INFLUENCE OF PERCEIVED ORGANIZATIONAL CULTURE ON EMPLOYEES PERFORMANCE
CHAPTER TWO
LITERATURE REVIEW
2.1 Theoretical Review
Existing literature points out theories that explain the rationale of organizational culture. The main theories considered in this section are Consistency theory, Involvement theory, Adaptability theory and the mission theory.
2.2.1 Consistency Theory
According to the consistency theory, organizations tend to be effective because they have strong cultures that are highly consistent, well-coordinated and well integrated (Davenport, 1993; Saffold 1988). Employee behavior is rooted in a set of core values and leaders and followers are skilled at reaching an agreement even when they have differing views (Block, 1991). This type of consistency is a powerful source of stability and internal integration that results from a common mindset and a high degree of conformity (Senge, 1990).
This theory examines how behavioural motivation happens when internal thoughts differ and conflict, resulting in a creation of tension. This tension is the driving force for a change in behaviour to ease the tension. When the change occurs and a person reacts, then the tension is reduced, bring one to homeostasis. In the working world, if a person sees something that is contradicting and inconsistent, he/she will be motivated to change the inconsistency and resulting in work. This theory states that people will naturally see imbalances and correct them through the motivation to make things consistent. People need consistency in their lives and this theory shows how people motivate themselves to work and adjust inconsistent measures. There are three steps to this theory: people expect consistency, inconsistencies create a state of dissonance, and dissonance drives us to restore consistency.
2.2.2 Involvement Theory
This theory is based on the idea that involvement and participation will contribute to a sense of responsibility and ownership and hence organizational performance and loyalty (Baker, 2002). Effective organizations empower their people, build their organizations around teams, and develop human capability at all levels (Becker, 1964; Lawler, 1996; Likert, 1961). Executives, managers and employees are committed to their work and feel that they own a piece of the organization. People at all levels feel that they have at least some input into decisions that will affect their work and that their work is directly connected to the goals of the organization (Katzenberg, 1993; Spreitzer, 1995).
2.2.3 Adaptability Theory
This theory is based on the idea that norms and beliefs that enhance an organization’s ability to receive, interpret and translate signals from the environment into internal organizational and behavioral changes will promote its survival, growth and development. Ironically, organizations that are well integrated are often the most difficult ones to change due to the deep levels of adaptability acquired over time (Kanter, 1993). Adaptable organizations are driven by their customers, take risks and learn from their mistakes and have the capability and experience at creating change (Nadler, 1998; Senge, 1990). Such organizations are continuously changing their systems to promote improvements and provide value for their customers (Stalk, 1988).
2.2.4 Mission Theory
A shared sense of purpose, direction and strategy can coordinate and galvanize organizational members toward collective goals (Baker, 2002). Successful organizations have a clear sense of purpose and direction that defines organizational goals and strategic objectives and expresses a vision of how the organization will look in the future (Mintzbert, 1994; Hamel & Prahalad, 1994). When an organisation’s underlying mission changes, changes also occur in other aspects of the organization’s culture (Ahmad, 2012). These theories focus on different aspects of culture but more importantly, they stress different functions of culture. Consistency theory and mission theory tend to promote stability whereas involvement theory and adaptability theory allow for change and adaptability. Consistency theory and involvement theory see culture as focusing on internal organizational dynamics while mission theory and adaptability theory see culture as addressing the relation of the organization to its external environment (Baker, 2002).
2.3 Conceptual Framework
Kothari, (2004), define a conceptual framework as a visual or written product, one that “explains, either graphically or in narrative form, the main things to be studied-the key factors, concepts or variables-and the presumed relationships among them”. The conceptual framework of this study will consist of the independent variables of competitive culture, entrepreneurial culture, bureaucratic culture, and consensual culture. These relationships are represented in Figure 2.2. The dominant direction of influence is illustrated by the direction of the pointed arrows where the independent variables directly influence the dependent variable of employee performance.
