di tomaso and gordon

8/9/2019 Di Tomaso and Gordon

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Journal of Managmunt Studies 29:6 Novemb er 19920022-2380 3.50

PREDICTING CORPORATE PERFORMANCE FRO MORGANIZATIONAL CULTURE*

GEORGE . GORDON

Department of Busincss Administration , Rutgers Universily

NANCYDITOMASO

Graduate School of Managnncnt, Rutgers University

ABSTRACT

This article investigates the relationships of culture strength and two substan-tive cultural values with corporate performance. Cul ture st rength is measuredby the consistency of responses to survey items across people and the twocultural values are measured by items on the survey that relate to eitheradaptability or stability. The data, from management surveys of 11 USinsurance companies in 1981, were correlated with asset and premium grow,thrates from 1982 to 1987. Results indicate that both a strong culture regardlessof content and a substantive value placed on adaptabi lity are associated withbetter performance for two to three subsequent years on both criterionmeasures. The results support the findings of Denison (1990) that strengthof culture is predictive of short-term performance. The present results,

however, suggest a more complex contingency model than that proposed byDenison.

INTRODUCTION

While the subject of corporate culture generated a flood of publications in the1980s, few empirical studies have assessed the impact of organizationalculture on corporate performance. A number of authors have established orsupported the hypothesis that successful companies have strong cultures,defined in various ways (Deal and Kennedy, 1982; Kilmann ct al. 1985;Mitroff and Kilmann, 1984; Ouchi and Price, 1978; Pascale, 1985; Peters andWaterman, 1982; Schall, 1983; Schein, 1985; Weick, 1985). For the most par t,

however, these arguments have been conceptual and anecdotal or have beencase studies without formal measurement of either performance or culture.This article examines the link between strong corporate cultures and corpo-

Address for rcpn'nts: George G . Gordon, Department of Business Administration, RutgersUniversity Newark, New Jersey 07102,USA.


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PREDICTING CORPOR4TE PERFORMANCE 785

process-oriented u s results-oriented and loose control u s tight control, para-llel Peters and Waterman (1982).

Many others have also pursued the trait approach to corporate culture,each with their own preferred content (see, for example, Akin and Hopelain,1986; Denison, 1984; Ouchi, 1981; Ouchi and Price, 1978; Stevenson andGumpert, 1985; Vaill, 1984; and Wilkins, 1984). However, most rely onanecdotal evidence that particular traits form the basis of company cultures.Indeed, much of this work has been attacked from both methodological andconceptual bases. For example, a consistent methodological criticism is thelack of comparison groups to provide evidence that companies with the traitsdiffer from those which lack them (Carroll, 1983; Saffold, 1988). And, asnoted by Business Week (1984), a third of the companies identified as excellentby Peters and Waterman (1982) experienced poor performance within twoyears after the book was published. The same studies have also been criticizedfor their lack of conceptual development. Many do not discuss the content ofvalues or beliefs, while others seem to point toward very different content(Saffold, 1988).

Strong and Weak CulturesAccording to Saffold (1988, p. 547), the cultural trait approach assumes animplicit model in which traits impact an organization in proportion to thestrength of its culture and ultimately affect performance. Strength, like content,however, is defined in various ways: as coherence (Deal and Kennedy, 1982;Weick, 1985); as homogeneity (Ouchi and Price, 1978); as stability andintensity (Schein, 1985); as congruence (Schall, 1983); as thickness (Sathe,1983); penetration (Louis, 1985); as internalized control (DiTomaso,1987).

While these authors define cultural s trength, they do not try to operational-ize it. These various authors seem to consider cultural s trength a function ofsome combination of the following: who and how many accept the dominantvalue set; how strongly, deeply or intensely the values are held; and how longthe values have been dominant (see Louis, 1985).

Corporate Culture and PefomanceMost empirical research that attempts to relate culture to some type oforganizational outcome has pursued the trait approach. That is, a specifiedtype of value or beliefhas been claimed to have particular effects. Forexample, Sapienza (1985) found that contrasts in shared beliefs about theimportance of people versus the importance of performance led two com-panies to adopt different strategies to cope with a change in the laws affectingtheir industry. Similarly, within a large sample of banks, Jenster and Bigler

1986) found a significant relationship between cultural patterns and thepursuit of particular strategies. Dunn et al. 1985) found a correlation betweena marketing effectiveness scale and customer-oriented cultures, as describedby Peters and Waterman (1982). Amsa (1986) reported that loiteringbehaviour (unauthorized rest breaks) in work groups was related to companybeliefs about the desirability of discipline. Finally, specific cultural character-istics have been related to involvement, identification and commit-


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786 GEORGE G. G O R D O N A N D N A N C Y D I TO M A S O

ment to the firm Koberg and Chusmir , 1987; OReilly, 1983; Posner et al.1985).

