The Close Relationship Between Management Practices and Corporate Culture

Abstract

A growing body of literature finds that a healthy corporate culture is associated with superior financial performance. A separate stream of research has found that a firm’s adoption of management “best practices” is correlated with higher efficiency and productivity. To date, the cultural and management practices literatures have proceeded in parallel, with few studies considering the relationship between an organization’s processes and its culture. This paper uses data from a carefully-designed survey of 370 organizations and nearly ten thousand managers to simultaneously measure corporate culture and management practices. Our key finding is that the quality of a company’s management practices and health of its corporate culture are highly correlated. This implies that studies which measure either culture or processes in isolation are likely to overstate their impact on performance. We also provide suggestive evidence that management practices may cause changes in corporate culture, or at least that this effect is stronger than the reverse.