Independent variable Dependent variable
Figure 2.1: Conceptual Framework
2.4.1 Competitive Culture
This is also referred to as market culture. The achievements of measurable and demanding goals, especially those that are financial and market-based, characterize a market culture. Hard - driving competitiveness and a profit orientation prevail throughout the organization. In a market culture, the relationship between individual and organization is contractual. The individual is responsible for some levels of rewards in return. A market culture does not exert much informal, social pressure on an organization’s members. They don’t share a common set of expectations regarding management style or philosophy. The absence of a long-term commitment by both parties results in a weak socializing process. Deshpande and Farley (1999) state that in the competitive culture, values relating to demanding goals, competitive advantage, marketing superiority, and profits were emphasized.
2.4.2 Entrepreneurial Culture
High levels of risk taking, dynamism, and creativity characterize an entrepreneurial culture. There is a commitment to experimentation, innovation, and being on the leading edge. This culture doesn’t just quickly react to changes in the environment it creates change. Effectiveness means providing new and unique products and rapid growth. Individual initiative, flexibility, and freedom foster growth and are encouraged and well rewarded. Deshpande and Farley (1999) state that in the entrepreneurial culture, the emphasis was on innovation, risk taking, high level of dynamism, and creativity.
Entrepreneurial Culture is here conceptualized as a society that depicts the exhibition of the attributes, values, beliefs (attitude or mind-set) and behaviour associated with entrepreneurs by individuals in such a society which distinguishes them from others. As such, to foster it implies that such government policy measures must anchor on the promotion of the attributes, values, mind-set and behaviour associated with entrepreneurs in individuals which will impact on such individuals’ mind-set towards entrepreneurship. Such an individual can be propelled to act entrepreneurially in an already established organization and other areas of life where they are opportune to find themselves. This implies that such individual when nurtured by any policy measures targeted at entrepreneurship will differ from other individuals since culture distinguishes one group from anotherand by extension does the same to organisations (Hofstede, 1980).
2.4.3 Bureaucratic culture
An organization that values formality, rules, standard operating procedures, and hierarchical co-ordination has a bureaucratic culture. Long – term concerns of bureaucracy are predictability, efficiency, and stability. Its members highly value standardized goods and customer service. Behavioral norms support formality over informality. Managers view their roles as being good co-coordinators, organizers, and enforcers of certain rules and standards; factors that normally boost the performance of organisations (Deshpande and Farley, 1999).
Tasks, responsibilities, and authority for all employees are clearly defined. The organization‘s many rules and processes are spelled out in thick manuals and employees believe that their duty is to go by the book and follow legalistic processes.According to Deshpande and Farley (1999), in the bureaucratic culture, values like formalization, rules, standard operating procedures, and hierarchical coordination.
2.4.4 Clan/Consensual Culture and Performance
Tradition, loyalty, personal commitment, extensive socialization, teamwork, self-management, and social influences are attributes of clan culture. Its members recognize an obligation beyond the simple exchange of labour for a salary. The members understand that their contributions to the organization may exceed any contractual agreements. The individual’s long-term commitment to the organization is exchanged for the organization’s long-term commitment to the individual. Individuals believe that the organization will treat them fairly in terms of salary increases, promotions, and other forms of recognition. Consequently, they hold themselves accountable to the organization for their actions. Deshpande and Farley (1999) aver that in the consensual culture, elements of tradition, loyalty, personal commitment, extensive socialization, teamwork, self-management, and social influence are important in the organizational values.
2.4.5 Employee Performance
Organizational Culture is the pattern of shared basic assumptions that was learned by a group as it solved its problems of external adaptation and internal integration (Schein 2004). These assumptions are said to be maintained in the continuous process of human interaction (attitudes and behavior) as the right way in which things are done. Zhang (2010) also describes OC as a mode, composed by some basic assumptions; and the assumptions are found and created gradually by a certain group in the process of exploring the method of adapting to external environment and solving internal interconnected system. Internal integration is the socialization of new members in the organizations, creating the new boundaries of the organization and the feeling of identity among personnel and commitment to the organization (Martins and Terblanche, 2003).