Very few empirical studies have related cultural characteristics to somemeasure of corporate financial performance. Gordon 1985) contrasted com-panies in dynamic industries, where technologies, participants and productschanged frequently, with companies in the more static utilities industry,where few such changes occurred. He found that companies in highlydynamic industries were characterized by cultural values that enhancedadaptability, whereas utilities were characterized by cultural values thatenhanced stability. He further found that the same values differentiated thefastest growing and most profitable companies within each type of industryfrom the less successful ones. On the other hand, Reynolds 1986) found thatemployee responses to a culture questionnaire in a company identified asexcellent by Peters and Waterman 1982) did not differ from those in twoother companies with less impressive performance.

Two studies of culture and performance have used data from the Surveyof Organizat ions Taylor and Bowers, 1972) to determine relationshipsbetween employee perceptions and attitudes and firm success. Hansen andWernerfelt 1989) refer to these as organizational variables and Denison1984) as cultural, but the differences are more semantic than substantive.

Hansen and Wernerfelt classified the emphasis on human resources andemphasis on goal accomplishment scales from the Survey of Organizationsas organizational variables and classified industry profitability, relative mar-ket share and company size as economic variables. Their study tested therelative importance of organizational and economic factors in predicting five-year return on assets. They found both the emphasis on human resourcesand on goal accomplishment to be significant predictors, with the organiza-tional data accounting for about twice as much variance as the economic.

Denison 1984) related two characteristics from the Survey of Organiza-tions, organization of work and decision-making practices to subsequentreturns on sales and investment. He found higher returns for companiesabove the average on each measure than for companies below, with differ-ences tending to widen across the five years following the survey. This studyis also the only one which, in addition to examining the impact of culturaltraits, attempted to determine the impact of cultural strength conceptualizedas consistency) on organizational performance.

Denison defined consistency as the inverse of the variance in questionnaireresponses across work groups within companies. Defined this way, Denisonsconcept of consistency is an amalgam of Louis 1985) concepts of sociologicaland psychological penetration, since low variance implies both pervasivenessand homogeneity of perceptions. Denison 1984; 1990) found low varianceson four different traits organization of work, emphasis on human resources,decision-making processes and co-ordination significantly correlated withcompanies standardized Return on Investment RO I) for the subsequenttwo years. This lat ter study gives tentative support to the notion that a firmsculture strength, as defined by the degree of agreement on cultural character-istics across respondents, relates to subsequent financial performance.


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PREDICTING COR PORATE PERFORMANCE 787

HYPOTHESES

The present study, following a strategy similar to Denison (1984; 1990),examines the effects of culture strength, measured as the consistency of surveyresponses within a company, on subsequent financial performance. T he studyalso provides a follow-up to Gordons (1985) work relating cultural values onadaptabil ity versus stability to corporate performance. Th e insurance indus-try, from which the sample is drawn, long operated in a very static environ-ment, in Gordons terms; but change brought on by deregulation andcompetition has required companies to be much more adaptive to newproduct and distribution opportunities. From both of these previous works,we derive three hypotheses for the firms in this industry:

HI: The greater the culture strength, the stronger the firms financial

H Z The higher the relative value placed on adaptability, the stronger the

H 3 Th e higher the relative value placed on stability, the weaker the firms

performance will be in subsequent years.

firms financial performance will be in subsequent years.

financial performance will be in subsequent years.

METHOD

Data Collection InrtmmcntThe culture data examined here are taken from T h S u m 9 of ManagnnnitCfimate(Gordon and Cummins, 1979) an inst rument applied in hundreds ofcompanies in a wide variety of industries. This study examines the 1981 da tafrom surveys of 11 insurance companies.

Although the instrument is labelled a climate survey, i t is neither anextension nor an adaptation of the climate instruments described in theliterature (Litwin and Stringer, 1968; Payne and Pheysey, 1971; Taylor andBowers, 1972). Instead i t grew out of interviews in approximately 30 organi-zations, where respondents were asked to describe the way in which theorganization operated, that is, its objectives, the means used to accomplishthem, and the influences they perceived to be at work. For each of the earlysurveys, these interviews became the basis of questionnaires customized tothe organization. Only after it was determined that similar issues wereemerging repeatedly across organizations, was a standardized questionnairedeveloped.

