Organizational Culture and Financial Performance: A Review of Literature

This report highlights the relationship between organizational culture and financial performance of the company. It includes a review of five articles that explore the impact of organizational culture on organizational efficiency, firm effectiveness, and bottom line. The report concludes that a positive corporate culture leads to higher financial performance.

Running head: CULTURE AND ORGANIZATIONAL PERFORMANCE
CULTURE AND ORGANIZATIONAL PERFORMANCE
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Table of Contents
Introduction:....................................................................................................................................2
Article 1:..........................................................................................................................................2
Article 2:..........................................................................................................................................3
Article 3:..........................................................................................................................................4
Article 4:..........................................................................................................................................5
Article 5:..........................................................................................................................................5
Conclusion:......................................................................................................................................6
References:......................................................................................................................................8

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Introduction:
In the current scenario, organizational or corporate culture creates a major impact on the
overall performance of the company. It affects the firm’s overall financial performance. Culture
is the core values, beliefs, attitudes and behavior of the organization (Gregory et al. 2009). Most
of the successful organizations in the recent times have attributed their success to their firm’s
effective culture management. The report highlights the relationship between the organizational
culture and performance of the company, from a financial perspective. The way people are
treated within the organization directly affect the way they treat their customers that also affects
the organization’s financial performance (Flamholtz 2001). Corporate culture creates a positive
influence on the decision-making and behavior of the firm.
Article 1:
Aktaş, E., Çiçek, I. and Kıyak, M., 2011. The effect of organizational culture on
organizational efficiency: The moderating role of organizational environment and CEO
values. Procedia-Social and Behavioral Sciences, 24, pp.1560-1573.
The journal sets out to highlight the concept of organizational culture and its efficiency in
the current ever-increasing competitive environment. The journal is made to draw interests for
both the practitioners as well as academic professionals. As per Aktas, Cicek and Krynak (2011),
the factors responsible for affecting the organizational efficiency are researched with increased
significance. According to the authors, organizational culture is a vital factor that affects the
organizational efficiency due to its various types, which is to be researched. The section is based
on the relationship between organizational efficiency and culture. Its effect of variability or

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stability in regards to internal and external environment is investigated. Moreover, the power of
all the leaders, stimulation, and the values about their self direction is also been ascertained. In
this section 40 organizational founders or top managers are therefore selected for the sampling
process in the health sector. The method used to gather all the information is done through
questionnaire technique and is primary and reliable source for data collection. The findings
obtained from the analysis explores the types of organizational culture are directly related to few
of the dimensions of organizational efficiency (Aktaş, Çicek and Kıyak 2011). It is seen that the
values of organizational leaders in the form of stimulation and self-direction plays a crucial role
on the stability of organizational environment.
Article 2:
Siehl, C. and Martin, J., 1989. Organizational culture: A key to financial
performance?. Graduate School of Business, Stanford University.
The article showcases the importance of organizational culture, which has dramatically
increased since the last few decades. According to Siehl and Martin (1989), the right set of
culture creates high morale, intense commitment and excitement towards the organization and its
objective. The authors questions on the unsubstantiated link between financial performance and
organizational culture. As per the authors 62 well established financial firms are taken to
identify the strong link between specified ‘strong’ superior and culture performance. In the
second version, the direct relation between various aspects of superior and cultural financial
performance is also determined. The contingency argument that links culture to performance has
also been proposed. It is significant to point out that culture literature assumes that
organizational culture is vital to impair organizational effectiveness, which negatively impacts

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their financial performance. The methods to conduct the analysis were apparently unstructured
and open-ended. An implicit bias leads many researchers to advocate the organizational
relationship in the absence of empirical support to gather the reliable data. As the organizational
culture is very effective variable to determine the performance of the organization in the current
times.
Article 3:
Yilmaz, C. and Ergun, E., 2008. Organizational culture and firm effectiveness: An
examination of relative effects of culture traits and the balanced culture hypothesis in an
emerging economy. Journal of world business, 43(3), pp.290-306.
According to the authors Yilmaz and Ergun (2018) organizational culture and
performance are interdependent. The article explores the impact of four main culture traits
affecting the organization. This includes consistency, involvement, mission and adaptability. The
article evaluates the firm effectiveness by using data sources gathered from manufacturing firms
in Turkey. The author hypothesizes that each of the cultural trait exerts positive effects the firm
overall performance. Moreover, it is viewed that a balanced combination of the vital four traits
would lead to superior organizational performance compared to empirical testing imbalanced
combinations. The outcome indicates that mission trait is significant of all the traits in relation to
the growth of firm’s overall performance, market shares, sales and ROA. The firm’s ability to
create new products successfully is directly influenced by the consistency and adaptability traits.
The methods used to gather the data is from primary sources, which is obtained from the surveys,
questionnaires and interviews. The researchers have showcased empirical studies to identify the
characteristics of cultural phenomenon of the organization as well as impact on its performance.

