barrier); high-end products and
services that they can be the premium player in; and a unique,
niche market regardless of industry. The
formula works quite well. For example, repeat customers like
Wal Mart (SEMCO manages their
inventory, cooling towers, building administration and
environmental investigation) represent close to
80% of their annual revenue.
9(1/2) 2014

The concentric circle is a democratic approach and “a new
architecture for organizations that is based
on much more freedom and flexibility, making employees want
to go to work on Monday morning”
(Semler, 2005). When asked if all companies could be
structured like SEMCO, Semler responded to
Shinn (2004),
This is an exercise in sociology or anthropology and has to do
with respecting tribes. It
has very little to do with types of companies. So, yes, it seems
universally applicable to
people and how they work. We’ve seen that proved in practice
by police divisions,
hospitals and schools in many parts of the globe - in
organizations that have seen our way
of doing things and have implemented similar concepts.
As of this writing I was unable to find companies who had
followed the concentric circle of
organizational design although I suspect they exist because
Semler said so above. An email inquiry to him
at SEMCO has not yet produced a response as of this writing.
Nevertheless, when asked why so few
companies follow the model Semler responded in 2007,
It has to do with fear and stasis. There is nothing in the system
to help people make a leap
of faith to let go of control. I know that as I let things
deconstruct it will turn out better
but not many can do this. Giving up control is something none
of us do well in any aspect

of our lives. Part of the problem is that the present system
throws up the wrong sorts of
leaders. It ousts the timid or introverted and alienates women.
Relatedly, Good to Great author Jim Collins (2001) discovered
in his analysis of 1,435 Fortune 500
CEOs that only 11 shifted from good to great stock
performance; and every one of the eleven companies
was headed by a CEO that personified humbleness and
distributed leadership. Capabilities of distributed
leadership include visioning, sense-making, inventing and
relating; and can be exercised from anywhere
in the organization (Ancona, Malone, Orlikowski and Senge,
2006). The concept and practice of
distributed leadership (also known as empowerment and
participative management) has made great
strides in educational administration, e.g., Bush and Glover
(2012), Klar (2012), and Jappinen (2012); and
in the field of nursing, e.g., (Thomlinson, 2012) who wrote
The data findings, on the whole, suggest the premise of the
study and the government’s
policy position…with a distributed approach the team is
positively engaged, patient-
centered care is the norm and organizational goals are met.
All of these examples were from highly regulated and
bureaucratic organizations. In higher education,
equally bureaucratic, distributed leadership may be synonymous
with shared governance required by
many regional accreditation bodies. Imagine the impact of
distributed leadership and shared governance

in non-hierarchical designed organizations, and indeed, entire
institutions.
A fifth and sixth organizational design option hail from the
disciplines of music and anthropology.
The metaphor of music has long been used by organizational
theorists and practitioners including Semler
(2004), Zander and Zander (2000), Drucker (1999), DePree
(1992) and many more. Whether symphony,
jazz or some other genre it is important to note that musicians
play from a common score (sheet music =
mission statement), take turns leading from any chair and derive
tremendous satisfaction and personal
growth in the performance of their instrument in concert with
others. These are certainly noble activities
for any employee or employer anywhere.
Regarding organizational design, the symphony option features
a deep semi-circle with a single
conductor who “never makes a sound during the performance”
(Zander and Zander, 2000); whereas the
jazz, rock or equivalent smaller ensemble is a tribal circle with
rotating leadership that enables individual
interests and talent. The two designs are not mutually exclusive:
symphonies occasionally accompany
smaller bands or soloists in a display of consummate teamwork.
Yet Zander and Zander (2000) admitted,
2014 53
“the profession of conductor is one of the last bastions of

totalitarianism in the civilized world!” Tribal
circles, illustrated by Logan, King and Fischer-Wright (2008)
are naturally occurring corporate groups of
20 – 150 people led by executives who become expert listeners
and guide them through five stages,
upgrading them with specific leverage points. Their ten-year
longitudinal study of two dozen
organizations concluded “tribes have the greatest influence in
determining how much and what quality
work gets done”.
The seventh and final organizational design option reviewed in
this writing is the network. The
network has also been labeled a pod (Gray, 2012); an organism,
(Hatch, 1997); a brain, an organism and a
hologram by Morgan (1997); and a hologram predated by
Mackenzie (1991, 1986, 1978, 1976). While
the pod, organism, hologram, brain and network differ
somewhat but Mackenzie (1978) united them with
this apt observation: “it is erroneous to think of an
organizational structure as a rigid and static object.
Organizational structures realistically should be seen as
processes of interactions which change as
conditions change”. Morgan (1997) added these five principles
of holographic organizations: 1) whole
into parts (including networked intelligence, structural self-
reproduction and vision, values and culture as
corporate “DNA” ) 2) redundancy of information processing,
skill sets and work design 3) requisite
variety such that the internal complexity matches the external
environment 4) minimum space and 5)
learn to learn to include emergent design.
Networks are a return to decentralization and feature self-
managing teams connected by nodes. In
living organisms, nodes are groups of specialized cells or

organs that work together to form systems like
the nervous system. In organizations, “nodes are the places
where people connect with goals. They are
fast forming, inclusive, easy to enter and leave, hyperconnected
and ubiquitous” (Cloke and Goldsmith,
2002).
Networks also replace hierarchy with heterarchy. The word
heterarchy originates from the Greek
word heteros meaning neighbors and “implying organizations
that are networked, participative,
democratic, egalitarian and self-managing”. Heterarchy suggests
that all organizational members are
peers and have equal power that is shared laterally; important
decisions are made at all levels, principally
by consensus. Heterarchy means “bottom-up, top-down, and
sideways” (Cloke and Goldsmith, 2002) who
further illustrated
Webs are informal, interactive hubs of self-management…free-
floating partnerships in a
context of shared values [requiring] curved
geometry…[reflecting] paradigms of
relativity, quantum mechanics, evolution, energy fields, chaos,
string theory and
complexity…boundaryless…eliminate need-to-know and
organizational secrecy
EBay, SEMCO and Wikipedia are popular contemporary
examples of the network-designed organization.
Gray (2012) described networks as democratic and podular
organizations, “every pod is an
autonomous fractal unit that represents, and can function on

behalf of, the business as a whole”. He cited
SEMCO as an exemplar
Workers at SEMCO choose what they do as well as where and
when they do it. They
even choose their own salaries…review supervisors
[performance] and elect corporate
leaders…on important decisions, everyone gets a vote… if a
business grows to more than
150 people, SEMCO will split it into two…nearly a quarter of
SEMCO’s profits go to
employees…growth from $4 million in 1980 to more than $200
million today
Malone (2004) summarized the economic and noneconomic
benefits of web-designed
decentralization: motivation, creativity, flexibility, freedom and
individualization; the antithesis of the
pyramid. He also aptly summarized the history of organizational
design history with this three-stage
pattern. Stage One: people operate in small, unconnected groups
(tribes). Stage Two: larger groups are
formed and decision-making became centralized
(bureaucracies). Stage Three: large groups remain but
decision-making becomes more decentralized (network
democracies).
9(1/2) 2014