The instrument therefore grew out of the type of qualitative fieldworkfrequently employed in current studies of organizational culture, and theprocedure was similar to that used by Hofstede et a f . (1990) in developingtheir measures of organizational culture. In contrast to Hofstede et a f . ,however, our instrument is more consistently organizationally than in-dividually oriented. I t measures managers perceptions of how their organiza-tions operate, and by extension, the values that drive the behaviours of thosein the organization.


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788 GEORGE G. GORDON AND NANCY DITOMASO

Th e version of the instrument used in this study asked managers to describetheir companies on 61 items using seven-point scales presented in a semantic

differential type format. Earlier analyses of these items yielded eight factors(Gordon and Cummins, 1979) ranging in reliability (coefficient alpha) from0.80 to 0.87. The eight factors are labelled:

1. Clarity of strategy/shared goals2. Systematic decision-making3. Integration/communication4. Innovation/Risk-taking5. Accountability6. Action orientation7. Fairness of rewards8. Development and promotion from within

These factors are consistent with many of the dimensions discussed in theculture literature. Examples include action orientation (Peters and Water-man, 1982) , integration/communication and innovation/ risk-taking (Kan-ter, 1983; Reynolds, 1986) and fairness of rewards and development andpromotion from within (Alston, 1986). As noted earlier, however, no set ofcultural traits is widely recognized as critical or accepted as comprehensive.We do not have measures for several values that have become important inthe culture literature, namely, a focus on quality, service and so on. We,nevertheless, believe the factors provide a good overall representation of thecontent alluded to in much of the literature on corporate culture. For thepurposes of this study, average scores on the highest loading items on eachfactor were computed for each company to produce the eight culture contentscales.

SampleThe 11 companies in the sample were all in the life/health sector of theinsurance business and varied in assets from 691 million to 18.7 billion,with a median of 1.9 billion. Participants in each company consisted ofeveryone in the top four to five levels of management. Questionnaires weredistributed to participants (with a cover letter from the company chairperson)through each companys internal mail and were returned directly to theinvestigator in pre-addressed envelopes. All questionnaires were administeredand returned during a two-month period in mid-1981. Returns exceeded 90per cent of those surveyed and ranged from 34 to 132 participants percompany, with a mean of 77, for a total of 850.

The fact that respondents were limited to managers represents bothadvantages and disadvantages. On the one hand, the management, especiallythe middle to upper level management represented in this study, is clearlynot a representative sample of the employees in the companies studied.Previous research has shown that management is considerably more positiveabout their companies than people at lower levels (Hay Group, 1986).Previous work also has shown that different levels in a company mayrepresent different sub-cultures (Davis, 1985; Mart in and Siehl, 1983; Riley,


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PREDICTING CORPORATE PERFORMANCE 789

1983). On the other hand, it is the management, especially senior manage-ment, that must support, if not initiate, any major efforts on the part of their

companies. As Schein (1990, p. 1) claims; . . . cultural origins and dyna-mics can sometimes be observed only in the power centers where elementsof the culture are created and changed by founders, leaders, and powerfulpersons. Following the same logic, culture measured at this level will be mostpredictive of future behaviour and performance of the firm. Also, becauseeach survey included only middle and upper management, the samples aremuch more comparable across companies than if, as is often done in compara-tive studies, different employee groups had been sampled.

Culture MeasuresFor purposes of this study, three separate measures were used. The first,culture strength, was designed as an attempt to replicate Denisons (1984; 1990)findings that consistency of company values predicts short-term profit per-formance. Culture strength was measured by the inverse of each of the eight-scale standard deviations averaged across all eight scales for each company.While Denison 1990) operationalized the culture strength construct bycomputing the variance across groups within companies, we computed s tan-dard deviations across individuals within companies. The standard deviation,of course, represents a measure of dispersion around the mean, and thus isalso consistent with Saffolds (1988) recommendation that one measureculture strength by dispersion. Since smaller standard deviations implygreater agreement among managers on the types of values driving thecompany, we assume that such agreement or consistency s an indicationof the strength of the organizational culture.

The other measures, adaptability and stability, were based on Gordons(1985) work indicating that companies tend to develop cultures that matchtheir environments. The adaptability measure is a combination of two of thescales, action orientation and innovation/risk-taking, because in Gordonswork the better-performing companies in dynamic or fast-changing industries(high tech manufacturers) scored high on those measures. Stability is acombination of three factors, integration/communication, development andpromotion from within and the fairness of reward. In Gordons study, thesescores were high in the better-performing companies in stable industryenvironments (utilities). Gordon found none of the other three factors relatedto financial performance in either stable or dynamic environments.

