IISES International Academic Virtual Conference, Prague

THE IMPACT OF ORGANIZATIONAL CULTURE ON FIRM PERFORMANCE: ORGANIZATIONAL CULTURE AS A MAGIC WAND OR SILENT KILLER?

NEBOJŠA JANIĆIJEVIČ

Abstract:

Impact of organizational culture on firms’ performances is analyzed in the paper. The basic question about the impact of organizational culture on performance is: how does organizational culture affect performance levels? Research has identified 4 possible answers. First, culture influences performance with its content: assumptions, values, or norms shared by members of the organization. Research has identified a wide range of assumptions, values and norms that have proven positive implications for an organization's performance. For example, one study showed that the combination of adaptability, market orientation and consumer orientation on the one hand, and innovation and identification with the company, on the other, is the best guide to better performance. Second, culture affects performance by configuration rather than by individual content elements, meaning that the type or type of organizational culture is a determinant of performance rather than individual assumptions, values, or norms in its content. In general, competitive types of culture such as market culture have a positive, while bureaucratic types of culture (hierarchy culture) have a negative impact on the performance of organizations. Third, the strength of a culture, not its content or type, is a determinant of an organization's performance. One of the first assumptions about the impact of culture on performance was that a strong culture delivers better performance and that successful businesses are different from those that fail because they have a strong culture. However, many authors warn that a strong culture must not only be a "magic wand of success" but also a "silent killer", that is, a strong culture can lead to the downfall of a company, not just its success. The reason for this is the fact that a strong culture with "wrong" assumptions and values can block change and prevent the company from adapting to changing environmental conditions. Finally, some researchers have focused on the cultural gap, that is, the difference between existing and ideal culture as a factor of organizational performance. However, relatively few studies on this topic have yielded mixed results, as in the case of research into the power of culture. The conclusion, after reviewing numerous research in the field, is that organizational culture influences performance, but that this impact is lower than previously thought, it is very complex and multidimensional.

Keywords: Organizational culture, performance, organization