SUMMARY AND CONCLUSION
Regardless of organizational design, the only organizations that
seem to endure the test of time (or at
least over a hundred years) are those which retained the original
value system of the founder of the
organization (Collins and Porras, 1994). The first of seven
strategies for an emerging organizational
design offered by Cloke and Goldsmith (2002) is to “shape a
context of values, ethics and integrity”. The
second strategy offered by Cloke and Goldsmith is to “form
living webs of association” in a context of
organizational democracy where there is no top, middle or
bottom: everyone is self-managing. Certainly
this is consistent with the emerging network design of
organizations.
Figure 2 summarizes organizational design options. I want to
emphasize that these designs are not
mutually exclusive. For example, SEMCO expanded into a
network after its experimentation as a
concentric circle.
FIGURE 2
ALTERNATIVE ORGANIZATIONAL DESIGN
1. Matrix
2. Multidimensional
3. Inverted Pyramid
4. Concentric Circle
5. Semi-circle with Conductor (Symphonic Model)
6. Tribal Circle (Small Musical Ensemble/Band)

7. Network (aka pod, organism, brain, hologram)
To conclude I would like to return to my hero, Semler (2004),
whose ground-breaking sustainable
concentric circle organizational design contains many network
features, and wrote
I believe it is time for organizations designed on the twentieth-
century model is
over…Redesigning the sustainable workforce for the twenty-
first century means letting in
fresh air and giving up control…until [we] begin to respect such
concepts as work-place
democracy, the need to question everything, and the search for a
more balanced
existence, even the most modest goals will be beyond reach
Thomas Kuhn (1962) showed that it takes about thirty years
before a new scientific theory becomes a
new paradigm; whereas Kaplan (2012) warned us “don’t get
netflixed: your current business model isn’t
going to last much longer”. Let’s hope we are still around in
the 2030s to see if the manifestation into a
new model of work and organizational life took place -- with all
the rights, responsibilities and privileges
thereof. Applications of exemplars, as well as other comments
and criticisms, are encouraged to be sent to
[email protected]
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9(1/2) 2014
Reproduced with permission of the copyright owner. Further
reproduction prohibited without
permission.
T h e J o u r n a l o f D e v e l o p i n g A r e
a s
Special Issue on Kuala Lumpur Conference Held in August 2014

Volume 49 No. 5 2015
THE LONGEVITY OF LARGE ENTERPRISES: A
STUDY OF THE FACTORS THAT SUSTAIN
ENTERPRISES OVER AN EXTENDED PERIOD
OF TIME
Malik Muhammad Sheheryar Khan*
University of South Australia, Australia
ABSTRACT
The high mortality of companies has been a common trend
especially following major economic
events such as the 2008 global finance crisis. Many companies
such as Lehman Brothers were
seemingly performing companies until their abrupt collapse
which left the business world shocked.
Many organisations currently are strategizing towards
sustainability and ultimately longevity.
However, not many companies have managed to survive for at
least a century and remain relevant in
the current market. The study therefore focuses on creating a

framework which illustrates the main
factors that are an imperative for any company to survive for a
long period of time. The framework
includes; five main factors which are responsible for
organisational longevity, i.e. Resources,
Innovative Capability, Organisational Culture, Organisational
systems and Strategy. Framework
proposed can be applied within large scale business enterprises
that have to bear the brunt in the wake
of recession. Maintenance of all the factors promoted longevity
among organisations.
JEL Classifications: M10, M14
Keywords: Longevity, Organisation, Sustainability, Framework,
Stability
Corresponding Author’s Email Address: [email protected]
INTRODUCTION
Organisational Longevity can be defined as the continued
existence of organisations even
after the founding members leave (Haugh and Talwar, 2010, p.
485). The high mortality of
companies has been a common trend especially following major
economic events such as

the 2008 global finance crisis. Many companies such as Lehman
Brothers, Enron and
Arthur Anderson were seemingly performing companies until
their abrupt collapse which
left the business world shocked following the crumble of
companies which once
symbolized power and stability. This trend can be attributed to
the fact that companies
many a times fail to understand that organisational change and
learning are inevitable for
accomplishing success and show high degree of reluctance for
change. Organisational
longevity is essentially one of the aspects that can categorize
the sustainability of a
company or enterprise. According to Pawlowski (1999) in order
for an organisation to
sustain itself, it must be stable, continuous and long lived. Most
organisations live in the
now and wish to solve the problems and address the needs of
today and make money whilst
they are at it. This shows need of stability and continuity among
organisations.
Organisational longevity can be accredited to enhancement of
the company’s self-

renewal process which fosters a prompt measure to instigate
changes which address the
recently emerged problems including proactive thinking and
planning (Montouri, 2000).
mailto:[email protected]
42
Krell (2000, p.8) defines two aspects of organisational
longevity. Firstly, organisations are
like living things and thus theories of human life are applicable
across organisations as
well, secondly, organisations need to identify the traits which
can ensure longer life or
better sustainability. Among the models that have focused on
organisational capabilities,
7S model by Waterman et al (1980) focussed on 7 factors which
were responsible for
sustainability, i.e. strategy, structure, systems, shared values,
style, staff and skills they
primarily focus on the stability and continuation spectrum.
Further, model proposed by

Hubbard et al (1996) also focussed on factors like; culture,
structure, systems, human
resource capacity and financial resources, but didn’t give
importance to the concept of
longevity.
Geus (2002, p.24) indicates that there are four attributes, 1)
environment sensitive
regardless of whether their fortunes were as a result of
knowledge or other natural
resources; 2) cohesive and have a significant sense of identity
among employees and
suppliers; 3) involving tolerant and accommodative
experiments, eccentricities and outliers
that which eventually expanded their knowledge of their
capabilities as an organisation and
4) conservative financing, in which capital is not utilized in
risky ventures but rather money
is used to grant the organisation financial flexibility. Geus
(2002) extrapolates the grim
outlook of high company mortality of Fortune 500 companies or
their equivalent by
explaining that most of these companies have a life expectancy
of only forty to fifty years.
For instance, one-third of the Fortune 500 companies in 1970

had failed by the year 1983
either through mergers & acquisitions or business failure. It
has become common to
witness many large companies last only an average of 12.5
years. In order to survive the
dynamic and unpredictable business climate, it is imperative for
organisations to invest in
achieving business excellence in all aspects of organisational
processes. This entails
process systems, innovation and technology, communication
systems, project
management, resource management and management of change
successfully (Harrington,
2006, p. 43). Working upon the strategies, companies tend to
follow the latest strategic
models which are in fashion rather than selecting strategic tools
on the basis of their utility
and applicability. However, not all concepts deliver results and
when not deliver desired
results does, they are promptly discontinued or put to minimal
usage. This paper would
review the literature on the concept of organisational longevity
in order to determine the
factors which contribute towards it.

