The impact of strong and balanced organizational cultures on firm performance

Abstract

PurposeThis study aims to investigate the relationship between organizational culture and performance. It concerns the aspects of culture related to culture strength and unbalance and its impact on introvert and extrovert firm performance, controlling for business environment and size.Design/methodology/approachBased on the competing values model (CVM), culture strength is measured as the intensity of the culture values driving the company. The cultural unbalance is measured by the sum of absolute deviations of organizational members’ culture perceptions across the four archetypes (adhocracy, clan, hierarchy and market) imposed by CVM from the individual “average” shared cultural value. Evidence is drawn upon a sample of 1,305 employees of 114 Greek firms.FindingsThe findings indicate a strong positive relationship between culture strength and internal performance (innovation competence and human relations) as well as firm outcomes (profitability, growth and reputational assets). On the contrary, culture unbalance exerts a negative influence to market position, growth and innovation competence.Practical implicationsUnderstanding the nature of the association between culture strength, unbalance and firm performance would enable academics and practitioners to reflect critically on the core culture values which shape employee involvement and formulate leaders’ quality improvement decisions and actions, so as to achieve sustainable competitive advantage at the organizational level.Originality/valueThis research provides supporting empirical evidence for the culture–performance link by identifying the principle culture value characteristics (strength and unbalance), which exert both direct and interaction effects on the introvert and extrovert aspects of firm performance.