Based on the research of Dr. Anthony Boyce of Michigan State University, this research shows the relationship between culture and performance describing.

1. Volume 5, Issue 2, 2011
researchnotes
Which Comes First: Culture or Performance?
Over the last 20 years, numerous studies have on year-2 culture. Then, the strength of the two “cross-
demonstrated the link between an organization’s culture lagged” effects was compared to determine whether
and bottom-line performance metrics (Sackmann, culture preceded performance or vice versa. Finally, by
2011). However, because we know that correlation repeating these analyses using several years of culture
does not necessarily equal causation, uncovering the and performance data, he was able to draw conclusions
precise nature of this relationship remains difficult. In about the causal nature of culture and performance and
other words, demonstrating an association between determine which came first.
effective cultures and high performance is not sufficient
evidence to conclude that effective cultures cause Culture and Performance in Car Dealerships
higher performance with confidence. The reverse is
also possible; higher performance could cause a more The importance of culture and performance has been
effective organizational culture. This leaves researchers demonstrated in a wide variety of organizational,
scratching their heads to try to resolve this “chicken industry and national settings. In the service industry,
and egg” dilemma: does high performance follow a an organization’s culture shapes the context in which
strong culture or does a strong culture lead to high the organization and customer interact. Effective
performance? cultures contribute to a positive customer experience
by supporting a fluid and responsive environment where
Research conducted by Anthony Boyce, Ph.D. front-line employees are empowered and have the
at Michigan State University, using the Denison resources necessary to deliver results on an ongoing
Organizational Culture Survey, helps us to resolve this basis. Ineffective cultures fail to identify and remove key
chicken or egg question and make stronger conclusions barriers while detracting from the organization’s ability
about the role of organizational culture in bottom-line to anticipate and respond to the customer’s changing
performance. The key to Dr. Boyce’s research entitled, needs. Car dealerships are a particularly fascinating
Organizational Climate and Performance: An Examination example of this because of the myriad of opportunities
of Causal Priority, was to examine how organizational for the customer to interact with a variety of service
culture and performance changed together over time. By providers within the organization over time such as
assessing both variables on a yearly basis, Boyce was salespeople, mechanics, support staff, and so on. By
able to estimate (a) the effect of year-1 culture on year-2 the same rationale, because the customer spends
performance and (b) the effect of year-1 performance considerable time in direct contact with the organization
Culture Predicts Performance Over Time
Bottom Line
Sales Performance
Customer Satisfaction
Service
High Performing
Culture
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2. and its people, any opportunity for the organization to Separate analyses were conducted for the sales and
“hide” its culture is limited. Instead, culture can be thought service departments of each dealership, as slightly
of as “on display” alongside the dealership’s inventory, in different performance outcomes are relevant for these
addition to pervading the parts of the organization less departments. For service departments, excellent customer
treaded by the customer. satisfaction is critical. Customer satisfaction ratings
were collected through quarterly surveys mailed to every
Therefore, the focus of this study was on the culture of customer that visited a service department. Customer
car dealerships and their sales and service performance. satisfaction is also very important for sales departments;
Ninety-five franchise dealerships were followed over a however, sales volume is their primary performance
six year period (2000-2005), collecting information about metric. The number of vehicles sold at each dealership
their organizational culture and performance outcomes on was collected on a quarterly basis. The number of
an annual basis. Culture was assessed with the Denison employees in each sales departments was controlled
Organizational Culture Survey (DOCS), a reliable and for when analyzing vehicle sales outcomes, as larger
valid assessment of the cultural drivers of organizational departments tended to have higher sales volumes.
effectiveness (see Denison et al., 2006). The survey
consists of 60 items, and scores are computed for 12 Culture Causes Performance, not Vice Versa
culture indexes, which can be further rolled up into 4
The analyses investigating the culture and performance
culture traits – Involvement, Consistency, Adaptability,
of car dealerships uncovered several major findings. First,
and Mission. For the purposes of this research note,
the results provided consistent evidence that effective
however, we describe culture at the overall level based
cultures lead to higher performance and not the other
on the average score across all four traits. As a result, we
way around. For both the sales and service departments
refer to “effective cultures” as those with higher overall
of car dealerships, an effective organizational culture
levels of Involvement, Consistency, Adaptability, and
was a reliable predictor of the departments’ subsequent
Mission.
Figure 1: Vehicle sales over time for departments with high (top 25) versus low (bottom 25) scores on the
DOCS.