The aim and objectives of the study are as follows:
1. The importance of sustaining organisations over an extended
period of time is
widely acknowledged in the management literature
(references).The purpose of
this inquiry is to seek to answer the question as to what are the
vital factors which
contribute to organisational longevity.
2. Review the literature to identify the factors thought to be
vital in sustaining
organisations over an extended period of time.
3. Providing interpretation and explanation of the findings with
reasoned arguments
drawn from the empirical and literature evidence to develop a
framework of
critical factors essential for organisational longevity.
43
FACTORS AFFECTING ORGANISATIONAL LONGEVITY

Resources
Material and human resources are both responsible for the
longevity of the organisation.
Dunphy, Griffiths and Benn (2003, p. 57) posit that allocation
of time as well as money to
strategic plans within a company helps enhance sustainability of
various projects.
However, other than time and money, human resources also play
a pivotal role, because
they offer the required intellectual, planning, co-ordination and
problem-solving skills in
managing projects strategically (Roome, 2005, p. 240).
Involving employees and
empowering them with responsibilities gives them autonomy
and intrinsically motivates
them to contribute to the growth and sustainability of the
organisation (Holton et al., 2010,
p. 154). Moreover knowledge generated, built and shared by the
employees acts as a
strategic asset for the organisation and boosts the organisation’s
competence for promotion
of innovation (Bollinger and Smith, 2001, P. 11).

Similarly, allocation of resources to the project is also
important to maintain the
sustainability for the organisation. However, finances should
also be used strategically
which in turn would promote growth and development of the
organisation (Siebenhuner
and Arnold, 2007, p. 341; Doppelt, 2008, p. 54). Companies that
have survived many years
are known to have great financial muscle which is an advantage
in case of a profitable
capital intensive investment or financial crisis. Moreover,
strong partnerships are also
based on the financial capability of an organisation (Spithoven
et al. 2013). Strategies
adopted for successful allocation and application of resources
should be designed based on
the present availability of resources. Many researchers have
studied the need of resource
management from multiple angles. According to Geus (2002),
longevity companies used
their cash resources sparingly. These companies understood
what it meant to have a cash
reserve in hand which would allow them to avail opportunities.
The other aspects that lead

a company to longevity according to Geus are sensitivity to the
environment, cohesiveness
and tolerance (See Figure 1).
44
FIGURE 1: MODEL FOR CORPORATE SUSTAINABILITY
AND LONGEVITY
Source: Geus (2002)
Also, Harrington (2006, p. xxi) adds that the directing of
resources and assets is
important in shaping business outcomes. Moreover, Harrington
(2006, p. 47) points out
that in order to survive the dynamic business market and sustain

an organisation for a long
time, it is important to ensure that organisational excellence is
made a priority. As per
Harrington (2006) there are five elements which contribute
towards organisational
excellence of which fundamental factors include; process
management, knowledge
management systems, project management, resource
management and management of
change successfully (See Figure 2).
Organisational Culture
Organisational culture refers to values, assumptions and
expectations that define an
organisation. . (Upadhyay et al. 2010), p. 51) proposes three
cultural levels including the
first level, second and third level. The first level comprises of
visible elements such as
facilities and dress code while the second level involves
strategies, objectives, and
philosophies and values a company has. The third level
comprises feelings, attitudes and
assumptions among organisational staff. According to Bart and

Baetz (1998, p. 827), the
mission statement and vision of the company significantly
affects the organisational
performance. Although sometimes ignored, aspects such as
company values and other
cultural aspects in a company are what shapes up current
employees and newly oriented
ones to either believe in achieving objectives or organisational
mission. There are four
main organisational cultures which support sustainability, clan,
adhocracy, market and
CORPORATE
SUSTAINABILTY
AND
LONGEVITY
Sensitivity to the
environment:
Ability to Learn and
adapt
Cohesion and
identity:
Ability to build a
community and a
persona for itself

Tolerance and
Flexibility: Ability to
build constructive
relationships with other
entities, within and
outside
Conservative
Financing: Ability
to govern its own
growth and evolution
effectively.
45
hierarchy cultures. While clan and adhocracy are used by
businesses which operate in high
risk and high volatility environment and therefore for them the
concept of stability and
longevity is not prioritized however, market and hierarchy
cultures thrive on stability with
low risk investments. Martins and Terblanche (2003, p. 45)
discusses the role of
organisations culture towards innovation and creativity, which

in turn stimulates a set of
mutually shared values which ensures that every aspect of firm
in totality is on the same
track.
FIGURE 2: ORGANISATIONAL EXCELLENCE MODEL
Source: Harrington (2006)
Organisational Systems
Organisational systems essentially refer to all the units of an
organisation that define it
including production or manufacturing systems, quality
management systems and
communications among others (Collins, 2001, p. 97). The
process system involves
definition and ensuring the set terms of inputs, outputs,
feedback mechanisms and
measurement systems are in check within an organisation
(Harrington, 2006, p. 48).Quality
systems on the other hand ensures that continuous improvement
is constantly undertaken

and that companies strive to sell and provide quality products
and services. Golden and
Powell (1999, P.169) discussed about the role of flexibility
along with quality and cost-
ORGANISATIONAL
EXCELLENCE
Process Management:
Output requirements
Input requirements
Reliable
transformation process
Feedback measurement
system
Project management:
Intellectual capacity
Proper scheduling
Proper planning
Change management: Defining
aspects to be changed
Defining change implementation
Implementing change
Knowledge
management: Defining
requirements
Infrastructure evaluation

