Relationship between Strong Corporate Culture and Long Term Financial Performance - Essay Example

TOPIC: MANAGEMENT (NAME) (COURSE NAME) (INSTITUTIONS NAME) 6th MARCH 2009 Relationship between strong corporate culture and long term financial performance Proposed Outline of the Paper Sample research questions: Creates the foundation on which the entire proposal will be based Introduction: “Present a background to the study, aim of research, sample, and collection of data, analysis, and interpretation, methods of analysis, summary, recommendations and conclusions. Evaluation of theory discipline and paradigm: Details why the study was done, how and the course of research Methodology: The methods that will be used in arriving at the conclusion. Evaluation of qualitative and quantitative designs for this research problem Conclusion: Gives the overall picture of the study. Sample Research questions The research proposal asks the following fundamental questions: What is culture of the organization? What are the most significant constituents of corporate culture? In what way can the culture of X influence its financial performance over time? Introduction Various studies have been carried on cooperate culture covering on the major changes in business models, technology developments, globalization, and the development of work laws and legislations. The explorations of the relationship between the strong corporate culture and long-term financial performances have been researched on by many management theorists. The objective of this proposal is in three-fold. Firstly, the proposal will explore on the effects of corporate cultures on organizational performance in the long-term. Secondly, it will explore and describe the extent to which contextually-fit cultures develop the organizational performance. And the last objective is to investigate and illustrate the scope to which adaptive cultures are associated with performance Culture can be defined as the fundamental values, principles and beliefs that serve as a base for an organization’s management system and the practices in management, behavior that reinforce and exemplify those values and principles. The above mentioned principles and value in the organization endure due to their meaning for the organizational members. Due to this reasons, this research plan is expected to capture comprehensive information of the relationship between strong corporate culture and long term financial performance The definition of culture: It refers to the stale set of ideas, principles and behaviors commonly held by a society and being resultant from social anthropology. The organization culture is the pattern of common principles and attitude that help individuals to comprehend organizational functioning therefore providing norms for behavior in the organization. According to Kotter and Hesskett, Culture can also be defined as the fundamental values, principles and beliefs that serve as a base for an organization’s management system and the practices in management, behavior that reinforce and exemplify those values and principles. The above mentioned principles and value in the organization endure due to their meaning for the organizational members. Evaluation of theory discipline and paradigm Effects and impacts of corporate cultures on organizational performance The business customs is interconnected with the financial performance of the organization but the strength of the relationship differs amid culture and performance. Decision making and work design are associated with long term financial performance while supervisory leadership is associated with the short term financial performance which should be guided by a sensible visualization of what kinds of cultures enhances performance. (Lim, 1995). The latent variables (organizational structure, values, tasks, climate and individual values and beliefs) has an impact on performance with workers attitudes and task organization activities as the most momentous variables taking into account the research carried out applied the capital, market and financial indicators (Marcoulides and Heck, 1993) Leadership styles as an analyzing tool for the impact of corporate performance on the organizations, variables like customer satisfaction, sales growth, competitive advantage, sales volume and market share were employed. In relation to the organizational culture competitive, innovative, bureaucratic and community cultures policies were employed and the resultant outcome was that they are associated with corporate performance and particularly the innovative and competitive cultures accounted for approximately 25 percent of the variances in organizational performance (Ogbonna and Harris, 2000). Cultures encouraging unfortunate behaviors and inhibiting change to more appropriate strategies tend to materialize bit by bit and gently over duration of time and there existence it’s difficult to change because of their invisible nature as they tend to support existing power structure of the firm. James L (Heskett, 1992) Performance degrading cultures inhibits firms fro adopting needed tactical change due to their negative financial impact on the firm progress (John, 1992) Culture provides consumer with an understanding of acceptable behavior and influences practices and has profound impact on the consumer perception on the organization which they purchase. The insidious effects have important implications, for instance the organizational character values are likely to parallel those of the culture of which the organization operates because of the business strategies