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It is viewed that employee satisfaction is known through the involvement trait. It is found that
imbalanced combinations related too few of the cultural traits generate negative impact on the
performance indicators.
Article 4:
Flamholtz, E., 2001. Corporate culture and the bottom line. European Management
Journal, 19(3), pp.268-275.
The article reveals the effect and impact of organizational culture on the performance of
the company financially. As per Flamholtz (2001), the previous studies only researched the
impact of corporate culture on performance by applying cross sectional data. This article
explores organizational effectiveness only applying it within a single medium sized industry. The
company had 20 comparable divisions and provides an opportunity to examine the effectiveness
of corporate culture. The data is obtained through questionnaires from the manger of the
company. Regression analysis was applied, which showed an important relationship (at 0.05
levels) between financial performances and corporate culture. This is further measured through
EBIT also known as earnings before interest and taxes. The finding obtained from the analysis
provides support for the earlier hypothesized relationship. The relationship between financial
performance and culture as well as its relevant implications for management practices and theory
is henceforth evaluated.

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Article 5:
Gregory, B.T., Harris, S.G., Armenakis, A.A. and Shook, C.L., 2009. Organizational
culture and effectiveness: A study of values, attitudes, and organizational
outcomes. Journal of Business Research, 62(7), pp.673-679.
The article sets out to identify the outcomes and values when organizational culture
affects firm effectiveness. This assumption is held implicitly by management researchers and
corporate managers. As per Gregory et al. (2009), the manuscript emphasizes on the detailed
research done through examining the attitudes of employee. As formulated by the diverse
measures and values framework related to company’s effectiveness, employee’s acts as a crucial
mediator between organizational culture and efficiency. The research was conducted across US
in over 99 healthcare facilities. The method to ascertain the information is done by surveying
members of leading management teams related to each facility. Physician satisfaction employee
satisfaction was used as attitudinal variables. The objective of the research is to address both the
direct and indirect impact of corporate culture on effectiveness. The findings of the study prove
that the attitudes and beliefs of the employees directly affect the effectiveness and culture
relationship within an organization. The research revealed that balanced cultures lead to
achieving higher level of patient satisfaction as compared to unbalanced culture.
Conclusion:
From the above discussion, it can be concluded that organizational culture has a positive
impact on the firm’s financial performance. The study analyzed through the research of different
articles facilities a rare opportunity to assess the affect of culture on financial performances. The
outcome provides relevant support for earlier theoretical framework related to the importance of

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organizational culture, moreover the role of culture, for the firm’s success. The cultural impact
on the bottom line is of vital importance related to influencing managerial practices. Corporate
culture affects the planning-goal setting as well as indicators for human resource development.
The self-direction attribute of the organizational mangers has been proved influential for goal
setting and establishing plan or vision.
External and internal business environment factors significantly influences the relations
between organizational efficiency dimensions and various culture types. Adequate diagnosing of
corporate culture is done through the determination of politics, human resource and strategic
techniques or practices in relation to the organization. This will furthermore enable the
organization to achieve desired corporate efficiency dimensions. This is related to the condition
relying on the variability and stability related to both the external and internal environment. In
addition to this an organization with positive cultural environment is identified by value sharing
and ideas. The firm is more likely to achieve maximum growth in the long –run through
successful innovations. Furthermore, effective corporate culture leads in developing positive
attitudes of the employees by team orientation and value empowerment.

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References:
Aktaş, E., Çiçek, I. and Kıyak, M., 2011. The effect of organizational culture on organizational
efficiency: The moderating role of organizational environment and CEO values. Procedia-Social
and Behavioral Sciences, 24, pp.1560-1573.
Flamholtz, E., 2001. Corporate culture and bottom line. European Management Journal, 19(3),
pp.268-275.
Gregory, B.T., Harris, S.G., Armenakis, A.A. and Shook, C.L., 2009. Organizational culture and
effectiveness: A study of values, attitudes, and organizational outcomes. Journal of Business
Research, 62(7), pp.673-679.
Siehl, C. and Martin, J., 1989. Organizational culture: A key to financial performance?.
Graduate School of Business, Stanford University.
Yilmaz, C. and Ergun, E., 2008. Organizational culture and firm effectiveness: An examination
of relative effects of culture traits and the balanced culture hypothesis in an emerging
economy. Journal of world business, 43(3), pp.290-306.