Design & development
Pilot
Deployment
Continuous improvement
Resource
management:
Money
Inventory
Customers
Investors
Suppliers
Alliance
partnerships
Employees
Patents
Real estate
Goodwill
46
efficiency within the system as the minimal requisites for
corporates to contest competition
effectually. Understanding the organisational systems is thus
necessary to ensure that the

organisation in its entirety is meeting its business objectives
and long-term sustenance is
one of the key one.
Innovative Capability
The dynamism witnessed among long lived companies is a clear
indication that in order to
achieve longevity, flexibility, creativeness and innovativeness
are paramount to achieving
survival in harsh economic market (Mitleton, 2006, p. 226). For
instance, companies that
deal with finite resources must invent possible alternatives they
can engage in years to
come by creating a pool of resources or better still innovative
new ways of doing things
(Dopplet, 2008, p. 14). However, achievement of innovative
capability within the
organisation is plagued with financial constraints. Hottenrott
and Peters (2009) in their
research paper discuss about the correlation between innovative
capability of the
organisation and financial constraints. The researchers assert
that although innovation

promotes organisational level productivity, competitiveness and
sustainable long term
business growth and complacent market positioning however,
there is a constant concern
about financing the investments in innovative products or
services or carrying out the
relevant research and development for inventing a breakthrough
product. Innovation within
the organisation drives business growth and also improves
sustainability within the
organisation. Pricewaterhouse Coopers (2012, P.2) in their
report advocated that in order
to be competitive in the international marketplace, companies
must emphasise extensively
on innovation not only in their products but also in functioning.
Innovation must be done
constantly but keeping the cost-optimization in mind.
Strategy
Business strategy is an integral part of maintaining an
organisation at a certain advantage
above other. The core business strategies are aimed at, core
competencies within the

organisation, marketing, and growth. When strategies are
aligned with organisational
objectives, sustained good performance and excellence is
usually the intended outcome; all
of which are precursors to an organisation’s extended lifespan
(Johnson and Scholes, 2002,
p. 111). Importance of strategy for sustainable growth of the
organisation is cited by Porter
(Lee et al. 2014, p. 62), when he discussed the example of
Japanese firms which are world
renowned for their impeccable operational effectuality.. It was
this operational
effectiveness which facilitated organisational longevity for
Japanese enterprises and gave
them an upper hand over the western world firms. Gebauer,
Gustafsson and Witell (2011,
P. 1273) are of the opinion that companies can only attain
sustainable competitive
advantage when they attempt differentiation in offerings taking
into considerations the
strategic, financial and marketing opportunities.
Factors that are found to be substantially influencing the
longevity of a business

organisation can also be classified into two main parts, internal
and external. The internal
factors are associated to various kinds of capabilities, relative
and absolute aspects of
management procedures. On the other hand, the external factors
consist of aspects that are
47
relevant and significant enough to impinge upon an organisation
without basically
including specific competitive factors including interests and
pace of the entire social order.
The internal factors that are typically associated to longevity of
an organisation
can be considered to be management’s quality of decision
making capabilities, quality of
planning, quality of organising, staffing standard and quality
control. If all the internal
factors are considered collectively, the points that are just
enumerated form the very basis
of the life of the organisation at any given moment. According
to (Yang and Zhao, 2011 p:

89), the management capabilities of a business organisation are
considered to be quite
effective for the long run. However, there are several other
longevity factors that are taken
to be quite significant but are mostly associated to short term
goals. For instance,
organisational strengths like strong cash position, good control
over key raw materials,
patent monopolies, low level of debt and such. So, in case an
organisation is suffering from
weaknesses like inefficient production system, inadequate level
of market coverage, high
cost of raw materials, submarginal level of transportation, poor
quality employees, poor
public relations, non-competitive public charges, inadequate
level of financing are some of
the reasons why an organisation may fail to have a longer life
span. In fact, as stated by
(Loukis, Spinellis, and Katsigiannis, 2011 p: 67), one of the
major factors behind longevity
of an organisation is the capacity of the management to resist
the above mentioned
weaknesses. Moreover, according to (Saleem, 2011 p:90), the
larger a business

organisation, the greater the possibility that it will encounter
various adverse circumstances
that lead to a lowered life span.
PROPOSED MODEL BUILDING FOR ORGANISATIONAL
LONGEVITY
Based on the models developed towards longevity (Geus, 2002)
and organisational
excellence (Harrington, 2006), the researcher proposes a model
and identifies five factors
which contribute towards organisational longevity (See Figure
3). These five factors are;
resources, organisational culture, organisational system,
innovative capability and strategy.
In terms of resources, Allocation of resources, including human
resources and money to
strategic plans within a company helps enhance sustainability of
various projects. The
challenge is ensuring that too much capital is not spent on risky
ventures that might not be
profitable or stimulate growth and development. Finances
should be used strategically in
innovative projects that will generate more income and continue
achieving increased

financial performance.
The practices and routines within the organisation is
determinant of the
organisational culture. It is the organisational culture which
inculcates values among the
employees. Further organisational systems comprise of
production systems, quality
management systems and communication systems among others.
The establishment of a
comprehensive assembly of systems is because it is easier to
relay information and monitor
smooth undertaking of events. The innovative capability of an
organisation is responsible
for new creations and better ways to survive the economic
climate that is constantly
changing. The dynamism witnessed among long lived companies
is a clear indication that
in order to achieve longevity, flexibility, creativeness and
innovativeness are paramount to
achieving survival. It is very important for organisations to
engage in open minded
possibilities, be flexible and willing to diversify or perfect their
niche in order to survive

the tides of different economic climates
48
FIGURE 3.MODEL FOR ORGANISATIONAL LONGEVITY
.
Strategy on the other hand relates to planning in such a way that
an advantage
over competing companies is achieved. This can be through
creation of core competencies,
marketing strategies and growth strategies. Because strategies
are set in alignment with
organisational objectives, sustained good performance and
excellence is usually the
intended outcome; all of which are precursors to an
organisation’s extended lifespan. It is
essential that companies keep on strategizing, assessing
progress and re-strategizing in
order to maintain a competitive advantage and sustain a core
competence. This sets a

company apart from the rest leading to organisational
excellence which is an essential pre-
requisite to business longevity. By and large, organisational
longevity is a complex aspect
owing to the fact that it takes companies years to build an
organisation, yet a period of bad
strategies or decision making may result in the mortality of a
stable company abruptly.
Numerous factors contribute to organisational extended lifespan
and they are based on
excellence models and strategic elements. The factors that
prominently stood out have been
analysed below in detail.
An organisation is expected to live longer in case, it has
expertise in aspects like
strategic management, well planned organisational systems,
high standard of resources
especially with respect to quality human resource with a large
cash reserve, excellent
organisational culture and high capacity to initiate innovation.
If a large scale organisation
ORGANISATIONAL LONGEVITY
Organisational Systems

Resources
Capital
Resource Capital
Innovative Capability
Organisational Culture
Culture
Values
Strategy
Term Strategies
Sustainable

