Theoretical Background

The historical study of organizational culture is derived from several fields and has generated significant debate with regard to definition, conceptualization, and measurement (e.g. Jung et al., 2009; Schein, 2004). Initial research on this construct began in the field of cultural anthropology (e.g., Chapple, 1943; Dalton, 1959; Kroeber & Kluckholn, 1952), using ethnographic field studies that were qualitative in nature and aimed at gaining a deep understanding through the insiders’ (or emic) perspective. As business leaders began to understand the potential value of organizational culture in the context of business performance, a second stream of research developed (e.g. Denison, 1990; Deshpande, Farley, & Webster, 1993; Gillet & Stenfert-Kroese, 2003).

Research streams and theoretical debates on organizational culture have spanned a wide variety of fields, industries, and sectors over the years, as researchers and business leaders attempted to understand the way it relates to performance (e.g. Burrell, 2008; Casida & Pinto-Zipp, 2008). Research on organizational culture in the business setting has taken several methodological approaches, including qualitative (e.g. Shera, 2008), quantitative (e.g. Seren & Baykal, 2007), and mixed-methods (e.g. Denison, 1990), to understand culture from a variety of perspectives. Much research has involved attempts to understand the role of culture as it relates to other business processes, such as innovation (e.g. Poskiene, 2006), sales growth (e.g. Denison, 2006), knowledge management (e.g. Zheng, Yang, & McLean, 2010), and employee commitment (e.g. Singh, 2007).

The diverse nature of the history of culture research has led to debate and a lack of consensus on a single, universally agreed upon definition (Jung et al., 2009; Schein, 2004). Definitions in psychology and marketing literature focus on the idea that culture is a combination of conscious and unconscious values and beliefs shared among members of a group (e.g. Schein, 2004). These values and beliefs manifest themselves in the behavior of group members and in the artifacts of the organization, and are reinforced and embedded in the organization over time (Schein, 2004).

In the past 30 years, a wealth of research on organizational culture has been conducted, and a variety of definitions have been suggested (Martin, 2002). Schein (2004) defined organizational culture as symbols, rites, ceremonies and other associated artifacts of the underlying values and beliefs that are shared by group members. Schein’s (2004) definition of the construct takes a theory building approach to culture, suggesting that the study of organizational culture be conducted using a mixed-methods approach in order to fully understand the depth of the underlying beliefs and assumptions that are held to be true by members of an organization. Unfortunately, this type of research is rare due to the demanding requirements of executing such studies in organizations.

Denison (1990) proposed a definition that stresses the role of culture in shaping the perceptions and behaviors of individuals in the group by suggesting that culture “may be seen as a code, a logic, and a system of structured behaviors and meaning that have stood the test of time and serve as a collective guide to future adaptation and survival” (p. 175). Others considered culture as simply “The way we do things around here” (Deal & Kennedy, 2000, p. 60). While Deal and Kennedy’s (2000) definition may be partially true, other definitions of culture make explicit the notion that many of the cultural influences that play a role in shaping people’s thoughts and behavior often go unstated and people may not even be aware of them (e.g. Schein, 2004).

Still, other researchers, attempting to study organizational culture in the context of building relationships with customers, define it differently. When viewed in the context of marketing and brand management in relation to customers, organizational culture has been identified as influencing the perceptions and behaviors of employees who create the experience that lives up to customer expectations (e.g. Alloza, Conley, Prado, Farfan, & Espantaleon, 2004).

Organizational culture may be seen as a series of values, norms, and beliefs about how business should be done in a particular organization, which acts as a filter for employee behavior (Boan, 2006; Deshpande et al., 1993; Schein, 2004). It may serve as a source of cues from which members of a group engage in sensemaking, a process that in turn guides their actions (Schultz & Hatch, 2006). This cultural filter may then help or hinder employees’ ability to develop relationships with their customers and create and maintain loyalty among them (Kwon, Beatty, & Lueg, 2000).

