Culture is commonly thought of as “a pattern of shared basic assumptions that a given group has invented, discovered, or developed in learning to cope with its problems of external adaptation and internal integration” according to Edgar Schein’s (1985: 9) most commonly accepted dichotomy of the definition of the term. In the literature, it is widely acknowledged amongst mainstream views that organisational culture leads to higher performance and is therefore portrayed as a form of competitive advantage for firms: it can differentiate an organisation from its competitors and become a key source of organisational success. Indeed, mainstream views supporting this argument present on one side, a “one best culture” formula that firms should adopt in order to succeed such as Peters and Waterman (1982). On the other side, others advocate for a more contingent approach to the debate, such as Handy (2009) and Deal and Kennedy (1982), where the “right” culture for an organisation depends on internal and external variables.
Whether a strong culture is desirable or it should find the appropriate culture for its organisation, these perspectives have their own limitations and this essay aims to present a more critical view on culture. Although, corporate culture can affect a company’s performance under certain circumstances, it can also “undermine decision making as it may encourage conformity, group thinking or inability to adjust and lead to failure” (Bratton, 2010: 352). This essay argues that performance is likely to be better for companies possessing cultures that are both strong and able to adjust sufficiently well to its environments.
the link between culture and performance
A “ONE SIZE FITS ALL” culture
The distinction between strong and weak culture is often said to be what characterises the performance of a company. Strong cultures emerge when the degree of commitment to organisational values is high and these are widely shared by the employees of the organisation (David A. Buchanan, Andrzej Huczynski, 2017: 124). According to Denison (1984), “The strength of corporate culture is directly correlated with the levels of profit in a company”. Indeed, strong cultures are believed to generate motivation in employees and therefore increases the responsibility felt in motivated employees for the organisation’s success. Sempane et al. (2002) underline the necessity to engage with organisational culture to ensure motivation in order to achieve the company’s goals. Moreover, strong cultures unite staff through common values and goals and increase a sense of belonging amongst the organisation. Strong corporate culture directs attitudes and actions in an organisation: it harnesses loyal, committed and hardworking employees who are able to behave in a way consistent with organisational purposes and goals (Deal and Kennedy, 1982; Peters and Waterman, 1982) however there are limitations to the “one size fits all” school of thought.
Companies such as Apple, Google or Disney are commonly thought of as “strong culture companies” and serve as evidence for the widely-accepted assumptions that strong cultures lead to higher performance than weaker ones (David A. Buchanan, Andrzej Huczynski, 2017). However, according to Chris Grey (2009) strong cultures with widely shared values do not tell us anything about the values themselves and the ethics around them. Wells Fargo’s pervert organisational culture of high competition is an example of this. After “about 165 million fake accounts were created to meet sales goals” (BBC, 2017), the firm’s performance has had drastic implications on its reputation and has numerous consequences on its performance. David A. Buchanan and Andrzej Huczynski, (2017) stress that “company success, measured in financial terms, depends on a great many factors other than culture and a weaker culture may have other competitive advantages (such as technological lead or product appeal)” leading to higher efficiency and performance and strong cultures can lead inappropriate behaviours. These various perspectives emphasise the need to question the very nature of strong cultures and their values as well as take into account different factors that constitute competitive advantages for companies.
This line of argument leads us away from a “one best culture” model to a more contingent approach. This ideology argues for a culture that is able to adapt and change according to external and internal variables in an unpredictable environment. “Strong corporate cultures facilitate reliable performance in relatively stable environments, but as volatility increases, these benefits are dramatically attenuated” (Sorenson, 2002). Goffee and Jones (2003) cited by Buchanan and Huczynski (2017) support this approach to corporate culture and refer to it as an “it all depends” model: anticipating environmental challenges for that particular corporation has a positive impact on its performance through the facilitation of decision-making and innovation for example.
Whether a strong culture is desirable in an organisation, or whether the “right culture” needs to apply for specific firms, these models present limitations regarding performance measures and the confidence in the reliability of the culture-performance link. Indeed, Bratton (2010) stress the challenges around measurements of the potential correlation between the two variables and the lack of “credible evidence about how much of the variance in performance can be explained by the culture factor” (Bratton 2010: 349).
the “dark side” of culture
Mainstream viewpoints regarding the need for strong organisational culture face criticism from critical management studies. It is argued that strong cultures impede on a firm’s success by encouraging unethical behaviours such as conformism, group-thinking: culture is described as a form of power that leaders use in order to manipulate employees for effectiveness and higher performance (Schein, 1992). Under strong cultures, there is little incentive to question ‘ways of doing’: conformity and group-thinking are usually encouraged in order to form a common culture which undermines overall an organisation’s performance through the lack of innovation and change. This theory is further developed by Miller (1994) who identifies different consequences of implementing strong organisational cultures. Behaviours such as inertia, immoderation and insularity (inability to adapt to the environment) have been seen in companies such as IBM who failed to respond to its competitors, Apple, due to the difficulty in changing strong organisational cultures in the 1990s (Buchanan and Huczynski 2017). Another example of this is Barclays’ “win at all costs culture which put financial gain before customers” (Salz, 2013 cited by Buchanan and Huczynski, 2017: 125).
Furthermore, studies claim that culture can indeed lead to unethical behaviours which can lead firms to failure. Although much of the publicity around the scandal of the company Enron has been based around its accountancy practises, Tourish and Vatcha (2005) underline the important role its internal corporate culture and leadership practices in maintaining this culture has played in the failure of the firm. Behaviours such as dominance from leaders, under the belief that a common culture leads to higher financial performance, aimed to manipulate workers through “subordinating their ethical sense to the needs of the corporation” (Tourish and Vatcha, 2005) has been highlighted in accounts of former employees. Mintzberg (2004, cited by Tourish and Vatcha, 2005) shares this view and believes the power of CEOs has grown at the expense of those of the employees and the dangers of culture are considerable. Such consequences include the loss of identity in employees, erasing their sense of ethicality in decision making leaving an opportunity of manipulation by the leaders of organisations. In the context of Enron, this lead to the emergence of “corporate cultism” and the failure of Enron (Tourish and Vatcha, 2005).
To summarise, it is commonly argued that strong cultures consist of competitive advantages for firms and therefore can lead to higher performance: strong cultures increase motivation, employee loyalty and constitute a common goal for employees to work towards. In contrast, contingency approaches give evidence for higher efficiency and performance from organisations with “the right culture” one that adapts to its environment and is specific for its organisation (as seen through the different types of cultures).
However, a firm’s culture may affect its all-round performance through increased commitment and greater loyalty but there are limitations to these perspectives. Indeed, there is a lack of measurements of what high performance is and what defines culture and a lack of validity of the correlation between these variables which add to the complexity of managing culture. As stated by Buchanan and Huczynski (2017), “evidence for a positive culture-performance link is tenuous” and many of its counter-effects such as conformity or group-thinking give evidence for the counter argument that strong cultures can lead corporations to failure.
It is therefore concluded that firms need to find the “right” culture which aligns with their strategic goals. Firms possessing a strong culture with the ability to adapt well to its environment and change is favourable. Moreover, the ethics of corporate culture and the values firms install need to be closely managed in order to combat the dangers that organisational culture may cause.