Jurnal 1

International Journal of Management, Accounting and Economics
Vol. 7, No. 9, September, 2020

ISSN 2383-2126 (Online)
© Authors, All Rights Reserved www.ijmae.com
A Literature Review on Organizational Culture

towards Corporate Performance
Yasas L. Pathiranage 1
Doctoral Student, Faculty of Graduate Studies,
University of Kelaniya, Sri Lanka
Lakmini V. K. Jayatilake
Professor, Faculty of Commerce and Management Studies,
Ruwan Abeysekera
Senior Lecturer, Faculty of Commerce and Management Studies,
Abstract
Syntheses of existing literature provide a framework for a broader
understanding of the current state of the organizational culture. This literature
review synthesized the relevant literature pertaining to the role of organizational
culture on business performance in a perspective of the corporate group. The
literature review comprised various published sources on the role of
organizational culture, such as journals, periodicals, seminal books, and other
published materials. The review focused on the conceptualization, measurement
and examines various dimensions of organizational culture on corporate
performance. After analysis of a wide range of renowned literature, it was found
that organizational culture has a strong impact on the organizational
performance. Empirical evidences further showed that lack of cultural
integration between member companies was a primary cause of failure in
corporate groups. Therefore, it is ascertained that cultural enhancing would
result performance enhancement. Business managers are recommended to
establish an effective organizational culture in order to enhance corporate
performance. Therefore, how an effective organizational culture is established
to enhance the corporate performance can be recognized as a needed research
scope. Moreover, this paper highlighted the prevailing theoretical and empirical
gaps in the area of organizational culture towards corporate performance, and
hence the findings may be useful for future similar studies.
Keywords: Organizational Culture, Organizational Excellence, Business

Performance, Corporate Group.
1
Corresponding author’s email: [email protected]
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Introduction
Callahan (2014) indicated that syntheses of existing renowned literature provide a
framework for a broader understanding of the current state of the organizational culture.
This literature review began with an examination of relevant literature concerning the role
of organizational culture on business performance in a perspective of the corporate group.
This literature review comprised various published sources on the role of organizational
culture such as journals, periodicals, seminal books, and other published materials. Every
possible effort was made to review the journals that are rated journal impact factor (JIF)
2.200 and above. The journal articles were sourced from different online library databases
including EBSCO Host, Emerald, Google Scholar, JSTOR, Oxford University Press,
Sage, Science Direct, Taylor & Francis Online, and Wiley Online Library. The keywords
such as organizational culture, business performance, and corporate group were used to
find journal articles that are relevant for the study. Most of the publications (> 95%)
synthesized in this literature review were not older than 10 years. All the literature that
were revived by the researcher were summarized and critically analysed for the study
purpose.
The review focuses on the conceptualization, measurement and examine various

dimensions of organizational culture on corporate performance. The syntheses of
literature categorized into twelve sections: organizational culture, sources of an
organizational culture, history of organizational culture, organizational excellence, strong
and weak organizational culture, positive organizational culture, effective organizational
culture, Denison organizational culture model, types of organizational culture, measuring
the effectiveness of organizational culture, the role of organizational culture on business
performance, and the role of organizational culture in the corporate group. Finally, the
conclusions are drawn for the benefit of practitioners and researchers.
Organizational Culture
Organizational culture is a system of values, beliefs, and behaviour patterns which
subconsciously drives members of the organization to make each choice and decision
(Ortega-Parra & Sastre-Castillo, 2013). Schneider et al. (2013) indicated organizational
culture as the norms that members of an organization perceive as their work environment,
and these norms influence how members behave and adapt to achieve organizational
goals. Organizational culture is the way that organizational members interact with each
other and other stakeholders (Simoneaux & Stroud, 2014). Yirdaw (2016) indicated
organizational culture as the glue which combines the nonhuman resources to the human
resources in an organization to build teamwork and good performance.
Weber and Tarba (2012) indicated that business managers use the organizational
culture to differentiate their organization from other organizations. Though Apple Inc.,
International Business Machines Corporation (IBM), and Hewlett-Packard Corporation
(HP) have similar technologies and operating environment, these organizations have
diverse cultures (Schein, 2010). The culture of Apple involves the development of simple,
innovative and elegant products (Toma & Marinescu, 2013). The priorities of IBM culture
are long-term thinking, and highly committed employees (Flamholtz & Randle, 2011;
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Kotter & Heskett, 1992). The cultural focus of HP is innovation and autonomy of
employees (Childress, 2013).
Organizational culture contributes favourably to corporate governance and

management (O’Connor & Byrne, 2015). The influence of effective organizational
culture on corporate performance is recognized by many business managers (Unger et al.,
2014). Warren Buffet, one of the world's wealthiest entrepreneurs, asserted how
organizational culture is important for organizational performance (Childress, 2013).
Likewise, Howard Schultz, the founder of Starbucks Coffee Company, confirmed that
corporate culture is a key factor in Starbucks' success (Flamholtz & Randle, 2012).
Sources of Organizational Culture