Deshpande and Webster (1989) derived the following definition of culture based on their analysis of more than 100 studies from a variety of fields: “the pattern of shared values and beliefs that help individuals understand organizational functioning and thus provide them with the norms for behavior” (p. 4). This definition presented culture as a force that guides individuals’ thinking about acceptable perceptions and behaviors.

Debates About Culture Research

Many theoretical definitions of culture assert that every organization is unique and that this view must be accepted in order to truly and fully understand the complex nature of the construct. Martin and Powers (1983), however, found that the unique aspects in some organizations are often found in other organizations. Existing research on organizational culture is comprised of a variety of theoretical perspectives that drastically affect the way in which culture is operationalized and studied (Martin, 2002, p. 94). Common terms and frameworks have been developed, over the years, to help describe the complexities of organizational culture (Martin, 2002; Martin & Powers, 1983).

These disagreements related to the very nature of organizational culture, as well as the proper ways to define, operationalize, and study the concept, only add complexity to the construct and make it more difficult to gain agreement (Martin, 2002, p. 115).

Levels of Analysis

Adding to the complex nature of culture research is the fact that the concept can be operationalized at several levels, including the individual, dyad, group, or collective level (Hertzog, Wright, & Beat, 2008; Jung et al., 2009; Schein, 2004). The importance of selecting the proper level of analysis is stressed by Hofstede, Bond, and Luk (1993). The following is an overview of the benefits and risks associated with each level of culture research.

Some researchers operationalize culture at the individual level, often focusing on the impact of a single key leader on an organization or on the interaction among dyads (e.g. Conrad et al., 1997; Singh, 2007). These researchers either considered one person to be capable of creating cultural change in the larger system or believed that interactions of dyads occurred independently of each other in the system (Katz & Miller, 1996). Conversely, organizational culture research at the group level has been based on the assumption that culture is a complex construct that is composed of the myriad of interactions that occur within the group (e.g. Bartley, Gomibuchi, & Mann, 2007). Conducting research at this level of analysis allows the researcher to compare groups to understand how culture develops and guides the perceptions and behavior of all members of the group.

Others have studied culture from the collective perspective (e.g. Calori & Sarnin, 1991; Gordon & DiTomaso, 1992; Jermier, Slocum, Fry, & Gaines, 1991). Wilkins and Ouchi (1983) argued in support of the existence of distinct organizational cultures of organizational subgroups and asserted that the study of organizational culture at the local level, rather than the overall organization level, will illuminate how these differences impact performance (e.g. Jermier et al., 1991).

In very large organizations, functional or professional groups and individual business units may have their own unique cultures; this view supported the notion that the study of business units (or groups) may be a more accurate method for studying large organizations (Jermier et al., 1991; Sayles & Wright, 1985; Wilkins & Ouchi, 1983). Hofstede’s (1998) research findings also suggested significant differences in organizational culture across subsidiaries of large organizations, lending support to this concept of studying culture at the group level. In their study of 258 nurses, Lok, Westwood, and Crawford (2005) found that the cultures of subgroups impacted group member commitment more than the culture of the overall organization did, lending support to the notion that culture research may best be conducted at the group or departmental level. Although these subgroups of large organizations may, in fact, exhibit differences in culture, it may be difficult to make the assumption that they are truly unique but, rather, they are a subset of the organizational culture in which they reside. These subsets of an organizational culture may, in fact, display differing manifestations of culture in their day-to-day behavior.

Dansereau and Alutto (1990) discussed the benefits and limitations of each of these levels of analysis, as well as the study of single levels of analysis versus multiple levels of analysis. The authors suggested that each level of analysis can be studied in two units of analysis: the whole and the parts (Dansereau & Alutto, 1990). Studying the whole makes the assumption that a group is a homogeneous unit with shared perceptions (Falcione, Sussman, & Herden, 1987; Schein, 2004), while studying the parts makes the assumption that a group is comprised of heterogeneous units that are differentiated (Smircich, 1983).