Because the use of survey data to study cultural phenomena is stillrelatively unexplored, the literature offers little guidance regarding the bestform of measure to use, and arguments can be made for several measures.We employed two different variations of the adaptabili ty and stability mea-sures. First, we used an unweighted average of the raw scores on the scalescomprising each measure. These will be referred to subsequently as adapta-bility (Adap) and stability (Stab). Second, we used standardized deviationscores, which set all means equal to zero. That is, for each company, themean across the eight factor scores was subtracted from each individual factorscore and divided by the standard deviation across the eight factors. Thisprocedure produces standardized deviation scores and is similar to that


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790 GEORGE G . GORDON AND NANCY DITOMASO

employed by Hofstede et al. (1990) in their development of the 22 practicesthat formed the basis of their culture measure. We then separately averaged

the standardized deviation scores for the two adaptability and three stabilityscales described above to create the deviation-adaptability (DevAdap) anddeviation-stability (DevStab) scales.]

The issue here is similar to that raised historically with ipsative versusnormative scoring of psychological tests (Cattell, 1944) such as interest orpersonality inventories. In this case, ipsative scoring parallels our use ofdeviation scores while normative scoring is similar to our use of raw scoremeans. The issue is that any instrument of this type, whether a personalitytest or organizational survey, can produce a halo effect, in which all itemstend to be rated either high or low for a given respondent or company. Thu s,in an organizational context, should we consider a company as innovative ifit is high compared to other companies on that factor even if its innovationscore is lower than its score on most of the other factors? This could welloccur in a specific gas utility where very little technical innovation is neededor appropriate, but where morale is very high. The question has no absoluteanswer. One must determine what makes most sense conceptually given thetopic at hand. We believe that the deviation scores are more reflective of acompanys value system, and therefore most relevant for a study of organiza-tional culture. However, we report both raw and deviation measures forcomparison.

Measures of PezfonnanceMeasuring corporate performance in the life insurance industry presents aunique problem because the majority of companies in the industry (and sevenof the eleven in the sample) are mutual companies, owned by policyholdersand not by stockholders. Because of this unique ownership structure, suchcompanies do not make profits per se and do not use generally acceptedaccounting principles (GAAP) in reporting company results. Thus, theprofitability measures used by Denison (1990), such as the Return on Sales(ROS) or Return on Investment (RO I) , are not available for many lifeinsurance firms.

One measure commonly employed in the life insurance industry is the gainor loss in admitted assets, or growth in assets. This measure reflects theincome contribution of many business functions, including sales, investment,actua rial and underwriting. Growth in assets thus represents the contributionof a variety of profitable and efficient activities to the companys growth.Growth in assets, however, includes a large component of very stable invest-ment earnings, and thus tends to cloud performance changes resulting fromshort-term management actions.

A measure more sensitive to management actions is new premium income,clearly a key revenue component in any life insurance company. However,during the period of the study, the nature of the revenue stream in theinsurance industry was changing very dramatically. Following the interestrate fluctuations of the 1970s, many companies began to offer interest-sensitive products to their clients in addition to insurance, and the significantchanges in policy portfolios resulted in large short-term gains. These gains,


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792 GEORGE G GORDON ANDN A N C Y DITOMASO

Table 11. Year-to-year growth in the industry and the current sample

Percentage growth mm pINiour year1982 1983 1w I985 I986 1987

SampleAssets 9.6 10.3 9.5 10.8 10.8 8.8Premiums 12.2 16.0 16.6 7.7 14.5 13.3

IndustryAssets 11.9 11.3 10.4 14.2 13.5 11.3Premiums 14.0 -1.6 13.3 15.7 24.5 9.7

Culture VariablesTable I presents the intercorrelations among our culture measures. As one

can see, culture strength, as measured by the average standard deviationacross factors, is significantly related to both stability ( T = 0.88) and adapta-bility ( r = 0.59). Adaptability and stability are themselves positively corre-lated 0.75, and are thus not highly differentiated when measured by rawfactor scores. But when we partial out the overall average of the factor scoresfrom the correlation between adaptability and stability, we get a partialcorrelation of -0.81, which is what one would expect from their conceptualdefinition.