Organizational culture may be derived from various sources, such as the beliefs and
assumptions of the founders, and the learning experience of members of the organization
(Ruiz-Palomino & Martínez-Cañas, 2014; Schein, 2010; Uddin et al., 2013).
Flamholtz and Randle (2012) indicated that the founders of the organization are the
primary source of establishing a new culture for their organization. Founders can make a
significant impact to the organization culture since they have an opportunity to introduce
the strategy and direction at an early stage of the organization (Andish et al., 2013). The
initial business strategy and direction are mostly based on the operational assumptions of
the founders, which may be derived from their personal experience and cultural history
(Toma & Marinescu, 2013). Founders may enforce their personal experience and culture
on their employees and partners (O’Reilly et al., 2014). For example, Steve Jobs, the
founder of Apple Inc., enforced his personal experiences and assumptions on employees,
which contributed to build an effective organizational culture at Apple Inc. (Kaliannan &
Ponnusamy, 2014; Toma & Marinescu, 2013). Apple’s organizational culture contributed
to transform the vision of the founder into realities. Schein (2010) indicated that Apple
Inc. is a perfect example to illustrate how the personal culture and assumptions of founder
greatly influence the culture of the organization.
The learning experience is another source of organizational culture, which is derived

from the social trends and the dynamics of the business environment (Nguyen & Aoyama,
2014). Members of the organization may adapt some attributes from the community as
well as from the business environment (Uddin et al., 2013). Gibbs (2012) indicated that
community may enforce its cultural attributes on the organization through members of
the organization.
History of Organizational Culture

In 1951, Jaques indicated a concept of an organizational culture from a business
perspective in his book “The Changing Culture of a Factory: A Study of Authority and
Participation in an Industrial Setting” that discussed some cultural issues in the
manufacturing industry in England (as cited in Childress, 2013).
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In the early 1980s, the theory of organizational culture included organizational

behaviour along with the disciplines of social science such as anthropology, sociology,
and social psychology (Denison, 1990).
In 1982, Peters and Waterman indicated the characteristics of the organizational

culture in high performing corporates. Moreover, Peters and Waterman have profiled 46
excellent corporates in the United States of America based on their organizational culture.
In 1985, Schein indicated the usefulness of organizational culture with respect to the
organizational performance by breaking organizational culture into three parts:
assumptions, artifacts, and values. Assumptions represent unofficial but important rules
in the organization. Artifacts represent the visible elements of organizational culture,
including work process, the workplace setting, and organizational structures. Values
represent the beliefs of the organization members and their business strategy. These three
elements contribute to maintain an effective organizational culture (Childress, 2013;
Schein, 1985).
In 1992, Kotter and Heskett researched more than 200 corporates in the United States
of America and found a strong relationship between organizational culture and business
performance. Schein (2010) has acknowledged this study as a seminal research in the
field of organizational culture.
In 2011, Flamholtz and Randle contributed to an extensive knowledge in the area of

organizational culture towards business performance with practical examples extracted
from numerous corporates in the United States of America, Europe, China, and other
countries.
In 2013, Sharma and Good carried out an empirical study to determine the effect of
organizational culture on organizational performance. The study results confirmed that
organizational culture is an important component of organizational performance and a
source of competitive advantage.
In addition to the said seminal studies, other similar books and articles contributed to
the development of organizational culture theory (Childress, 2013). However, Nwibere
(2013) indicated that there is a lack of theoretical support to advance managers’
knowledge in the area of effectiveness of organizational culture to enhance corporate
business performance.
Organizational Excellence
Brown (2013) indicated that an effective organizational culture is a reflection of the
organizational excellence. It is essential to maintain a healthy organizational culture to
foster a vision of excellence (Fusch & Gillespie, 2012).
Following a detailed analysis into 46 high-performing corporates in the United States

of America, Peters and Waterman (1982) indicated eight characteristics of excellent
organizational cultures, which include fast decision-making and problem-solving,
autonomy and entrepreneurship in leadership, and efficiency through organizational
members.
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An excellent organizational culture includes motivated employees and value-driven

management (Childress, 2013). Business managers use the characteristics of excellent
organizational culture to increase corporate profitability and sustain organizational
excellence (Childress, 2013; Bolboli & Reiche, 2014).
Strong and Weak Organizational Culture

Strong organizational culture is vital to enhance organizational performance (Nwibere,
2013; Sharma & Good, 2013). Raza et al. (2014) indicated that strong organizational
culture plays a significant role in aligning the future business trajectory of the
organization. Organizational members have common opinions towards the organization
in a strong organizational culture and are consistent with organizational values (Flamholtz
& Randle, 2011). Kotter and Heskett (1992) indicated that strong organizational cultures
encourage to share organizational values and goals across the organization, facilitating
the rapid adaptation of these values to new employees.
Business managers empower their employees to take part in the critical decision-
making process within a healthy organizational culture. Miguel (2015) indicated that the
involvement of the employees in the organizational decision-making process is critical
for enhancing performance. When engaged in the organizational decision-making
process, employees may build a sense of ownership and obligation (Engelen et al., 2014).
As employees build a culture of ownership and obligation, their loyalty and commitment
towards the organization increases substantially even without close supervision (Denison,
1990; Nwibere, 2013; Pinho et al., 2014). When employees and business managers build
respect and integrity among themselves, they can support each other and integrate their
expertise and experience to enhance corporate performance (Miguel, 2015).
Business managers with a strong organizational culture use open and transparent
communication to inspire employees and enhance performance (Kohtamaki et al., 2016;
Senaji et al., 2014). In an organizational culture with open communication, organizational
members easily share relevant information across the organization (Simoneaux & Stroud,
2014). Transparent communication involves a high level of participation by all members
of the organization. When organization members engage in transparent communication,
all members of the organization have a high degree of engagement (Miguel, 2015).
Establishing a set of organizational standards and trends mainly involves developing