Common Themes in Culture Research

Berger and Luckmann’s (1966) view supported the notion that culture is both an influence on the individual group member as well as a construct that is developed, reinforced, and changed through the social interaction of members of the group. This contention suggested that the relationship between the organizational culture and the individual is somehow intertwined. This view is shared by researchers such as Martin (2002, p. 3) and Schein (2004).

Organizational culture research must be treated both as a cause as well as an effect (Denison, 1990). The notion that organizational culture impacts the individual by setting clear expectations about what is valued in a particular group is balanced by the impact that the individual(s) have on shaping the culture over time (Schein, 2004).

Denison (1990) suggested some additional themes in culture research. First was the idea of a common argument that a “strong” culture, as opposed to a “weak” culture, is a successful culture. This theory was challenged by some who questioned strength and weakness as being nebulous concepts (e.g. Saffold, 1988), but this theory of conceptual strength and weakness was supported by others who attempted to measure cultural traits using quantitative methods (Boyce, 2010; Denison, 2006; Nier, 2009; Schein, 2004). Stronger cultures performed better than weaker cultures on measures of financial performance in the short-term (Denison & Mishra, 1995). Additionally, the strength of organizational cultures is linked to organizational performance (Lee and Yu, 2004).

Second, Denison (1990) suggested that the shared beliefs, values, and ideologies of a group have a significant impact on performance. This thinking has been supported by a variety of empirical studies that explored a diverse range of organizational performance metrics (e.g. Boan, 2006; Lee & Yu, 2004).

The Link Between Organizational Culture and Performance

Although the study of the concept of culture began many decades ago (e.g. Kroeber & Kluckholn, 1952), it was not until the early 1990s that researchers began to investigate the link between aspects of organizational culture and performance (e.g. Bititci et al., 2006; Boan, 2006; Denison, 1990; Garnett, Marlowe, & Pandey, 2008; Hertzog et al., 2008; Lee & Yu, 2004). The growing interest in the assessment and management of organizational culture in business settings drove a stream of research that yielded several different theories and quantitative culture assessments (e.g. Ashkanasy, Broadfoot, & Falkus, 2000; Denison, 1990; Jung et al., 2009). These quantitative approaches took the outsiders’ (or etic) perspective to studying organizational culture in that certain aspects of the construct were identified as important by the researchers and were then quantified (Appiah-Adu & Singh, 1999).

Research based upon the competing values model of organizational effectiveness (e.g. Quinn, 1988; Zazzali, Alexander, Shortell, & Burns, 2007) has resulted in the development of several models and assessments aimed at helping organizations understand how culture affects their performance (Denison, 1990; Jung et al., 2009). One benefit of using the competing values model is that researchers are better able to study various dimensions of organizational culture in relation to organizational outcomes (e.g. Zazzali et al., 2007).

Denison’s (1990) model of culture also involved a quantitative and integrative approach to assessing culture based on the competing values framework and is considered the most extensive quantitative study of organizational culture and performance ever conducted (Calori & Sarnin, 1991). The DOCS is a quantitative assessment designed to help managers understand culture in business terms (Denison, 1990; Denison & Mishra, 1995; Denison & Spreitzer, 1991). Empirical research using this tool has shown it to be a valid and reliable measure of culture linked to business performance outcomes such as sales growth (e.g. Huang, 2003), market share (e.g. Denison & Mishra, 1995; Huang, 2003), customer satisfaction (e.g. Casida & Pinto-Zipp, 2008; Gillespie et al., 2008), employee satisfaction and commitment (e.g. Lok et al., 2005), and innovation (e.g. Denison & Mishra, 1995; Huang, 2003). Empirical links between organizational culture and performance, such as growth (e.g. Lee & Yu, 2004) and creativity (e.g. Koberg & Chusmir, 1987), have been established using a variety of methods (e.g. Zheng et al., 2010).