Strategies
49
is able to implement the model, the organisation is expected to
get benefitted with respect
to internal as well as external factors that contribute to
longevity of the organisation. The
internal factors will strengthen the internal working capacity of
the organisation while
external factors will enable the organisation to take advantage
of any external business
opportunity coming its way.
CONCLUSIONS
Organisational longevity has over the years gained precedence
following the high number
of large and stable companies that have succumbed to the
economic pressures of today’s
harsh business climate. Following an analysis of the literature
about organisational
sustainability and longevity, the findings indicate that many
factors are indeed linked to

organisational longevity, although five main factors are an
imperative in the survival of a
company for many years. Firstly, allocation of resources,
including human resources,
money, to strategic plans within a company helps enhance
sustainability of various
projects. Secondly, the establishment of a comprehensive
assembly of systems, in order to
ensure that information is regularly relayed and monitored for
smooth undertaking of
operations and events. For instance, process systems will
determine whether the output
defines company excellence which in the long run determines
the viability and lifespan of
an organisation. Thirdly, the dynamism witnessed among long
lived companies is a clear
indication that in order to achieve longevity, flexibility,
creativeness and innovativeness
are paramount to achieving survival. . It is very important for
organisations to engage in
open minded possibilities, be flexible and willing to diversify or
perfect their niche in order
to survive the tides of different economic climates. Fourthly, it
is the culture of the

organisation which develops the values required in employees to
achieve the objectives of
the organisation and its mission. Finally, because strategies are
set in alignment with
organisational objectives, sustained good performance and
excellence is usually the
intended outcome; all of which are precursors to an
organisation’s extended lifespan
The outcomes of the study could have been more exhaustive if
the study was based
on a particular organisation. The study has considered
organisations that are large scale.
However, the proposed model could have been more accurate
and effective for ensuring
longevity for an organisation, if the field in which the
organisation is operating is known.
This particular limitation can be associated to another major
limitation which is paucity of
time.
The study has a good future scope. The study indeed throws
light on the various
concepts of the factors that contribute to the longevity of an
organisation. In fact, the study

can be used as a strong base material for secondary research
studies dealing with subject
matters like sustainability of business organisations. With the
aid of the study, the
researchers in future will also get an idea about how new
models can be proposed. The
proposed model for this study can be used as basic structure
based on which more complex
models can be made.
50
ENDNOTES
Acknowledgement
*I would like to thank my supervisors Dr Howard Harris and Dr
Saras Sastrowardoyo for
inspiring me, guiding me and providing me with the motivation
to write and get my work

published.
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Reproduced with permission of the copyright owner. Further
reproduction prohibited without
permission.

17
1
J. Anitha
2
Farida Begum N
Role of Organisational Culture and
Employee Commitment in
Employee Retention
1
Dr. Anitha is Associate Professor at
Department of Management Studies, PSGR
Krishnammal College for Women,
Coimbatore.
E-mail : [email protected]
2
Farida Begum N. is Research Scholar at
PSGR Krishnamal College for Women,
Coimbatore.
E-mail : [email protected]
Abstract
Employee retention is one of the challenges faced by Indian
organisations. Employees are the most valuable assets of
an organisation. It is they who add value to an organisation
in terms of quality and quantity. There is a great demand for

the skilled professionals within India and abroad.
Employee retention means various policies and practices
which let the employees stick to an organisation for a long
period of time. In order to achieve competitive advantage,
maximum utilization of resources and to get organisational
efficiency employees must be retained in a true spirit in
order to cope with all these conditions. This paper focuses
on automobile manufacturing and service sector, and
highlights factors like Employee Commitment and
Organisational Culture that measure how to retain an
employee in an organisation. The model will be validated
which will be beneficial to organisations in the automobile
and service sector to focus on key aspects that aid in
Employee Retention. Organisational Commitment
comprises of three dimensions, namely: Affective,
Continuance and Normative Commitments, which were
derived from Allen and Mayer's model. The perceptions of
Organisation Culture are also the factors measured to
know the existing levels of retaining an employee in an
organisation. The findings reveal that Organisational
Culture has high impact on Employee Retention than
Continuance Commitment and Normative Commitment.
This implies that the employees of the organisation have
more positive perception regarding organisational culture.
However, Affective Commitment doesn't impact Employee
Retention to a significant extent. This indicates that most of
the employees remain in the organisation due to the
benefits they get in being on the job (Continuance
Commitment) and due to the obligation values they have in
,
giving something back to the organisation
(Normative Commitment). It also indicates that

Affective Commitment need not reflect in getting
retained in organisation.
Keywords
Employee Retention, Organisation Culture,
A f f e c t i v e C o m m i t m e n t , C o n t i n u a n c e
Commitment and Normative Commitment.
Introduction
People are the most important resource of any
organisation. The best people are the reasons for
the best organisations, and inept people result in
inept organisations. Employee retention is a
challenge in many organisations. Demographical
and market changes have created a more
confident and demanding workforce, which
makes it necessary for organisations to be
competitive and work harder at meeting
employees' needs to retain their loyalty.
Employees are the assets of any organisation and
organisation cannot afford losing its key
performers. Organisations are striving to retain
their talents by implementing effective retention
strategies. Organisational Culture and Employee
Commitments are the strategies used to retain the
employees. Employee Retention involves taking
measures to encourage employees to remain in
the organisation for the maximum period of time.
The corporate world is facing a lot of problem in
Employee Retention these days. Hiring
knowledgeable people for the job are essential for
an employer. But retention is even more
important than hiring. There is no dearth of
opportunities for talented persons. There are

many organisations which are looking for such
employees. If a person is not satisfied by the job
she/he -is doing, she/he may switch over to some
other more suitable job. Thus, in today's
environment it becomes very important for
organisations to retain their employees.
When the right people are found for the
organisation, they blend into the Organisational
Culture. Organisations these days are going
through a situation where the number of
employees is large but the quality is lacking.
Organisations are also finding it difficult to adapt
to changing situations. An organisation's culture
has a profound impact on the effectiveness of the
organisation by influencing how decisions are
made, how human resources are used and how
people respond to environmental challenges. In
this study, the factor Organisational Culture is
taken into consideration on Employee Retention
as Organisational Culture is increasingly being
pushed as an important selling feature as
companies attempt to attract and retain valued
employees. Employers are being advised to
evaluate their cultures and, where necessary,
change them to increase their attractiveness to
employees. Sheridan (1992), in his study, has
suggested that a possible dilemma for
organisations interested in using culture as a
retention tool. A culture that promotes strong
'relationship values' appears to increase the
retention of both strong and weak employees.
That is, it reduces both dysfunctional and
functional turnover.