and resultant success are credited to their cultural values (Rhody and Tang, 1995) Culture defines the procedures of operations on a firm and technology restricts the variation in how things are done by definition of what is being done. Similarities in technology across firms in the same industry are associated with less variation in their cultures. Firms characterized with intense technologies have cultures depicted by high levels of innovations and strong team orientations (Kanter, 1988). According to Kotter says that the shared values and unwritten rules can profoundly enhance the economic success or lead to failure to adapt to changing environments and markets. Through incisive insight Kotter traced both the ancestry of demonstrating easily the changes. In latter, both healthy and unhealthy cultures, mostly in firms which experience huge success in the past. Challenging the strong believes of corporate cultures create excellence business performance; otter explains that while many institutionalized practices, shared values can promote good performance in some instances (Reason and Rowan, 1981). The corporate culture can be characterized by inward focus, superiority and administrative features that undercut an organization’s concept in adapting to change. Contextually appropriate cultures can not fit in a company’s plans and business context in promoting excellent performance over long periods of time unless they facilitate the adoption of plans and practices that persistently respond to changing markets and new competitive environments. Importantly to the process of reversing unhealthy cultures and making them more adaptive, the authors assert, is effective leadership. Corporate culture can have a significant impact on a firm's long-term economic performance. Companies firms with cultures that underline all the key administrative constituencies that is customers, stockholders, and employees and management from leaders at all levels outperformed companies that do not have those cultural m contextual traits by a huge margin. Corporate culture will possibly be at level with more important aspect in determining the success or failure of firms. Performance-degrading in relation to contextual cultures have a unconstructive financial impact for many reasons, the most important being their affinity to hinder firms from adopting needed considered or calculated changes. In a world that is changing at an increasing rate, one would forecast that un-adaptive cultures will have an even superior unhelpful financial impact in the near future. Corporate contextual cultures that inhibit strong long-term financial performance are not rare; they grow easily, even in companies that are full of realistic and intellectual community. Contextual cultures that encourage unsuitable behavior and hinder change to more appropriate plans are likely to surface slowly and in silence over a period of short time, usually when companies are performing well. When the contextual culture in place, it can be enormously hard to change because they are often undetectable to the people concerned, because they help support the existing power structure in the organizations and for many other reasons. Although tough to change, corporate contextual cultures can be made more performance enhancing. Such change is complex, time consuming, and involves management, which is something quite dissimilar from even excellent management. That management must be guided by a practical revelation of what kinds of contextual cultures enhance performance .the revelation or visions that are currently hard to find in either the commerce industry or the literature on contextual culture. Adoptive cultures are the culture that facilitates the adoption of strategies and practices that continuously respond to changing markets and new competitive environments. They are healthy cultures which supports the organizational instant strategies and business context. This will guide the organization to a positive change. The unhealthy organization culture will tend to be arrogant, have an inward focus, and bureaucratic in nature. All this elements undermine the ability of the organization to adapt to a change in the system. The companies with adaptive corporate cultures and strong leadership practices financially outperform the companies that do not have the adaptive corporate cultures. This report shows that three out of ten strategic change programs produce the business value or financial return that company leaders expect. In a study of the financial performance of large companies, it is found that companies that create adaptive corporate cultures outperform companies with non-adaptive cultures by a factor of 900 to 1 as measured by long term net income and stock price growth. It is recognizable that recognize the importance of corporate culture and strong leadership in sustaining business change and conversion. Companies that have an adaptive or responsive corporate culture have in the past performed well in the face of managerial change while those with non-adaptive cultures suffer through change. The major values have permitted our company to remain very responsive in adapting cultural expectations to comprise the importance of cultural standards as a career company, management as a profession, and capacity development and movement. If companies really were to measure the value and impact of leadership and culture on their bottom lines, they would invest more in developing leaders and creating high performing cultures. Most consultants use the Kotter and Hesskett framework to describe for