a well-defined communication channel between managers and employees (Schein, 2010).
Cao et al. (2015) indicated that business managers may use the communication channel
in order to create transparent communication to promote a culture of sharing and
teamwork among organizational members.
A strong organizational culture is critical for motivating the employees of the

organization (Schein, 2010). Motivated employees are the key drivers for achieving
organizational goals and enhancing organizational performance (Fiordelisi & Ricci, 2014;
Simoneaux & Stroud, 2014). Motivated employees make productive use of their time to
perform their daily tasks (Flamholtz & Randle, 2011).
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Business managers and employees with a strong organizational culture have an

exceptional professional quality which leads to the enhancement of organizational
performance (Pinho et al., 2014). According to Busse (2014), professional quality
includes three main elements: respect and dignity between managers and employees,
strong commitment to customer services, and motivation and moral engagement for
achieving organizational goals.
In a strong organizational culture, business managers may establish a set of formal

rules and trends of doing business (Denison, 1990; Flamholtz & Randle, 2011;
Simoneaux & Stroud, 2014). Customers and other stakeholders may perceive and use the
culture and work trends of members of the organization to distinguish the organization
from other organizations (Childress, 2013; Cian & Cervai, 2014).
Management with weak organizational culture has a significant potential to affect

business profitability of the organization (Shahzad et al., 2012). If the organizational
culture is weak, the existence of the organization is at risk since the members of the
organization have different values and beliefs, where they may work against the priorities
of the management (Eaton & Kilby, 2015). Childress (2013) indicated that in a week
corporate culture, there is always a challenge for employees to identify the values of the
organization and establish the appropriate business process in order to achieve the
organizational goals. Flamholtz and Randle (2011) indicated that employees with a weak
organizational culture may act in a way that is inconsistent with organizational goals due
to inadequate communication and lack of clear direction from the leadership.
Positive Organizational Culture

Business managers may create and sustain a positive organizational culture to enhance
corporate performance (Childress, 2013; Fiordelisi & Ricci, 2014; Flamholtz & Randle,
2011; Melo, 2012). Founders of Google and Apple recognized their positive
organizational culture as the primary source of enduring competitive advantage
(Simoneaux & Stroud, 2014). Walmart and Southwest Airline’s founders also asserted
that their positive organizational culture as a vital factor for the success of their business
(Flamholtz & Randle, 2011). Inabinett and Ballaro (2014) found that positive
organizational culture and corporate performance are having a positive relationship.
In a positive organizational culture, business managers deploy a transparent leadership

style to build and endure confidence towards the leadership. Transparent leadership
involves steady processes of decision-making and transparent communication across the
organization (Andish et al., 2013; Miguel, 2015; Simoneaux & Stroud, 2014).
Positive organizational cultures encourage business managers to explain and convey

corporate goals and values to employees and other stakeholders of the organization
(Flamholtz & Randle, 2012; Simoneaux & Stroud, 2014). Once employees understand
and share the corporate goals and values, they may effectively engage with value-added
activities (Childress, 2013).
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Effective Organizational Culture

Effective organizational culture is an amalgamation of strong organizational culture
and positive organizational culture. In a strong organizational culture, organizational
members behave in a manner which consistent with organizational values. In a positive
organizational culture, employees understand and share the corporate goals and values
across the organization (Flamholtz & Randle, 2012). Childress (2013) indicated that an
effective organization culture is a combination of five sub-organizational cultures:
healthy customer service, employee-oriented management, strong interpersonal
relationship, exemplary leadership, and ethical decision-making process. Hartnell et al.
(2011) indicated that business managers deploy an effective organizational culture to
shape employee attitudes, improve operational effectiveness, and increase financial
performance in the organization. Business managers deploy an effective organizational
culture to create a healthy working environment in order to enhance performance in the
organization (Flamholtz & Randle, 2012; Inabinett & Ballaro, 2014; O’Reilly et al., 2014;
Pinho et al., 2014; Shahzad et al., 2012).
Flamholtz and Randle (2011) indicated that an effective organizational culture is an

asset while an ineffective culture is a liability for organizational performance. Business
managers with an effective organizational culture encourage an innovative business
environment (Givens, 2012). Engelen et al. (2014) indicated that effective organizational
culture sustains employee-focused leadership, sound interpersonal relationship, and
ethical decision-making process. Low employee turnover and high employee satisfaction
are characteristics of an effective organizational culture (Hartnell et al., 2011). An
effective organizational culture is important to motivate and retain competent and
trustworthy employees in the organization (Berg & Wilderom, 2012; Eaton & Kilby,
2015).
Teamwork is an important factor in achieving a common organizational goal. Effective