Th e more predictable -0.79 correlation of DevStab and DevAdap furthersupports the claim that the deviation scores are more consistent with thecultural values emphasized in each company than are raw scores. Adap andDevAdap are positively correlated (0.92), but S tab and DevStab have anegative and non-significant relation of -0.20. Even so, for the reasons

already discussed, we report all of the measures in the relationship withperformance, but we focus on the deviation scores.

Culture Strength and GrowthAll but one of the correlations between culture strength (AvgSD) and assetgrowth for the first four years and premium growth for the first three yearsfollowing the survey are significant beyond the 0.10 level (see table IV). Thus,the extent to which individuals agree in their view of the total culture ispredictive of future performance. One might want to know if agreement on

Table 111. Intercorrelations among rhe culture measures

AugSD Stab A 4 DeuShb DeuAdap

AvgSD

Stab

Adap

DevStab

X 0.88 ** 0.59. -0.08 0.42

X 0.75.. -0. 20 0.5 1

X -0.73** 0.92**

X -0.79

p < 0.10 * p < 0.05 p < 0.01


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PREDICTING CORPORATE PERFORMANCE 793

any of the specific scales is driving the relationship. In this regard we foundthat the correlations with performance of the inverse of the standard devia-

tions for each of the eight individual scales were generally similar to, butsmaller than, the average of all the scales (AvgSD). There was no pattern ofsome scales being clearly better predictors than others. While it might betempting to speculate how agreement on different scales might be differen-tially related to success, the small number of companies and the largecombination of scales (8) times years 6) times criteria 2) in this study makeit impossible to do any more than speculate. I t is, however, useful to comparethe results on overall culture strength (AvgSD) with those reported byDenison. He found significant correlations of approximately 0.50 +/- 0.05between consistency of culture on three of his four measures and ROI for thefirst two years after the survey. The correlations in his study then droppedbelow 0.25 for the next three years, and even become negative during thisperiod.

The findings here are similar to Denison's, with the relationship showingsignificance for about the same period and the correlations being of similarmagnitude. Thu s Hypothesis 1 is supported and is consistent with Denison'sfinding that strong culture, measured as consistency of survey responseswithin organizations, is related to organizational performance in ensuingyears. This similarity in the two studies exists despite differences in thesamples used and in the studies' measures of both culture and performance.

Culture Contentand G r o w t hThe direction of correlations with the growth scores for the two deviationscores of adaptabil ity and stability are quite different, as would be anticipatedfrom their negative intercorrelation. The DevAdap correlations with the twogrowth measures are primarily positive, while most of the DevStab correla-tions are negative. Furthermore, the correlations with asset growth, the morestable criterion, are almost always smaller than the corresponding correla-

Table IV. Correlations between measuresof culture and average growth of assets and premiums

YtlV 982 983 1984 1985 19 j 1987

Assets growthAvgSD 0.3 0.44 0.45+ 0.68. 0.08 0.26Stab 0.39 0.38 0.30 0.64. 0.10 0.18Adap 0.21 0.23 0.12 0 56 0.19 0.23DevS a b -0.07 -0.04 0.15 -0.14 -0.25 -0.32DevAdap 0.22 0.30 0.26 0.55. 0.37 0.33

Premium growth

Stab 0.73+* 0.25 0.54+ -0.15 -0.02 0.12Adapt 0.65** 0.32 0.63. -0.07 -0.57. -0.03DevS a b -0.42+ -0.30 -0.37 -0.08 0.69+* 0.14

AvgSD 0.78*+ 0.47 0.44+ -0.13 -0.16 0.46

DevAdap 0.57* 0.44+ 0.54+ 0 10 -0.75 . 0 00

+p = 0.10 *p C 0 05 * p C 0.01


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794 GEORGE G. GORDONAND NANCY DITOMASO

tions with premium growth, which we would expect, because we assumepremium growth is most readily impacted by management actions and

therefore most sensitive to cultura l issues. Within this sample and time frame,companies with cultures that emphasized adaptability tended to enjoy signifi-cantly greater sales growth over a three-year period following the survey thanthose with cultures that emphasized stability. Given the pattern of correla-tions for the two deviation measures against both growth measures, we canalso conclude that the results lend support to Hypotheses 2 and 3. Thesefindings are consistent with Gordons (1985) finding that companies indynamic industries perform best when their culture fosters adaptabili ty ratherthan stability.

We should, of course, comment on the pattern of effects from 1985 on. Asnoted in table 111, there is a negative correlation between premium growthin 1985 and 1986, resulting mainly, as discussed earlier, from some extremelywide swings in performance for specific companies in the sample and in the

industry as a whole. Since these performance swings tended to be temporaryrather than sustained, in this particular case it is reasonable to conclude thatthe significant and reversed correlations in 1986 resulted more from chanceand temporal fluctuations of measurement than from the existence of impor-tant relationships.