clients and its characteristics. They however indicate that effective leadership is required to move from the unhealthy un-adoptive cultures to adoptive cultures. The tools that are objectively required to objectively determine these kinds of movements are not provided by Kotter. Organizational Culture Inventory These constitute the constructive cultural style. These styles of culture are encouraged for the members to interact with each other and their approach to duties in ways that will help them met their higher order satisfaction. They include the achievement, self-actualization meaning the are able to think in a unique and independent ways, humanistic encouraging, meaning that they are able to help others grow and develop and the affiliative approach which make people treat people as more valuable than things. Aggressive cultural style includes the cultures that members believe that they must interact with people in ways that will not threaten their own security. They are characterized as oppositional, power, competitive and perfectionist. Passive cultural styles are cultures in which members are supposed to approach tasks in forceful ways to protect their status have the following cultural styles approval which makes sure they are accepted by others, conventional, dependent an avoidance style The un-adoptive cultures are associated with the cultures commitment to emphasize the short-term results, the structures and systems over leadership, holding on to pressure to conform, discomfort over expressing negative thoughts, illusions and invulnerability and the biased perception of the competition. On the other side the adoptive cultures are associated the items describing the constructive culture styles. It measures the cultures commitment that is proactive, is risk taking, enthusiastic, has integrity, leadership styles and skills which produces change, maintaining a fit between the culture and the business context, use of the alternative strategies, which have been ignored, valuing entrepreneurship, feeling of confidence, members who actively support each other and involve in a workable solution. Methodology It presents brief information on the research methodology that is to be made use of in the project. In this case, the research will take two forms which are the major components of research methodology. The first part of the proposal entails the effects of corporate cultures on organizational performance in the long-term, forming the first objective of the research proposal. In this case, the quantitative research will be based on the definition of a model to be applied to exclusive regions within the X markets. The final results are presumed to be of such nature that the effects of various important aspects of an organizations culture can be correlated to long term economic performance. The other bit will be covered using the qualitative research method. This research will be based on the questionnaire survey which will allow the construction of corporate culture strength of X. The indexes obtained will be compared to the obtained results from the qualitative research hence a comprehensive conclusion will be formulated. The second part of the research will test the second and the third objective of the research proposal. The quantitative research will collect data on the basis of the adoptive cultural measures and the contextual-fit cultures of X advisory areas. The qualitative research will consider meeting that will be used to compare the fit between contextual –fit culture and adoptive measures in the organizational cultures the formulation of the final conclusion will not be made without the sufficient surveys, interviews with the staff from different regions of the company X to progress. The sampling method will be used to get the required sample for the survey. In order to ensure that biasness is eliminated during the selection of the sample, random sampling method will be used to select the subjects to be included in the sample. In addition, the advantage of using the questionnaire survey method over the other methods is that it is easy to come up with questionnaires and disburse them to the staff included in the sample. The collected data will be analyzed and results generalized to the entire population in order to arrive at the conclusion and proper recommendations. Evaluation of qualitative and quantitative designs for this research problem The assumption that characterizes the quantitative research designs used in the above research problem is that behaviours of human beings can be explained by social facts such as the organizational social culture. These can be investigated through deductive logic methodologies of natural sciences (Nau, 1995). Quantitative methodologies to be used in the above research problem look for empirical boundaries and elemental as well as distinguishing characteristics and tend to measure how often or how much of the strong corporate culture is related to long term financial performance. The use of quantitative design in carrying out the above research problem is that it allows for flexibility in data treatment in terms of statistical analysis, comparative analysis and verification of reliability of data through repeated collection of data. The advantages of using quantitative data collection methods are that it will allow the patterns of the behavior of the sampled subjects to be ascertained (Creswell, 1994). Qualitative design of carrying out research is those associated with approaches that are interpretative from the point of view of an informant rather than undertaking