organizational culture involves shared values and common purpose to develop a sense of
teamwork (Flamholtz & Randle, 2011; Schein, 2010). Wiewiora et al. (2014) indicated
that business managers deploy an effective organizational culture to promote teamwork
and information sharing environment. In an effective organizational culture, business
managers and employees work together to enhance corporate performance (Childress,
2013; Schein, 2010).
Customer service: a source of sustainable competitive advantage, is an important

responsibility for business managers in an effective organization culture (Berg &
Wilderom, 2012; Givens, 2012; Miguel, 2015). In an effective organizational culture,
employees share the organizational values and beliefs (Denison, 1990). As employees
share the organizational values and beliefs, they are inspired to accomplish organizational
goals by delivering a professional customer service (Childress, 2013).
In an effective organizational culture, business managers deploy employee-focused

and transformational leadership to enhance performance in the organization. Veiseh et al.
(2014) found that effective organizational culture and transformational leadership are
connected with a positive relationship. Transformational business managers promote
collaboration and teamwork (Wiewiora et al., 2014). As business managers promote
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collaboration and teamwork within the organization, employees may benefit from
supportive alliance and mutual expertise (Man & Luvision, 2014). In a supportive and
friendly business environment, employees are motivated to deliver better performance
(Veiseh et al., 2014; Wiewiora et al., 2014).
Strong interpersonal relationship is an important element of an effective organizational

culture (Engelen et al., 2014). When there are strong interpersonal relationships within an
organization, employees may positively communicate with their managers, and share
their ideas and opinions without reservation and hesitation (Nongo & Ikyanyon, 2012;
Veiseh et al., 2014). Busse (2014) indicated that business managers deploy an open-door
policy and strong interpersonal communication with their employees in order to build a
high degree of faith in the leadership. When employees are satisfied and have faith in
their leadership, they would build a sense of ownership and obligation towards the
organization, which is an important factor in engaging and inspiring employees to achieve
better performance (Denison, 1990; Nongo & Ikyanyon, 2012).
Denison Organizational Culture Model

Denison (1990) indicated four cultural traits of organizational culture model:
involvement, consistency, adaptability, and mission, where he further categorized
involvement and consistency as internal factors, and adaptability and mission as external
factors. For each of these four cultural traits, the model defines three indices of managerial
practice as shown in Figure 1.
Figure 1: Denison Organizational Culture Model
These four cultural traits of organizational culture model are important in establishing
and sustaining an effective organizational culture within the organization (Kotrba et al.,
2012). Mousavi et al. (2015) indicated that involvement is an important factor for
effective organizational culture. According to Engelen et al. (2014), involvement involves
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transparent communication, employee-focused leadership, and strong interpersonal

relationships in the organization. O’Reilly et al. (2014) indicated that business managers
encourage a high degree of employee involvement and participation in main
organizational activities. Denison (1990) indicated that when employees participate in the
organizational decision-making process, they would build a sense of ownership and
obligation towards the organization. Hacker (2015) found a positive relationship between
high employee involvement in the decision-making process and organizational
performance. But, Givens (2012) argued that a high level of involvement in numerous
activities results a lack of specialization, and it is difficult to identify the individual
responsible for the specific task.
Research findings recognize the consistency of an organization as a reflection of the

effectiveness of organizational culture. Givens (2012) identified consistency as one of the
key factors for creating an effective organizational culture and enhancing organizational
performance. But, Nongo and Ikyanyon (2012) argued that a high degree of consistency
in the organization does not directly influence the commitment of employees and
organizational performance.
Schein (2010) indicated adaptability as the organizational capacity to perceive external

influences and respond to them. An effective organizational culture requires a set of basic
assumptions planned, exposed, and developed by organizational members in addressing
the external adaptation issues (Cian & Cervai, 2014). Owing to various internal and
external influences, business managers often modify and adopt new circumstances within
the organization. Childress (2013) indicated that business managers are essential to
passionate and responsive to internal and external influences. Denison (1990) indicated
that as per the adaptability principle, employees are essential to adapt, restructure and
reinstate their internal processes, behaviours and attitudes in response to external
influences. Adaptability is an important element of the organizational culture to enhance
corporate performance (O’Reilly et al., 2014). Nongo and Ikyanyon (2012) found a
positive relationship between adaptability and commitment in enhancing organizational
performance.
In an effective organizational culture, business managers use the mission and vision to
establish short-term and long-term goals of the organization (Nongo & Ikyanyon, 2012).
Business managers use the organization's mission to provide appropriate direction to
internal and external stakeholders (Rosa et al., 2014). According to Mousavi et al. (2015),
the mission includes clear direction and vision, strategic decision and intent, and goals
and objectives of the organization that are used by business managers to drive the
organizational activities. Business managers agree that assuring an efficacious alignment
between organizational culture and business mission is an important responsibility for
them to secure the organizational success (Denison, 1990; Eaton & Kilby, 2015). Raza et
al. (2014) indicated that in an effective organizational culture, business managers align
the organization’s mission with organizational goals for enhancing performance and
determining organization’s future directions. Empirical evidences showed a positive
relationship between mission and business performance (Givens, 2012; Mousavi, et al.,
2015).
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Mousavi et al. (2015) found that involvement and adaptability principles directly
influence organizational performance whilst consistency and mission principles indirectly
influence organizational performance. Nongo and Ikyanyon (2012) found that
adaptability and consistency are connected with a positive relationship in enhancing
organizational performance. Givens (2012) found that there is a positive relationship
between mission and organizational performance.
Types of Organizational Culture