The figure shows
the average number
of vehicles sold
per quarter over
time as a function
of organizational
culture scores on
the DOCS. The blue
line represents the
average vehicle
sales for the 25
departments with
the strongest culture
scores; the red, the
weakest culture
scores. By comparing
the two trends, it is
apparent that vehicle
sales were consistently higher among those departments with stronger organizational cultures – on average,
between 20 and 30 more vehicles sold per quarter – and with the difference appearing to widen over time.
* Note: The sales numbers for 2002 were re-constructed from the last two quarters of 2001 (Q3, Q4).
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3. Figure 2: Customer satisfaction over time for sales departments with high (top 25) versus low (bottom 25)
scores on the DOCS.
The figure
shows customer
satisfaction ratings
(based on a 5-point
scale) over time
as a function of
organizational
culture scores
on the DOCS.
Departments were
grouped into the top
25 (blue) and bottom
25 (red) according to
their average scores
on the DOCS over
the years 2000 to
2005. By comparing
the two trends,
it is apparent that customer satisfaction was consistently higher among those departments with stronger
organizational cultures, and with the difference appearing to widen over time.
Figure 3: Customer satisfaction over time for service departments with high (top 25) versus low (bottom
25) scores on the DOCS.
The figure
shows customer
satisfaction ratings
(based on a 5-point
scale) for the service
departments over
time as a function
of organizational
culture scores
on the DOCS.
Departments were
again grouped into
the top 25 (blue)
and bottom 25
(red) according
to their average
scores on the
DOCS over the years 2000 to 2005. When we look at these trends side-by-side we can see the same pattern
as previously: that customer satisfaction was consistently higher among those service departments with
stronger organizational cultures, and did not experience the severity of downturn experienced by the bottom
25 cultures from 2000 to 2002.
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4. performance, and the strength of this relationship was positive changes in culture predicting the number of cars
consistently larger than the reverse possibility (that sold within two years on average. These results suggest
is, the impact of high performance on subsequent that the culture of a dealership has its most immediate
organizational culture). In other words, the dealerships impact by enhancing customer satisfaction and that
with the most effective cultures early on experienced higher sales are a longer-term benefit.1
the highest customer satisfaction and vehicle sales in
later years, and this pattern was repeated over time. Conclusions
As a result, an effective culture at the ground-level sets
This study provides important evidence that an
the stage for high performance down the road. At the
effective culture is a causal factor in the performance
same time, a strong sales and service record does not,
of car dealerships and not simply a by-product of
in-and-of-itself, ensure that an organization’s culture will
their previous success levels. The findings underscore
experience similar positive growth. Therefore, the results
culture as a unique point of leverage for future business
point to culture as a key leverage point in organizations’
performance. For businesses in the service sector,
ability to drive up performance over time.
culture shapes the immediate experience of customers,
and in doing so, lays the groundwork for positive
Culture Causes Performance, but not Immediately (or negative) outcomes in the years to come. For
The results also shed light on the timing of the culture- the dealerships in our study, the “return” on positive
performance relationship and the immediacy with which changes in culture was higher customer satisfaction
culture management can be expected to demonstrate a within one year and more cars sold within two years.
return-on-investment. In this research, the answer to this These findings demonstrate in compelling fashion the
question depended on the department and also the kind answer to our initial question – it is the culture (not the
of performance outcome studied. The positive effects performance) that comes first.
of culture were most immediately evident for customer
satisfaction outcomes in the service departments. In this 1.
It is important to note that it is highly unlikely that
case, a 1-year time lag was observed, such that positive economic factors could account for these findings, as
changes in culture predicted customer satisfaction it is assumed that fluctuating market conditions would
ratings within one year on average. For vehicle sales impact all dealerships similarly.
outcomes, the time lag was somewhat longer, with
Related Resources
We wish to acknowledge that this research note is based Sackmann, S. A. (2011). Culture and performance. In
on Anthony Boyce’s (2010) dissertation, “Organizational Ashkanasy, N.., Wilderom, C., and Peterson, M. (eds.),
climate and performance: An examination of causal The Handbook of Organizational Culture and Climate, 2nd
priority.” edn. Thousand Oaks, CA: Sage Publications, pp. 188-
224.
Denison, D. R., Janovics, J., Young, J., & Cho, H. J.
(2006). Diagnosing organizational cultures: Validating a
model and method.
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