External adaptation was also said to be creation of competitive edge, making sense of environment in terms of acceptable behavior and social system stability. The definitions by Schein (2004) and Zhang (2010) offer both deeper basic assumption and faith that is shared by organizational members in explaining the purpose; and the environment of organization itself. Also, the assertions focus on internal integration and external adaptation of organizations which are the OC attributes that define the performance of organizations. It is thus admittable that OC is paramount to organizational success (Twati and Gammack, 2006).
Organizational culture is gaining support as a predictive and explanatory construct in organization science (Liu et al. 2006), where; if managed and controlled is useful as a management tool for organizational effectiveness and performance. Abdul Rashid, Sambasivan and Johari (2003) argue that several researches have been conducted to identify the nature and type of OC in organizations with a view to eliciting the key values, beliefs, and norms in an organization that have given much impetus to the success and superior performance of the organization. To elicit some of these researches and their successes in establishing relationship between OC and performance require that the concept of OC be understood first.
Culture involves beliefs, values and behavior which exist at various levels and manifest in a wide range of characteristics of organizational life (Krumbholz and Maiden 2000). Included in the wide range of organizational life where culture manifests itself is performance. Therefore, OC is important to organizational success (Twati and Gammack, 2006). Success can be regarded as a performance construct with differing areas as components. Martins and Terblanche (2003) assert that OC seems to be a critical factor in the success of any organization with particular emphasis on creativity and innovation. This indicates that organizational culture affects the way creative and innovative solutions are encouraged. In their study of the influence of OC on the quality of services provided in higher education in Greece, Trivellas and Dargenidou (2009) find that different dimensions of higher education service quality are linked to specific culture models. Knowledge is considered the one and only distinct resource crucial to sustenance of organizational competitive advantage. Suppiah and Sandhu (2012) find that organizational culture types influence tacit knowledge sharing behavior positively or negatively depending on the culture type. The negative influence is an indication that the contribution of culture to organizations could not only be positive. For example a strong OC is a potential stumbling block to organizational change. Job satisfaction and commitment are recognized as variables that can majorly determine organization performance (Riketta 2002). However, both variables (job satisfaction and commitment) are influenced by OC (Lok and Crawford 2003).
2.5 Empirical Review
Haigh (2006) has studied organizational culture on employee performance identity, commitment and citizenship behaviors: Antecedents, change over time, interrelationships and potential of inoculation to bolster identity, commitment and citizenship behaviour. A good example given by Hellriegel and Slocum (2009), shows that most of the organizations have their own computer gurus, but often, It is their secretaries who do not go for lunch that help other workers who have the problem with the method of handling computer problem. Culture, as the collective sum of beliefs, values, meanings and assumptions, is shared by a social group and it helps to shape the ways in which they respond to each other and to their external environment (Fazilah, 2005). A culture is also seen as the personality of an organization, and it differentiates a company from another (Fazilah, 2005).
Alwi (2005), in his writing from his reference, has stated organizational culture as a perception which can be shared with members within the organization. In other words, organizational culture is correlated with decision making, acting, and communication formation and communication network. Mcewan (200) postulates that as a concept, culture is inseparable from the notion of human society. To try and change the prevailing culture within an organization, one has to take cognizance of the relevant societal culture.
Robbins (2001), on the other hand, argues that a company‘s organization culture does not pop out of thin air and, once it is established, it does not fade away. An organization‘s current customs, traditions, and general way of doing things are largely due to what it has done before and the degree of success it has had with these endeavors. This leads one to its ultimate source of an organization‘s culture: its founders. Robbins further emphasizes that the founders of an organization have a major impact on that organization‘s early culture. They have a vision of what the organization should be, and they are unconstrained by previous customs and ideologies.