There are four main types of organizational culture: clan culture, adhocracy culture,
hierarchy culture, and competition culture (Fiordelisi, 2014; Sok et al., 2014; Wiewiora
et al., 2014). Clan culture involves an employee-oriented leadership, cohesiveness,
engagement, and teamwork (Han, 2012). Adhocracy culture involves the features of an
innovative, creative, and adaptable nature (Veiseh et al., 2014). Hierarchy culture
involves rules and regulations for the management of organizational activities (Sok et al.,
2014). Competition culture involves addressing rivalry and market achievement towards
corporate goal and objectives (Pinho et al., 2014).
Clan or supportive culture involves the values of human affiliation, collaboration,

attachment, trust, loyalty, and support (Fiordelisi, 2014). Miguel (2015) indicated that
business managers in a clan culture need to function collectively to inspire and motivate
employees to build a culture of excellence within the organization. Clan culture involves
collaboration, engagement, and open communication (Pinho et al., 2014). Yirdaw (2014)
indicated that business managers encourage teamwork and empowerment of employees
in a clan culture. Mango and Ikyanyon (2012) indicated that business managers encourage
engagement and commitment of employees towards the organization since committed
employees may effectively execute their tasks and fulfil their accountabilities. The sole
focus of clan culture is to enhance the performance of employees through engagement,
collaboration, commitment, sense of ownership, obligation, and accountability (Han,
2012; Murphy et al., 2013; Nongo & Ikyanyon, 2012). Research findings showed how
clan culture positively relates to organizational performance (Han, 2012; Man &
Luvision, 2014; Murphy et al., 2013). But, Givens (2012) argued that the clan culture
involves issues of employee relations rather than enhancing organizational efficiency and
effectiveness. Kotrba et al. (2012) compromised both views, supporting the clan culture’s
indirect role in enhancing performance and they acknowledge the clan culture’s direct
role in enhancing efficiency and effectiveness.
In adhocracy or entrepreneurial culture, it is believed that innovation and change are

important to enhance the performance of the organization (Fiordelisi, 2014). Business
managers in adhocracy culture devote more resources for research and development and
inspire employees to pursue innovative business ideas (Sok et al., 2014). Hartnell et al.
(2011) indicated that growth, risk taking, creativity, diversity, independence, and
adaptability as the values and assumptions of adhocracy culture. Organizational members
in an adhocracy culture need clear direction for their work assignments regarding the
importance and impact of such works towards the organizational goals (Veiseh et al.,
2014). Engelen et al. (2014) found a positive relationship between adhocracy culture and
innovative entrepreneurial orientation. Hartnell et al. (2011) also found a positive
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relationship between adhocracy culture and corporate performance in the long-term

perspective.
Hierarchy culture involves establishing effective control systems across the

organization. Hartnell et al. (2011) indicated that organization members obey the rules
and regulations of hierarchy culture, where each operation is carried out with pre-defined
procedures and rules. Clear communication, consistency, and stability are the values and
assumptions of hierarchy culture. The sole focus of hierarchy culture is efficiency and
effectiveness (Fiordelisi, 2014). Cao et al. (2015) found a negative relationship between
hierarchical culture and customer integration. Han (2012) also found a negative
relationship between hierarchy culture and corporate performance.
Competition or market culture involves gathering customer and competitor

information, appropriate goal setting, planning and decision-making, task focus
leadership, and market aggressiveness and achievement. Members of the organization
have clear objectives to increase their reward via market achievement is obvious in a
competitive culture (Han, 2012). Miguel (2015) indicated that the core elements in
competition culture are open communication, competition, competence, and
achievement. In competition culture, business managers concentrate on the effectiveness
of the external business environment through market control and secure their
competitiveness through market achievement. To succeed in a competitive market,
business managers must have knowledge of their customers and market priorities
(Miguel, 2015). Han (2012) indicated that business managers need to sustain customer-
driven leadership since the customer satisfaction is a priority in the competition culture.
The other priority for business managers in competition culture is to satisfy their business
owners. The sole focus of competition culture is high revenue, high market share, high
profits, fast growth, and productivity (Hartnell et al., 2011). In an effective organizational
culture, business managers use the values, behaviours, and strengths of employees to
make the business sustainable and competitive in the marketplace. The proper alignment
of fair competition and stakeholder return is vital for the effectiveness of organizational
culture (Eaton & Kilby, 2015).
Measuring the Effectiveness of Organizational Culture

