Corporate culture and performance: relating concepts and outcomes

Corporate culture is a collectively internalized deeply embedded set of beliefs, expectations and assumptions that influence and guide thinking and behavior among an organization\u27s members. A corporation\u27s culture, because of its pervasive influence, can destroy or promote its ability to compete and succeed;This study investigated the relationship between culture corporate and financial performance. Specifically, the study compared culture data from a cross section of organizations with past financial performance. Previous work examined the relationship between culture, measured at a point in time, and future performance. This work took a different perspective comparing culture data with financial performance the year an organization assessed its culture and five years prior. The intent of the study was to determine if past financial performance suggested future culture ratings;Culture data were collected via the Organizational Culture Inventory (OCI) which measures three types of cultural norms: Constructive, Passive/Defensive, and Aggressive/Defensive. Four financial performance measures, Market Value Added, Economic Value Added, Cost of Capital and Return on Capital, were gathered from the Stem Stewart Performance 1000 Index. In total 33 firms comprised the population categorized in three industry types: Manufacturing, Service, Telecommunications/Computer;The study revealed a negative significant correlation between organizations with Passive/Defensive culture types and their Market Value Added ratings across each of the six years examined. The other significant financial outcome was a negative correlation between Cost of Capital and the Constructive culture style the year the OCI was administered;There were significant industry type differences between Telecommunications/Computer and Manufacturing firms. Based on the results there are differences among the firms on three of the four measures: Economic Value Added, Return on Capital and Cost of Capital. The results indicate that in some years Telecommunications/Computer firms\u27 costs may have been higher, but overall their gains were greater than Manufacturing firms;These results suggest that an organization\u27s past performance and its industry type may provide insight into its culture, but further investigation is warranted. Study implications and future directions are discussed