Organisational Culture is the behaviour of
human beings within an organisation and the
meaning that people attach to those behaviours.
According to Needle (2004), organisational
culture represents the collective values, beliefs
and principles of organisational members and is
a product of such factors as history, product,
market, technology, and strategy, type of
employees, management style, and national
culture. Culture includes the organisation's
vision, values, norms, systems, symbols,
language, assumptions, beliefs, and habits.
Ravasi and Schultz (2006) wrote that
organisational culture is a set of shared
assumptions that guide what happens in
organisations by defining appropriate behaviour
for various situations. Schein (1992), Deal and
Kennedy (2000) and Kotter (1992) advanced the

idea that organisations often have very differing
cultures as well as subcultures. Though a
18 International Journal of Asian School of Business
Management, Vol. IX, Issue I, January - June, 2016
company may have its "own unique culture", in
larger organisations there are sometimes co-
existing or conflicting subcultures because each
subculture is linked to a different management
team.
This study has also tried to find out the impact of
organisational commitment on employee
retention. Organisational commitment has been
defined as the attitude which ties the individual to
the organisation. On the other hand, satisfied and
committed employees tend to be less attracted by
alternatives. This means that even in situations of
existing job alternatives, the employee's decision
of staying in the organisation depends

significantly on employee's perception of firm's
interest and effort for trying to make him/her to
stay. The employees' perception of being valued
by the organisation is likely to increase their
satisfaction and commitment which tend to
enhance the employee's desire to remain member
of the organisation. Organisational Commitment
is treated as comprising three dimensions,
namely: Affective, Continuance and Normative
Commitments. As part of their research, Meyer &
Allen (1991) developed a framework that was
designed to measure three different components
of Organisational Commitment: (a) Affective
commitment refers to employees' emotional
attachment, identification with, and involvement
in the organisation. Employees with a strong
affective commitment stay with the organisation
because they want to. (b) Continuance

commitment refers to employees' assessment of
whether the costs of leaving the organisation are
greater than the costs of staying. Employees who
perceive that the costs of leaving the organisation
are greater than the costs of staying remain
because they need to. (c) Normative commitment
refers to employees' feelings of obligation for the
organisation. Employees with high levels of
normative commitment stay with the organisation
because they feel they ought to. In arguing for
their framework, Meyer & Allen (1991)
contended that affective, continuance, and
normative commitment were components rather
than types because employees could have varying
degrees of all three.
This study thereby focuses on the influence of
o r g a n i s a t i o n a l c u l t u r e a n d E m p l o y e e
commitment on employee retention. Specific
reviews on the study variables were made to
develop a theoretical framework and the same

was validated using empirical data.
Literature Review
A number of researches (Kuttappa, 2013; Kumar
and Arora, 2012; Hassan et al., 2011) have
focused on finding out the factors that influence
employee retention in organisations. However
different researches have shown different factors
as influential of retention that includes HRM
factors and organisation factors, work life balance
and demographic factors, superior subordinate
relationship etc. This section focuses on the
various key elements that play a major role in
employee retention. Kuttappa (2013) determines
the influence of HRM factors and organisational
factors on employee retention. His paper dealt
with the association between retention rates and
application of the identified HRM factors and
organisation factors. His study also highlighted
several external constrains that may affect the
retention of core employees. These results imply
that effective retention management practices
(using ten identified HRM and Organisational
factors that is effective selection, challenging
employee assignment and opportunities, training
and career development, reward recognition of
employee value, equity of compensation
leadership, company policies and culture,
working environment etc) will have impact on
better retention rates. Irshad (2012) also
concluded the same that almost all the factors or
indicators that directly or indirectly influence
employee retention are correlated. Not only a
single factor promotes an employee to leave but it
is blend of many reasons to leave the organisation.

Hassan et al., (2011), in their study reveal that
hiring right person for a right job leads an
employee for long term relationship. The
supervisor plays an important role to gain the trust
19
of an employee; also there should be good
judgment of job security and future prospects in
an organisation. Chebolu (2006), emphasises the
concept of “social visibility” that constitutes the
core job of “effective executive” for achieving
organisational and personal goals. Galindo
(2012) concentrates on the way toward the future
s t u d y i n m a k i n g c o m p a r i s o n b e t w e e n
administration, faculty, staff, and student
perceptions of social media in higher education.
The significance of social media research will
impact future communication, collaboration and
success among retention administration. Naik
(2008), states that a personal touch will go a long
way in deep rooting sustainable motivation
drivers. The factors like loyalty and love, long
term prospects and congenial societal
environment are equally important drivers of
motivation.
Sheridan (1992) tried to find out whether person-
organisation fit and individual commitment have
substantial effects on employee retention.
Organisational culture value has important
implications for human resource managers. The
r e l a t i o n s h i p b e t w e e n e m p l o y e e s ' j o b
performance and their retention also varied

significantly with organisational cultural values.
The research study also describes a relationship
between fit and performance and explains
partially why stronger performer stayed much
longer than weaker performer in the culture
emphasizing work task values. Millan (2010)
tries to find out in his study that if group mean
difference in cultural perception exists between
people of different generational ages, gender and
ethnicity. In this study, his theoretical frame work
consisted of Herzberg's two factor motivation and
Mc Gregor's theory X and Y. In his study the
finding indicates that there is no significant group
mean difference in cultural dimension for
demographic in addition his findings suggest that
highly skilled worker prefer a family oriented
participative culture. His study determines that
improving organisational structure and shift
cultural norms that result in increased
productivity, global competitiveness and social
change. Zhao et al., (2008) in their study reveal
that corporate culture, hiring and promotion
practices impact management retention as well,
more over as well as organisation mission, goals,
direction and employee retention were found to
positively reduce non-management employee
turnover. The study also implies that a trusting
and committed work force that will reap long
term benefits, which in turn provide high
productivity levels, improved financial
performance over all firm enhancement.
Chatterjee (2009) explores that overall
satisfaction of employees with regard to
organisational culture. The studies also reveal the

expectations of employees from organisations to
understand the changes needed in the
organisational culture to improve retention rates.
The author also suggest that to ensure employee
retention the organisation should give due
importance to the organisational culture and
work environment and try to devise strategies
specific to their own organisation. Allen and
Meyer et al. (1991) state that Affective
commitment as the employee's emotional
attachment to, identification with, and
involvement in the organisation; Continuance
commitment as awareness of the costs associated
with leaving the organisation; and Normative
Commitment as a feeling of obligation. Kreisman
(2002) has found through his study numerous
employee-retention related issues that are of
particular significance to organisations today. It
further seeks to demonstrate how the Insights
Discovery System can be utilized as a powerful
force to engage, or re-engage employees in a
manner that fosters greater job satisfaction and
commitment thus improving business results.
Aay (2004) highlighted the importance and
complexity of new employee orientation and
peer mentoring within organisations, which then
evolved into the identification of variables that
strengthen organisation commitment and
retention in new employees. He also suggested
that new employees had strong organisational
commitment and new employee participated in
online orientation combined with peer mentoring
had higher commitment levels. Dockel (2003)
proposed in his study that specific retention
factors that induce organisational commitment
and can thus increase the retention of high

technology employees. The author describes that
high technology employees want a competitive
salary. The majority of high employees receive an
incentive, which provides a measure of group
performance feedback. This feedback creates the
perception that the organisation values their
commitment.
Based on the above reviews, this study arrives at
a theoretical framework as shown in Figure 1
t h a t d e p i c t s t h e r e l a t i o n s h i p b e t w e e n
Organisational Culture, the three types of
Commitment namely, Affective Commitment,
C o n t i n u a n c e C o m m i t m e n t , N o r m a t i v e
Commitment and the main study variable
Continuance
Commitment
Affective
Commitment
Organisation
culture
al
Normative