Business managers may deploy various methods to evaluate and measure the
effectiveness of their organizational culture. O’Reilly et al. (2014) indicated that selecting
an appropriate measurement method is important since the method shall capture every
aspect of the organizational culture which may be unique to the organization concerned.
Hartnell et al. (2011) found a disagreement and lack of universal standardization to
measure the effectiveness of organizational culture.
O’Reilly et al. (2014) developed a method with six factors: adaptability, integrity,
collaboration, result oriented, customer oriented, and detail-oriented factors in order to
measure the effectiveness of organizational culture. Flamholtz and Randle (2012)
indicated three elements: cultural alignment, behavioural consistency, and cultural gaps
to measure the effectiveness of organizational culture. Hacker (2015) confirmed that
O'Reilly et al.'s six factors are more detailed and appropriate to measure organizational
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values, beliefs and norms. The evaluation helps to identify the prevailing cultural gaps
which highlight the difference between desired and actual values in each factor.
Fusch and Gillespie (2012) developed a performance analysis model to assess the gap
between the desired and actual performance of the organization. The performance
analysis model of Fusch and Gillespie illustrates how business managers identify
performance gaps by contrasting the actual performance of the organization against the
desired performance. A desired organizational performance involves detailed analysis of
the organization’s vision, mission, strategy, goal, objectives, and other desired results.
The actual performance analysis involves discussion of internal and external factors
including economic, market, and customer relations. Fusch and Gillespie pointed out the
importance of identifying performance gaps as a primary pathway to effective
performance intervention deployment. Fusch and Gillespie used a work-life approach as
a performance intervention to create an effective organizational culture and enhance
performance.
Flamholtz and Randle (2012) developed a method with five key dimensions of
organizational culture: customer orientation, employee orientation, performance and
accountability standards, commitment to change and innovation, and company process
orientation in order to measure the effectiveness of organizational culture. Customer
orientation involves how business managers understand their customer demands and how
employees serve their customers. Business managers must identify their organizational
values to guide employee on effective customer interactions (O’Reilly et al., 2014). The
organizational values contribute to the effectiveness of organizational culture by
maintaining a high degree of customer satisfaction (Hartnell et al., 2011). Employee
orientation involves how organizational members behave while performing their jobs in
the organization (Flamholtz & Randle, 2012). Business managers use employee
orientation to sustain an effective organizational culture. The third organizational culture
dimension of Flamholtz & Randle’s method involves how performance and
accountability standards collaborate in the business process of the organization. These
standards elaborate how employees are accountable for their job roles, and how they
receive their performance evaluations and rewards. O’Reilly et al. (2014) indicated that
performance and accountability standards have a significant impact on the work
performance and behaviour of employees. Green (2012) indicated that performance and
accountability standards contribute to the achievement of organizational objectives, and
effectiveness of organizational culture. Flamholtz and Randle (2012) indicated that
commitment to change and innovation involves the readiness of business managers to
lead unexpected changes and improve products and services. Commitment to innovation
and readiness for change are important strategic contributions to the effectiveness of
organizational culture (Hartnell et al., 2011). Company process orientation is the process
of how the corporate business structure operates with planning, organizing, decision-
making, communication, and social responsibility (Flamholtz & Randle, 2012). The
effectiveness of organizational culture involves economically feasible planning,
transparent decision-making processes, clear communication channels, and socially
responsible organizations (O’Reilly et al., 2014).
An effective organizational culture involves highly motivated employees, high level

of customer satisfaction, well-established performance standards, openness to change,
533
innovation, and clearly defined company process orientation (Flamholtz & Randle, 2011).
Diverse aspects of the effectiveness of organizational culture contribute to corporate
performance (Schneider et al., 2013). For instance, supportive organizational culture may
contribute to employee satisfaction, innovative organizational culture may contribute to
higher sales growth, and bureaucratic organizational culture may increase efficiency
(O’Reilly et al., 2014).
The corporate group leadership uses an appropriate and consistent measurement tool
to evaluate the role of organizational culture in the corporate group (Zahavi & Lavie,
2013). Eukeria and Favourate (2014) indicated that many successful corporate group
managers use return-on-capital, net profit, or earnings per share to measure the
performance of member companies.
The Role of Organizational Culture on Business Performance

