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Home arrow Management arrow Strategic Management in the 21st Century. Corporate Strategy

WHAT MAKES STRONG ORGANIZATIONAL CULTURES?

Whenever scholars discuss links between organizational culture and financial performance or competitive advantage, the notion of "strong cultures" emerges. Though the relationship between culture and performance has been analyzed and interpreted in different ways,25 a strong organizational culture has often been considered to be related to improvements in performance26 and organizational effectiveness.27 Whereas some scholars argue that a strong culture is "predictive of short-term future company performance,"28 others link it to overall growth rather than to profitability29 or long-term performance.30 Strong culture has also been associated with the demise of companies and entire industries.31 Some have argued that organizational culture could be a "driving force behind continued success in American businesses,"32 extending the influence of culture beyond individual firms to an industry context. Much of the research findings come from an era (1980-1990s) when Japanese firms were dominant (and hence a lot of research hailed their approaches to culture) and U.S. firms were becoming stronger.33 Since then, however, the performance of Japanese firms has fallen. Does this perhaps signal a different relationship between performance and culture?

Since strong cultures were traditionally seen as influencing organizational performance, the concept of strong culture is relevant to any discussion about culture. So what are the characteristics of a strong culture and how has it been defined by scholars? Just as there are a variety of definitions for organizational culture, scholars have proposed different definitions of strong cultures and their attributes. Strong culture has been identified as "stable and more intense,"34 "homogenous,"35 and "coher-ent."36 They have also been associated with wide consensus, for example, norms and values that are "widely shared among employees."37 Furthermore, strong cultures reflect an organization's sense of mission, long-term vision, and adaptability to change.38 Three key variables have been identified as being potentially related to the overall strength of a culture: who accepts the dominant value set, how strongly or deeply these values are held by employees, and for how long the values have been dominant within an organization.39

An example of a strong organizational culture that has led to continued success is that of Southwest Airlines. Southwest has consistently outperformed its competitors by simultaneously keeping costs low and customer and employee satisfaction high. This is due largely to its strong organizational culture. This can be characterized as being informal or relaxed, and is manifested in terms of an enjoyable work environment. For example, the CEO personally recognizes birthdays, births, and weddings with cards and notes to make employees feel valued and acknowledged. The core value underlying Southwest's organizational culture is that employees are the number one priority, and this is the foundation for the airline's service model. The inference is that the strong organizational culture is positively related to high work performance and that this represents a competitive advantage the company has been able to maintain.

Research suggests that four conditions are necessary for any asset to lead to superior and sustainable performance or a competitive advan-tage.40 To the extent that a strong corporate culture represents an asset, culture must thus meet these conditions. First, the asset must be valuable, meaning that it enables an organization to "do things and behave in ways to add economic value to the firm."41 It must, in essence, be measurable (e.g., in terms of sales or profits margins) or enable a firm to "take advantage of an opportunity" in the environment.42 Second, it must be rare in that it has unique characteristics which are "not common" to other firms in the marketplace.43 Third, it must be imperfectly imitable by competitors. In other words, whereas many elements of culture may be visible and appear to be imitable (e.g., allowing dogs in the workplace seems to be an increasing trend in the last five years according to many practitioner discussions of culture), it is the integration and combination of various factors that make up a culture that make it difficult to replicate. Thus, even if the first two conditions can be satisfied (e.g., adding economic value and being rare), they will not lead to sustainable competitive advantage and superior performance if they are easily imitable and can be copied. A final condition is that no perfect substitutes for the asset should exist, making it even more difficult to imitate.44 Although the natural tendency may be to notice visible artifacts or surface-level attributes of culture such as office space and design (e.g., Google's bean bag chairs, IDEO's bicycles hanging from the ceiling), these may reflect but do not define an organization's culture.

Other factors may support the sustainability of organizational culture as a competitive advantage, such as geographic location45 or the extent to which new employees capture and adapt to a culture, thereby ensuring its continuation over the years even if management changes.46 From an internal standpoint, consistent values and methods of doing business, and goal alignment across the organization enhances the likelihood of creating a competitive advantage, as well as enhancing the visibility of the culture among those outside the organization.47 The fact that scholars have voiced different opinions and created a variety of models concerning the influence of strong culture on competitiveness demonstrates the importance of the culture concept but also highlights the fact that it is not yet fully understood.

 
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