Commitment
Employee
Retention
Figure 1 : Theoritical framework depicting the relationship
between Organisational Culture,
three components of Commitments and Employee Retention.
Need for the Study
Employee Retention has become a major concern
for corporate in the current scenario. An
organisation invests time and money in grooming
an individual and makes him ready to work and
understand the corporate culture. The employees
working for a longer period of time are more
familiar with the company's policies, guidelines
and thus they adjust better. It has been observed
that individuals sticking to an organisation for a
longer span are more loyal towards the
management and the organisation. This study
sought to determine that the Organisational
Culture and Organisational Commitment factors
are measured to know at what level an employee
can be retained in an organisation. The Culture
decides the way employees interact at their
workplace; indeed healthy culture encourages the
employees to stay motivated and loyal towards the
management. The culture of an organisation
represents certain predefined policies which guide
the employees and give them a sense of direction at
the workplace to be retained. Employee
Commitment is important because high levels of

commitment lead to several favourable
Organisational outcomes. It reflects the extent to
21
which employees' identify with an organisation
and is committed to its goals. Many successful
organisations are strongly committed to their
employee needs because they believe that
organisation that fosters employee satisfaction can
be lead to stay and fit in an organisation.
Automobile Manufacturing and
Service sector
The Indian auto industry is one of the largest in the
world with an annual production of 23.37 million
vehicles in for the year 2014-15, following a
growth of 8.68 per cent over the last year. The
automobile industry accounts for 7.1 per cent of
the country's gross domestic product (GDP).The
two and four wheelers segment with 81 per cent
market share is the leader of the Indian Automobile
market owing to a growing middle class and a
young population. Moreover, the growing interest
of the companies in exploring the rural markets
further aided the growth of the sector. The overall
Passenger Vehicle segment has 13 per cent market
share. India is also a prominent auto exporter and
has strong export growth expectations for the near
future. In the year 2014-15, automobile exports
grew by 15 per cent over the last year. In addition,
several initiatives by the Government of India and

the major automobile players in the Indian market
are expected to make India a leader in the Two
Wheeler and Four Wheeler market in the world by
2020.
The majority of India's cars manufacturing
industry is based around three clusters in the south,
west and north. The southern cluster consisting of
Chennai is the biggest with 35% of the revenue
share. The western hub near Mumbai and Pune
contributes to 33% of the market and the northern
cluster around the National Capital Region
contributes 32%. Chennai, houses the India
operations of ford, Hyundai, Renault, Mitsubishi,
Nissan, BMW, Hindustan Motors, Datsun.
Chennai accounts for 60% of the country's
automotive exports. Gurgaon and Manesar in
Haryana form the northern cluster where the
country's largest car manufacturer, Maruti Suzuki,
is based. Nashik has a major base of Mahindra and
Mahindra with a SUV assembly unit and an engine
assembly unit. Aurangabad with Audi, Skoda and
Volkswagen also forms part of the western cluster.
India's automotive industry is one of the most
competitive in the world. It does not cover 100 per
cent of technology or components required to
make a car but it is giving a good 97 per cent, as
highlighted by Mr. Vicent Cobee, Corporate Vice-
President, and Nissan Motor's Datsun. The vision
of automobile mission plan 2006-2016 aims for
'India to emerge as the destination of choice in the
world for design and manufacture of automobiles
and auto components with output reaching a level
of US$ 145 billion; accounting for more than 10

per cent of the GDP and providing additional
employment to 25 million people by 2016.'
Leading auto maker Maruti Suzuki expects Indian
passenger car market to reach four million units by
2020, up from 1.97 million units in 2014-15.
This study is done in this sector to reduce the
turnover of employees and motivating them to be
retained, as the high rate of employee turnover in
the car business just might be the single greatest
source of aggravation in the industry. Turnover
frustrates every single person at the dealership,
starting with the owner. Turnover makes every job
at the dealership more difficult to accomplish,
drives up operating costs and drives down profits.
Most importantly, turnover impacts customer
satisfaction and loyalty. (ibef.org)
India Brand Equity Foundation (IBEF) is a Trust
established by the Department of Commerce,
Ministry of Commerce and Industry, Government
of India. IBEF's primary objective is to promote
and create international awareness of the Made in
India label in markets overseas and to facilitate
dissemination of knowledge of Indian products
and services. Towards this objective, IBEF works
closely with stakeholders across government and
industry.www.ibef.org is a knowledge centre for
global investors, international policy-makers and
world media seeking updated, accurate and
comprehensive information on the Indian

economy, states and sectors. IBEF regularly tracks
government announcements in policy, foreign
investment, macroeconomic indicators and
business trends. IBEF works with a network of
stakeholders - domestic and international - to
promote Brand India
Objectives of the Study
This study influences on the variables shown in the
theoretical framework figure 1 and hence framed
the following objectives.
1. To study the existing level of positive perception
of Organisational Culture, the level of Affective
Commitment, Continuance Commitment and
Normative Commitment and level of Employee
Retention.
2. To find the association between Organisational
Culture, Affective, Continuance and Normative
Commitment and Employee Retention.
3. To find the impact of Organisational Culture,
Affective, Continuance and Normative
Commitment on Employee Retention
Methodology
Type of Study - The study is both descriptive and
causal in nature. It describes in various aspects of
how to retain an employee in an organisation. It
also studies the measure of organisational culture
and employee commitment. As a causal study, this
work is focused on identifying how organisational
culture and three components of commitment that

i s A ff e c t i v e c o m m i t m e n t , C o n t i n u a n c e
commitment and Normative commitment helps to
retain an employee in an organisation. Thus it
arrives in establishing a cause and effect
relationship between organisational culture, three
components of commitment and employee
retention.
Sampling Design and Data Collection - The
population comprise employees from Automobile
manufacturing company and service sector in
Coimbatore. Two stage random sampling was
used to identify the sample. In first stage
companies were identified using random
s a m p l i n g . T h e n u m b e r o f A u t o m o b i l e
manufacturing company taken is one, next
number of Automobile spares and service sector
taken are 5 and number of employees taken is
around 2000 approximately. In second stage 10%
is computed on total employees who lead to
around 200 employees. For this study total
respondents are 200 employees out of which 100
employees belong to Automobile manufacturing
company which is ROOTS Manufacturing in
Coimbatore district and remaining 100 employees
or respondents belong to Automobile spare and
service sector namely Ford, Chandra Hyundai,
Nissan, Toyota and Chevrolet in Coimbatore
district. The sampling frame consists of the
employees' attendance register from which the
samples of the employees were selected randomly.
The variables included in the study tend to assess
the creativity of the employee. Each response was
measured using a five-point likert scale, ranging
from 5 (strongly agree) to 1 (strongly disagree).