Organizational culture is an important determinant of business performance (Denison,
1990; O’Reilly et al., 2014). Establishing an effective organizational culture contributes
performance enhancement in the organization (Fusch & Gillespie, 2012). Uddin et al.
(2013) found a strong positive relationship between organizational culture and business
performance. However, Childress (2013) argued that an organizational culture does affect
business performance positively or negatively.
Laforet (2016) indicated that paternalistic or founder type culture does not have a
positive effect on innovation performance, but an entrepreneurial-like (externally
focused, flexible, agile, proactive, and long-term oriented) culture does. Park et al. (2016)
found that participative management and innovative culture are positively related to
perceived organizational performance (internal efficiency), but the relationship between
participative management and perceived organizational performance is moderated by the
perceptions of employees. Polychroniou and Trivellas (2018) found a positive
relationship between culture strength and internal performance (innovation competence
and human relations) as well as firm outcomes (profitability, growth and reputational
assets). In contrast, culture unbalance exerts a negative impact on organizational
performance. Jin et al. (2019) found that innovation culture facilitates the sustainability
orientation of the organization and that the converse also applies.
Unger et al. (2014) found a positive relationship between corporate culture and
financial performance. Flamholtz and Randle (2012) indicated that 46% of corporate
earnings are affected by the effectiveness of organizational culture. However, Berg and
Wilderom (2012) argued that the organizational culture might affect performance, where
the change is a longer time interval showing the effects of culture on financial
performance.
Sengottuvel and Aktharsha (2016) found that all dimensions of organizational culture
explain significant variation in the performance, whilst strategic emphasis as the most
significant predictor of organizational performance. Nikpour (2017) indicated that
organizational culture beyond its direct impact exert indirect impact on organizational
performance through the mediation of the organizational commitment of employees. Cura
534
(2018) indicated that 25% of performance is affected by organizational cultural traits, and
therefore cultural enhancing will result performance enhancement by 25%.
There are many other empirical evidences highlight the relevance of organizational
culture on organizational performance. Quantitative study results indicate a positive
relationship between organizational culture and business performance (Han, 2012;
Hartnell et al., 2011; Jofreh & Masoumi, 2013). Case study results also confirm that an
effective organizational culture is a driving factor in organizational performance (Pinho
et al., 2014; Simoneaux & Stroud, 2014).
Most of the studies found that there is a positive relationship exists between
organizational culture and organizational performance (Cura, 2018; Gorondutse &
Hilman, 2019; Heris, 2014; Kohtamaki et al., 2016; Nikpour, 2017; Sengottuvel &
Aktharsha, 2016; Wahyuningsih et al., 2019). But some recent empirical evidences
argued that there is no such relationship exists between organizational culture and
organizational performance (Leithy, 2017; Rashid & Shah, 2016). A study carried by
Rashid and Shah (2016) rejected the hypothesis that stated there is a significant
relationship between organizational culture and organizational performance. Moreover,
Leithy (2017) argued that both work-related attitudes and work behaviour can be seen as
related to organizational performance, and the structural equation model apparently
eliminated the relationship between organizational culture and organizational
performance.
Berg and Wilderom (2012) developed a method with five factors: employee
empowerment, external emphasis, interdepartmental collaboration, human resource
orientation, and performance improvement tendency in order to evaluate the impact of
organizational culture on business performance. Unger et al. (2014) confirmed that Berg
and Wilderom's five factors are more detailed and appropriate to evaluate the real impact
of organizational culture on business performance in an organization.
The Role of Organizational Culture in the Corporate Group
A corporate group is a combination of two or more legal independent member

companies with different business segments under one corporation with the power of
control, governance, and leadership (Eukeria & Favourate, 2014; Gajewski, 2013). Under
a corporate group business structure, member companies may involve with similar or
diversified products and services from a different business sectors and geographical
locations (George & Kabir, 2012). Organizational culture is an important element to unify
various units and divisions in the corporate group structure (Kenny, 2012).
The organizational culture must align with the corporate business strategy. Eaton and
Kilby (2015) indicated that 68% of corporate business managers in the world believe that
their organizational culture does not align with their business strategy. Several empirical
evidences in the area of corporate groups showed that without the support of effective
organizational culture, managers fail to implement and maintain their strategy (Eaton &
Kilby, 2015; Weber & Tarba, 2012).
535
Cultural integration between corporate office and member companies is also a key
factor of the performance of the corporate group (Idris et al., 2015). Weber and Tarba
(2012) showed that 89% of newly acquired businesses in the United States of America
fail to succeed because of a lack of cultural integration between corporate office and
member companies. Whalen (2014) indicated that organizational culture change
initiatives in corporate groups have more than 50% failure rate.
Business managers believe that establishing an effective organizational culture in the

corporate group is important to manage and lead diversified companies under the
corporate group (Lee & Gaur, 2013; Neffke & Henning, 2012). Many well-known
business managers confirmed the benefits of deploying diversified business strategy with
an effective organizational culture to enhance performance in the organization (Kenny,
2012). Research findings show that when diversification supports with effective
organizational culture, diversified companies outperform the other companies (Gajewski,
2013; George & Kabir, 2012; Lee & Gaur, 2013). In contrast, Coad and Guenther (2013)
indicated that diversification activities contribute less financial return in the short-term,
but high financial return and competitiveness in the long-term. Business managers with a
diversified business strategy may benefit from many opportunities in an effective
organizational culture (George & Kabir, 2012). The key benefits are: sharing limited
resources, economies of scale, taking the advantages of cost saving, strategic adjustments
and financial economics, and experience sharing among managers of member companies
in the group (Flamholtz & Randle, 2011; Hashai & Delios, 2012; Man & Luvision, 2014).
In a business acquisition and merger process, it is vital for management to integrate

with the different cultures of merging companies (Eaton & Kilby, 2015). Hirsch (2015)
indicated that 70% of newly acquired businesses fail to integrate with the organizational
culture of the corporate group, and 83% fail to increase the shareholder value. Tarba et
al. (2017) indicated that synergy potential (similarities and complementarities) between
high-tech merging companies, and effectiveness of post-acquisition integration of
organizational culture positively influence the overall acquisition performance of
merging high-tech companies.
Business managers use collaborative organizational culture to make a successful

integration between member company culture and corporate culture (Gajewski, 2013;
Kenny, 2012). Latif and Ullah (2016) indicated that collaborative culture and internal
service quality have a direct and positive impact on the organizational performance whilst
internal service quality partially mediates the relationship between collaborative culture
and organizational performance.
The corporate group leadership encourages a decentralized organizational structure to