the discrete measurement of observable issues that show the relationship between a strong corporate culture and financial performance of company X (Patton, 1987). The use of qualitative methodologies in this research will be to aid the weakness of the quantitative methodologies, for example, the use of interviews and observations in order to offer a deep rather than a broad knowledge of a cultural phenomenon in the company that affects financial performance of company X. This will allow for achievement of an empathetic or a verstehen understanding in the side of the researcher (David, 2009). Conclusion This research proposal has covered the link involving organizational culture and corporate performance and we presented wide varieties of the results which are mixed or inconclusive. Culture is the stale set of ideas, principles and behaviors commonly held by a society and being resultant from social anthropology. The organization culture is the pattern of common principles and attitude that help individuals to comprehend organizational functioning therefore providing norms for behavior in the organization. The objective of this proposal was in three-fold. The proposal explored on the effects of corporate cultures on organizational performance in the long-term. It also examines and describes the extent to which contextually-fit cultures develop the organizational performance. And the last objective was to investigate and illustrate the scope to which adaptive cultures are associated with performance The manner in which the cultural values place significance of mutually understanding between customer satisfaction and business performance by bringing harmony and working relationship in the achieving of the goals and customer satisfaction. It explains the relative importance of the similarity between organizational values, national culture and industry characteristics on customer satisfaction and business performance. Then it’s critical for the top management of the firms to engender an organizational culture favorable for business achievement in harmony with the fundamentals of the exterior environment. Assumption were made that the organizational culture is directly related to the performance but the research carried indicates the opposite: the only variable having direct effect on performance was pioneering culture while the competitive culture had both direct and indirect effect. In addition procedures of practical and societal culture had an indirect influence. Apart from few studies, all other studies examining the culture-performance relationship failed to talk about the influence of other variables like organizational structure and leadership. For this prospect study on this affiliation we have to take into contemplation and eliminate the effect of other factors. Therefore, this proposal aimed at capturing the comprehensive information of the relationship between strong corporate culture and long term financial performance Reference Cooke, R. A. & Lafferty, J. C. (1987). “The Organizational Culture Inventory”. Plymouth, MI: Human Synergistic, Inc, pp 10-23 Kotter, J. P. & Heskett, J. L. (1992). “Corporate Culture and Performance”. New York: The Free Press, pp 101-112 Lim, B. (1995). “Examining the organizational culture and organizational performance link. Leadership and Organizational Development Journal”, 16(5), 16-21. Marcoulides, G. and Heck, R. (1993). “Organizational culture and performance: Proposing and testing a model. Organization Science”, 4(2), 209-225. Ogbonna, E and Harris, L. (2002). “Managing organizational culture: Insights from the hospitality Industry”. Human Resource Management Journal, 12(1), 22-53. Rhody, Jim D. and Thomas Li-Ping Tang, (1995) "Learning from Japanese Transplants and American Corporations," Public Personnel Management, 24(Spring), 19-32.  Kanter, Rosabeth M., (1988) "When a Thousand Flowers Bloom:  Structural, Collective, and Social Conditions for Innovation in an Organization," eds. B.M. Shaw and L.L Information on adoptive measures of culture and leadership in the organization available from www.hrmguide.com Information retrieved on 6th April 2009 Nau, D. (1995, December). Mixing Methodologies: Can Bimodal Research be a Viable Post-Positivist Tool? The Qualitative Report [On-line serial], 2 (3) Patton, M. (1987). How to use qualitative methods in evaluation. London: Sage Publications. Reason, P., & Rowan, J. (1981). Human inquiry: A sourcebook of new paradigm research. Chichester: John Wiley and Sons. Creswell, J. (1994). Research design: Qualitative and quantitative approaches. London: Sage, pp 56-78 Jayaratne, T. (1993). Quantitative methodology and feminist research. In M. Hammersley (Ed.), Social research: Philosophy, politics and practice (pp. 109-123). London: Sage, pp 101-111 David, E. (2009). Qualitative and Quantitative approaches to research work, London: Sage, pp 45-67 Gregory, A. Angelina C.S (2004). “Organizational Climate Partly Mediates the Effect of Culture on Work Attitudes and Staff Turnover in Mental Health Services” San Diego: USA Scott A. Goodman and Daniel J. S (October 1999) Journal of Vocational Behavior, information of Organization fit and contextual performance. Do shared matter Volume 55, Issue 2, Pages 254-275 Information on culture www.toronto.ca Information retrieved on 6th April 2009 Debble M. (2007) “Human resource management guide network contributors” Kennedy A. (2006) “The new corporate cultures”. New York: Sage, pp 90-92 Carmazzi A., (2004) “Organizational Culture and clinician Attitude towards evidence” San Diego: California, pp 12-15 Read More