The research strategy is in quantitative nature.
Also the study intends to explore the cause and
effect relationship between Organisational
C u l t u r e a n d t h e t h r e e c o m p o n e n t s o f
Organisational Commitment on Employee
Retention. A pilot study was done in order to test
the reliability of the questionnaire for the intended
target group of employees in automobile sector.
The reliability of the study was 0.863. Simple
random sampling was used to identify the
companies and further the respondents. Mean
value analysis, correlation and regression were the
tools used to achieve the above said objectives.
The study is based on primary data collected from
respondents through questionnaire. The
questionnaire for Employee Retention and
organisational culture that is taken for the study is
combination of pre-validated instruments
proposed by (Hai and Robert, 2012), and
Jeevananda (2010), and the questionnaire for
Employee Commitment is taken from the original
commitment scale items (Allen and Meyer, 1990).
Findings & Analysis - The analysis of the study
was done using SPSS. Specific tools for specific
objectives were used. Descriptive statistics was
23
used to analyze the mean scores and the nature of
the sample. About 200 valid responses were
analyzed. Responses were collected from
Automobile manufacturing and service sector. The

majority of the respondents are men.
Correlation was used to study if there was any
association between organisational culture, three
components of commitment - affective
commitment, continuance commitment, and
normative commitment and employee retention.
And regression was used to analyze the strength of
impact of organisational culture and three
components of Commitment on Employee
Retention.
Existing level of Organisational Culture, three
components of Commitment and Employee
Retention - The existing level of perception of
Organisational Culture, the level of Affective
Commitment, Continuance Commitment,
Normative Commitment and level of Employee
Retention is measured using the Mean score and
standard deviation. Table 1 shows the mean values
of these constructs.
Table 1: Existing level of Employee Retention, Organisational
Culture, Affective Commitment,
Continuance Commitment and Normative Commitment
Descriptive Statistics
Factors
Mean Std. Deviation
Organisational culture 4.1104 .55478

Employee retention 3.7688 .53636
Affective commitment 3.6269 .79438
Continuance commitment
3.5406 .78528
Normative commitment 3.6350 .69222
The mean value for the factor namely
Organisational Culture (M = 4.1104) is greater
than 4 in a scale of 5, which implies that the
employees of the organisation have more concern
on above factor. For the constructs, Employee
Retention, Affective Commitment, Continuance
Commitment and Normative Commitment, the
mean value is less than 4. This indicates that these
factors score less, comparatively to the
organisational culture variable.
A n a l y s i s o f a s s o c i a t i o n b e t w e e n
Organisational Culture, three components of
Organisational Commitment and Employee
Retention - The association between the
Organisational Culture, Affective Commitment,
Continuance Commitment, and Normative
Commitment on Employee Retention is
explained here. The five factors considered are
h i g h l y c o r r e l a t e d . T h e a s s o c i a t i o n o f
Organisational Culture with Employee Retention
indicates highly correlated (r =0.735). The
association of three components of commitment

that is Affective Commitment (r = 0.710),
Continuance Commitment (r = 0.670),
Normative Commitment, (r = 0.516) are highly
correlated with Employee retention. This shows
there is a positive significant correlation between
the Organisational Culture, three components of
commitment on Employee Retention. The factors
Organisational Culture, Affective Commitment,
Continuance Commitment, and Normative
Commitment have high influence and are
positively correlated to the factor Employee
Retention.
Table 2 : Correlation between Organisational Culture, Affective
commitment, Continuance
Commitment, Normative Commitment and Employee Retention
Factors Employee Retention
Organisational Culture .735**
Affective Commitment
Continuance Commitment
Normative Commitment
.756**
.670**

.516**
Strength of impact of Organisational Culture
and three components of Commitment on
Employee Retention - Regression analysis was
performed to find out the factors that influence
the Employee Retention from among the two
independent variables. Employee Retention was
taken as dependent variable and Organisational
Culture and three components of Commitment
(Affective, Continuance, and Normative
Commitment) were taken as independent
variables and step wise regression was carried
out.
The model summary indicates that the four
Independent Variables have about 66.4%
influences on value of Employee Retention. This
conveys that the independent factors have high
influence on the dependent variable, Employee
Retention. This can play a major extent to retain
an employee.
Table 3: Model Summary
Model Adjusted
1
R R Square Std. Error of the Estimate
R Square
.664.819

a
.671 .31087
Note: Predictors: (Constant), Normative Commitment,
Organisational Commitment, Affective
Commitment, Continuance commitment
Table 4: Coefficients
Model
Standardized
Coefficients
T Sig.
B Std. Error Beta
(Constant) .500 .181 2.760 .006
Organisational Culture .512 .046 .529 11.070 .000
Affective Commitment .055 .041 .082
1.345 .180
Continuance Commitment .178 .050 .261 3.586 .000
Normative Commitment .092 .044 .118 2.099 .037

Note: Dependent variable - Employee Retention
25
It can be seen from table 4, that the Affective
Commitment (β = .082, t = 1.345, p = 0.180
greater than 0.05). This shows that Affective
Commitment have low impact on the Employee
Retention as P value is greater than the
significance level. Hence the organisation has to
give considerate on the employees who are
emotionally attached to an organisation in order
to retain them. Organisational Culture (β =
0.529, t = 11.070, p <0.001), Continuance
Commitment (β = 0.261, t = 3.585, p <0.001), and
Normative Commitment (β = 0.118, t = 2.099, p
<0.001), are positively related to Employee
Retention as the coefficient shows positive sign.
And have high impact on Employee Retention.
The result indicates that all the three independent
factors have high contribution towards
Employee Retention. The relative importance of
the three factors Organisational Culture (β =
0.529), Continuance Commitment (β = 0.0261)
and Normative Commitment (β = 0.118) shows
that this factors have the significant and a
positive impact on effectiveness of Employee
Retention. This indicates that these factors can be
adapted as it plays a significant role in retaining
an employee in the organisation.
Discussion
The analysis and the results show that the

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