empower general managers of each company and to distribute power and responsibility
(Kenny, 2012). Weber and Tarba (2012) indicated that the decentralized organizational
structure is important for delegating accountability and power at the levels of member
companies. Zahavi and Lavie (2013) indicated that within the corporate group, general
managers and divisional managers need to perform like small business owners. General
managers of member companies are responsible for the profitability and return on capital
employed at each company level (Cian & Cervai, 2014). Managers of business units have
536
to understand their customer demands in delivering a competitive service at the business

unit level (Kenny, 2012).
It is necessary to incorporate an appropriate and consistent performance measurement

tool to evaluate the role of organizational culture and performance of each division and
member company within the corporate group (Eukeria & Favourate, 2014; Zahavi &
Lavie, 2013). Effective corporate groups typically use return-on-capital, net profit, or
earnings per share to evaluate the performance of member companies (Eukeria &
Favourate, 2014).
Conclusion
In a corporate group, organizational culture can be considered as an essential
ingredient of organizational performance and a source of sustainable competitive
advantage. This paper presented a synthesis of various renowned literature concerning
the role of organizational culture on business performance in a perspective of the
corporate group. It was found that organizational culture has a strong impact on the
organizational performance. Empirical evidences further showed that lack of cultural
integration between member companies was a primary cause of failure in corporate
groups. Therefore, it is ascertained that cultural enhancing would result performance
enhancement.
Business managers are recommended to establish an effective organizational culture

in order to enhance corporate performance. 68% of corporate business managers in the
world believe that their organizational culture does not align with their business strategy.
Whilst 72% of corporate leaders acknowledged the importance of organizational culture
to organizational performance, only 25% identified an effective organizational culture for
their organizations. Therefore, how an effective organizational culture is established to
enhance the corporate performance can be recognized as a needed research scope.
Moreover, this paper highlighted the prevailing theoretical and empirical gaps in the
area of organizational culture towards corporate performance, and hence the findings may
be useful for future similar studies. More research can be done in this area to determine
the nature and ability of organizational culture in manipulating corporate performance.
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International Journal of Management, Accounting and Economics

Vol. 7, No. 9, September, 2020

A Literature Review on Organizational Culture

Keywords: Organizational Culture, Organizational Excellence, Business

The review focuses on the conceptualization, measurement and examine various

Organizational culture contributes favourably to corporate governance and

Sources of Organizational Culture

The learning experience is another source of organizational culture, which is derived

History of Organizational Culture

In the early 1980s, the theory of organizational culture included organizational

In 1982, Peters and Waterman indicated the characteristics of the organizational

In 2011, Flamholtz and Randle contributed to an extensive knowledge in the area of

Following a detailed analysis into 46 high-performing corporates in the United States

An excellent organizational culture includes motivated employees and value-driven

Strong and Weak Organizational Culture

Establishing a set of organizational standards and trends mainly involves developing

A strong organizational culture is critical for motivating the employees of the

Business managers and employees with a strong organizational culture have an

In a strong organizational culture, business managers may establish a set of formal

Management with weak organizational culture has a significant potential to affect

Positive Organizational Culture

In a positive organizational culture, business managers deploy a transparent leadership

Positive organizational cultures encourage business managers to explain and convey

Effective Organizational Culture

Flamholtz and Randle (2011) indicated that an effective organizational culture is an

Teamwork is an important factor in achieving a common organizational goal. Effective

Customer service: a source of sustainable competitive advantage, is an important

In an effective organizational culture, business managers deploy employee-focused

Strong interpersonal relationship is an important element of an effective organizational

Denison Organizational Culture Model

Figure 1: Denison Organizational Culture Model

transparent communication, employee-focused leadership, and strong interpersonal

Research findings recognize the consistency of an organization as a reflection of the

Schein (2010) indicated adaptability as the organizational capacity to perceive external

Types of Organizational Culture

Clan or supportive culture involves the values of human affiliation, collaboration,

In adhocracy or entrepreneurial culture, it is believed that innovation and change are

relationship between adhocracy culture and corporate performance in the long-term

Hierarchy culture involves establishing effective control systems across the

Competition or market culture involves gathering customer and competitor

Measuring the Effectiveness of Organizational Culture

An effective organizational culture involves highly motivated employees, high level

The Role of Organizational Culture on Business Performance

The Role of Organizational Culture in the Corporate Group

A corporate group is a combination of two or more legal independent member

Business managers believe that establishing an effective organizational culture in the

In a business acquisition and merger process, it is vital for management to integrate

Business managers use collaborative organizational culture to make a successful

The corporate group leadership encourages a decentralized organizational structure to

to understand their customer demands in delivering a competitive service at the business

It is necessary to incorporate an appropriate and consistent performance measurement

Business managers are recommended to establish an effective organizational culture

Brown, A. (2013). Managing challenges in sustaining business excellence. International

Busse, R. (2014). Corporate culture, organizational change, and meaning at work:

Cura, F. (2018). Impact of organizational culture on organizational performance:

Denison, D. R. (1990). Corporate culture and organizational effectiveness. New York,

Fusch, G. E., & Gillespie, R. C. (2012). A practical approach to performance

Gajewski, D. (2013). The holding company as an instrument of companies' tax-financial

Gibbs, C. (2012). Corporate citizenship and corporate environmental performance. Crime