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

MISMATCHES BETWEEN CULTURE AND PERFORMANCE

As discussed earlier, the research suggests that strong culture is linked to high performance. But can organizations perform well when they do not have what management scholars might consider to be a strong or positive culture, or conversely, can an organization have a strong culture yet encounter employee turnover or poor performance? Under what conditions might these situations occur? One study did reveal that this is possible, and the one variable that seemed to help explain the difference was whether firms had cultures that were appropriate for their industry sectors and environments.73 Beyond that, we have little clear evidence or indication of the conditions under which these counterintuitive outcomes may occur, whether it occurs in certain sectors, during certain points within economic cycles, or in periods of political or technological instability or other environmental states. Yet, it appears that such situations do occur, as we discuss briefly in the following two examples.

High Performance, Unclear Culture

At a recent meeting of eight CEOs from a variety of industry sectors including sports, software, the arts, and government, one said that culture is so important for his firm that "if you look away for just a moment, it can slip from your fingers." The others nodded in agreement and shared stories about how they focused daily on making sure the message of culture was clear within their organizations. But what if it is not viewed as being so critical? Can an organization with an unclear or weak culture perform well? What if top management seems somewhat oblivious about the role of culture and its importance? During the financial crisis of 20072009, several organizations experienced major declines in performance. Discussion was rampant about whether the risk-taking cultures of investment banks led in part to the crisis, as described, for example, in Too Big to

Fail.74 One bank that has received much attention over the years is Goldman Sachs. As far back as 1999, the book Long-Term Greedy characterized some Goldman bankers in less than positive terms.75 Even during the crisis, however, the bank performed well compared to many of its peers. In a 2010 Charlie Rose show interview, Goldman's CEO Lloyd Blankfein was asked what he thought had led to the behaviors that caused risky investments and decisions, where the "callousness" in the e-mails read before a Congressional committee stemmed from, and whether it was a "single individual" or if there was a culture of "callousness." Blankfein waffled, almost as though the idea of culture had not been something he had considered or focused on as a CEO, responding,

we have to be thoughtful about that [the culture] . . . I can't at this point . . . I can't exclude [the culture] . . . there are 35,000 people at the firm . . .

When asked what does contribute to Goldman's performance. Blankfein's response was that

we recruit and hire the best people and we retain them . . . because we get people who are really interested in doing something that they think is good for the public. . . . We get a kind of person who wants to be influential . . . the people would like to do well for themselves but at the height of their careers go into public service.

So just how important is a strong culture to performance? Other than anecdotal evidence, we have little clear information about the extent to which culture contributes to high performance or competitive advantage.

Strong Culture but Potential Turnover

One of the best-performing organizations in the United States, which has over the last five years worked to build a culture of innovation, problem-solving mindset, accountability, and responsibility, has long attracted excellent people. For entry-level positions, it consistently receives 100 applications per job opening. One middle manager at a different organization reported that seeing the CEO go on television five years ago to admit that the organization had made a mistake was a trigger point for him. That a senior manager would publicly apologize said to him that this was a place with a culture of "doing things right." He decided to leave his existing employer and take a lower-level position at the organization in question just to be able to join an organization with a better culture. Since he switched organizations five years ago, he has moved back up the ranks and continues to believe it was the best career decision he ever made.

When the CEO took over just five years ago, he realized the organization had what he called "the cancer of complacency." It was a good organization and had been well run for 20 years by his predecessor; thus when a crisis hit, the assumption was that one employee who did not follow policy was the cause for the mistake and should be fired. The CEO, however, began looking in more depth and concluded that the culture needed to change to one where the "good enough" attitude was unacceptable. Over an 18-month period, the unit's supervisors developed three key pillars that were a key to building and maintaining high performance and that became the foundation for a culture of constant improvement over the next several years. They included, for example, being sure that staff members were considered first in important decisions, and that the concerns of the broader community in which the organization operated were also considered in the decision-making process. The culture has helped spread a reputation among potential applicants as well as customers that this government agency is becoming the "agency of choice" when people need its services. It has introduced several innovations that none of its peer institutions have adopted, saving several hundred thousand dollars annually.

Yet even this organization, with quantifiable benefits stemming from an innovative culture and widely acknowledged positive and supportive culture, found itself stymied within the last year. Circumstances beyond its control led to a change in the market area it would cover. A peer organization's members began rumors that lower-level employees with short tenure would lose their jobs and should jump ship to ensure they had a job. Further, and especially irritating to senior management, was that "recruitment" took place during work hours when employees of the two organizations happened to meet on overlapping work or job sites. The result was that four employees did leave. The stated reason was that pension benefits at the competitor organization were better even though the culture, which employees would experience every day, was not as strong. So can culture be a competitive advantage? Anecdotal evidence suggests that although it can, additional research is needed to better understand its leverage and its effects and influence.

 
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