2.6 Critique of the Existing Literature
Culture creates a sense of meaning to the employee but that there are often several cultures within a company which might conflict. Important to remember is that organizational culture is not static, it is a process of continuous progress, and an individual might adapt to a company culture more or less extensively. In addition there are differences between supported cultures and when it comes down to the actual practice of culture. The business environment, with its stake holders, is the greatest influence on organizational culture. The size of the company is another influencing organizational factor. It has been proved that smaller organizations to a larger extent have more innovative, competitive and supportive cultures than larger organizations (Gray, Densten, Sarros 2003). Another difference between small and large firms is that the innovative environment in which smaller firms often are positioned creates a more performance oriented business culture than in larger firms (Gray et al. 2003).
Culture plays an extensive role in how a company tends to act and manage business, and some argue that there is correlation between business culture and business effectiveness. Schein’s (2004) four characteristics of culture are structural stability, depth, breadth and pattering or integration. Structural stability in culture means that there is some degree of structural stability in a group. Beliefs and norms are not just shared in the group; they are also stable within the group and defined within it. Organizational culture is difficult to change because stability is valued by the group members, it provides them with meaning and certainty. Structural stability is the reason why the culture in an organization is maintained, even if some members leave the group. With depth is meant that culture is a part of a group on a deep, often unconscious, level.
Culture is often intangible as well as abstract and it is something which is deeply rooted in an organization, contributing to the stability described above. With breadth is meant that when culture has once developed it will cover all aspects of a group and its activities. Culture spreads and it will eventually influence the entire organization, from its external primary tasks to internal operations. The fourth characteristic, patterning or integration, unite the other three. This distinction means that everything within an organization, may it be behaviors or a specific organizational atmosphere, are combined into one integrality. This is the core of culture, everything comes together to form an accepted and integrated way of being and acting within the organization (Schein 2004).
2.7 Research Gaps
Although empirical research has been carried out on corporate culture and employee commitment/performance to the organization, there has been little evidence to prove the effect of corporate culture on employee performance (McKinon et al., 2003). In a study of Hong Kong and Australian managers, Lok and Crawford (2004) found a positive effect of corporate culture on organizational commitment. Zain et al. (2009) examined the effect of four dimensions of corporate culture namely teamwork, communication, reward and recognition, and training and development on organizational commitment and found that all the four dimensions of corporate culture were important determinants of organizational commitment. While Mahmudah (2012) report a significant relationship between corporate culture and organizational commitment, research by Lahiry (1994) showed only a weak association between corporate culture and organizational commitment. This study seeks to further examine this relationship between organization culture and employee performance specifically at Nestle PLC.
2.8 Summary of Literature
Organizational culture is well regarded as one of the unique characteristics that distinguish successful organizations from others (Berson, Oreg, & Dvir, 2008). Therefore, understanding the concept of organizational culture is a crucial task for leaders because of its great impact on different aspects of organizational behavior. Ignoring organizational culture in plans for any changes within the organization would yield unforeseen and negative consequences (Cameron & Quinn, 2011). Organizational culture includes many aspects. It represents everything from an organization’s myths, believes and ethics to more concrete things, such as the official way of dressing and the customary language within the organization.
Culture is thus viewed as a means of learning, as well as teaching ways, to become acceptable and effective member of the group. Much of what an individual is, and the way he behaves is largely due to his cultural upbringing. It is this upbringing that shapes his internal “self” and its outer manifestation, his personality. That is why culture is sometimes viewed as “the collective programming of the mind which distinguishes the members of one human group from another” (Hofstede, 2001, p. 9). As such, it includes as well knowledge, beliefs, arts, morals, laws, customs, and other capabilities acquired by man as a member of society. The acquisition of culture begins with birth and continues throughout life.
Organizations are composed of people who work collectively to address the overall goals of the organization. Different people of groups may have different specific goals within the organization, but theoretically they should collectively address a common goal. Different people of groups may be specialized according to role, objective or task, and rank or status within a hierarchy may differentiate them from one another. Each organization is unique, and because each contains a group of people with a way of existence, they have culture (Matsumoto & Juang, 2008).