CONCLUSIONS

This study points up a number of interesting issues, both theoretical andmethodological. For one, it supports the finding that a strong culture, asmeasured by the consistency of perceptions of company values, is predictiveof short-term future company performance. T he pa ttern of results is similarto Denison (1990) who proposes a contingency theory. He argues: consis-tency is an indication of a system that is currently well coordinated . . . andthat currently performs well. In the longer term, however, the lack of varietyconnected with such a system limits the organizations ability to adapt tochanges in the environment (Denison, 1984, p. 18). While our results aresimilar to Denisons, this study suggests a more complex explanation. Indeed,given the gross approaches to the measurement of two very complex pheno-mena, culture and performance, and the differences in underlying measure-ments and contexts, the similarity in results is striking. However, we alsofound that a culture of adaptability but not stability is also predictive of short-term performance. The best explanation may be that both a strong culturefrom the standpoint of consistency, and an appropriate culture from thestandpoint of content, will produce positive results, but a combination of thetwo is most powerful. Although we cannot directly test interaction effects witha sample of 10, the hypothesis warrants further research.

While the need for a culture to be appropriate for an industry has beendiscussed in some detail by Gordon (1991), the explanation of how consis-tency alone enhances performance is less clear. We can assume that ifmanagement has a consistent perception of company behaviour, then theyshould have a common orientation in given situations. For example, if action


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over study is valued in t he company , then one would expect quick reactions

to new opportunities. This conduct may make the company a performanceleader when the costs of not taking action a re gre ater t han the potential lossesfrom ill-conceived actions. Th e alternative, of course, may also be true, actingtoo precipitously may lead to higher costs and therefore lower performancewhen more caution is warranted for high-level decisions. Which conduct ismost consistent with good performance depends, we assume, on variouscharacteristics of the company and its industry.

More important for our analysis here is the extent to which a companysmanagement personnel see the same trade-offs and act similarly in similarcircumstances. A consistent outlook on the pa rt of management may improveperformance because it indicates that the company has chosen a policy, forexample, on whether it is better to act quickly as opportunities presentthemselves or cautiously to avoid undue risk. A company where individual

managers act according to their own preferences rather than a widely-accepted corporate pattern may suffer both from missing important oppor-tunities and from failing to develop selected opportunities in an orchestr ated,powerful manner.

Both this study and Denisons suffer from the same shortcoming insofar asthey measure culture at one point in time and performance over a long period.I n neither, for instance, ar e we able to determ ine whether subsequent changesin culture in specific companies actually caused their performance to change,rather than the changes in performance being a sustained effect from theculture at the time of the survey. An important issue for further study iswhether culture strength (consistency) changes actually do occur within thespace ofjust a few years, and if so, the nature and extent of these changes.A further research question is whether lowered consistency presages loweredperformance or whether its impact is contingent on the extent and directionof change occurring in the economic, political and social environment.

From a methodological standpoint the current study also points up thedifficulties in trying to predict ongoing corporate performance from anymeasure obtained at one point in time. Even if culture has a strong influenceon how well people do their jobs and how well the aggregate companyperforms, external events can sharply affect corporate results, for example,an unfavourable ruling from an Insurance Commissioner or the rush of themarket toward a previously unsuccessful product.

For some time the liter ature has focused on the beliefs and values tha t makecompanies successful. A prior question may be the extent to which beliefsand values are held in common, no matter what their content. If so, it isimportant to examine the potential effects of consistency in values held acrossorganizations, as we have attempted to do here. Further, it appears thatdifferent beliefs and values may be more productive in different industries.In this study, a culture of adaptability was more related to success than oneof stability for an industry undergoing significant and rapid change. But theopposite may well be true in companies where technologies, products andcustomer needs change very slowly, if at all. Clearly, the composition andeffects of organizational culture are highly complex, and they require a greatdeal more study to sort out the pieces and the relevant relationships.


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NOTES

*We would like to thank Emilio Venezian for his help during the preparation of thismanuscript.[ For each organization let:

D(factor) = S(factorl-MSD

S(factor) is the factor scoreM is the mean of 8 factor scoresSD is the standard deviation of the 8 factor

where

scores from their meanThen for each organization:

DevAdap=D(Action) +D(Innovation)DevStab =D(Integration) +D(Development) +D(Fairness)

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