According to Denison (1990), the culture of an organization has a direct impact on its performance, and all of the tangible artifacts in an organization are manifestations of the true underlying beliefs, values, and assumptions that people hold to be true. This focus on the measurement of the observable traits of an organization was termed the trait approach to studying culture (Saffold, 1988). Denison (1990) further suggested that one must gain a thorough understanding of an organization’s culture in order to understand how the underlying beliefs and assumptions affect the organization’s ability to execute its strategy over time.

Denison’s (Denison & Spreitzer, 1991) model of organizational culture “makes the assumption that organizations can be characterized according to cultural traits or dimensions common to all human organizations”(p.7) and this is the assumption that is being made in the current study. Denison et al. (2006) empirically linked four traits of organizational culture to organizational performance. These four traits, which have each been linked to organizational performance in a variety of studies, include Mission (e.g. Alloza, 2008; Bendapudi & Bendapudi, 2005), Adaptability (e.g. Berry & Carbone, 2007; Chan, 2001), Involvement (e.g. Chan, 2001; Reichheld et al., 2000; Smidts, Pruyn, & Van Riel, 2001; Zazzali et al., 2007), and Consistency (e.g. Fombrun & Van Riel, 2004; Gillespie et al., 2008; Henry, 2000; Wansink & Chan, 2003).

At the center of the Denison model are the underlying beliefs and assumptions that individuals in an organization hold to be true and that they propagate to others, which then shape the perceptions and behavior of group members (Denison, 1990; Schein, 2004). Since these behaviors are overt manifestations of the true culture, they are measurable using quantitative methods (Denison, 1990).

Two assumptions were made with regard to the competing values model (Denison & Spreitzer, 1991). The first is that the four culture traits make up ideal cultures and most organizational cultures are made up of some mixture of the four types rather than being comprised entirely of one type (Denison & Spreitzer, 1991). The second assumption is that organizations that are better able to balance the competing values perform better over time than organizations that focus on only one trait at the risk of ignoring the others (Denison & Spreitzer, 1991).

Denison’s (1990) study also showed support for the argument that the degree of agreement among members of an organization is empirically linked to firm performance, thus the strength of the culture does indeed have an impact on performance. This theory was supported by Gordon and DiTomaso’s (1992) study finding that Consistency of perceptions among group members was significantly related to organizational performance in the short-term.

A review of the literature on the topic revealed several current studies, both nonempirical (e.g. Chan, 2001) and empirical (e.g. Chandler, 2000; Gregory, Harris, Armenakis, & Shook, 2009; Zheng et al., 2010) linking organizational performance to culture. Gregory et al. (2009) studied top management teams from 99 hospitals in the United States and found that direct links between group culture and patient satisfaction. The sampling of only top management in these hospitals presents a limitation as only the perceptions of senior leaders were studied. Similarly, Zheng et al. (2010) studied the link between organizational culture and organizational effectiveness by sampling HR professionals in 301 organizations in the mid-western United States, which makes the assumption that these HR professionals have an in-depth understanding of the employees within their organizations.

Chandler et al. (2000) studied 429 employees of 23 manufacturing companies and found that, when rapid changes in the external environment are present, culture was positively linked to earnings. This study showed moderate support for the notion that organizational culture links to organizational performance but Denison’s (1990) research is widely considered to be the most in-depth study of this relationship. Denison’s (1990) research examined 35 different companies, including 43,747 respondents in 25 industries, and the DOCS has empirically linked aspects of organizational culture to organizational performance (Boyce, 2010; Denison et al., 2006; Nier, 2009).
The relationship between organizational culture and performance was studied using the Denison model and survey to examine 356 companies in the United States and Taiwan (Huang, 2003). Huang (2003) found that the four traits of the Denison model were positively and significantly related to organizational performance metrics such as (a) budget achievement, (b) return on assets, (c) sales-revenue growth, (d) market share, (e) quality, (f) innovation, (g) employee satisfaction, and (h) overall company performance.