Toward a Theory of Organizational Culture and Effectiveness

Abstract

This paper develops a model of organizational culture and effectiveness based on four traits of organizational cultures; involvement, consistency, adaptability, and mission. These traits are examined through two linked studies: In the first, qualitative case studies of five firms are used to identify the traits and the nature of their linkage to effectiveness; In the second, a quantitative study provides an exploratory analysis of CEO perceptions of these four traits and their relation to subjective and objective measures of effectiveness in a sample of 764 organizations. The results show support for the predictive value of the traits, and help to illustrate the complementarity of qualitative and quantitative methods for studying organizational cultures. Two of the traits, involvement and adaptability, are indicators of flexibility, openness, and responsiveness, and were strong predictors of growth. The other two traits, consistency and mission, are indicators of integration, direction, and vision, and were better predictors of profitability. Each of the four traits were also significant predictors of other effectiveness criteria such as quality, employee satisfaction, and overall performance. The results also showed that the four traits were strong predictors of subjectively-rated effectiveness criteria for the total sample of firms, but were strong predictors of objective criteria such as return-on-assets and sales growth only for larger firms. This paper suggests that culture can be studied as an integral part of the adaptation process of organizations and that specific culture traits may be useful predictors of performance and effectiveness. The paper also illustrates how qualitative case studies and inductive theory building can be combined with quantitative comparisons and theory-testing to make progress on specific aspects of organizational culture research.