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ISSN: 2162-6359
International Journal of Economics & Management Sciences
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Organizational Culture and Organizational Performance

Walid El Leithy*

Maastricht School of Management, Maastricht, The Netherlands

*Corresponding Author:
Walid El Leithy
Maastricht School of Management
Maastricht, The Netherlands
Tel: 1223240667
Fax: 01223240667
E-mail: [email protected]

Received Date: July 02, 2017; Accepted Date: July 12, 2017; Published Date: July 14, 2017

Citation: Leithy WE (2017) Organizational Culture and Organizational Performance. Int J Econ Manag Sci 6: 442. doi: 10.4172/2162-6359.1000442

Copyright: © 2017 Leithy WE. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

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Abstract

A few studies have dealt with work attitudes and work behavior as intervening variables with regards to the relationship between organizational culture and organizational performance. Therefore, the purpose of this research is to develop and test a theoretical framework that combines organizational culture in relationship to work related attitudes, work behavior as intervening variables and organizational performance as a dependent variable. The Structural Equation Modelling results show that both work-related attitudes and work behavior can be seen as related to organizational performance. Meanwhile the structural equation model apparently eliminates the relationship between organizational culture and performance.

Keywords

Organizational culture; Work-related attitudes; Work behavior; Organizational performance

Introduction

According to Kotter and Hesket [1], the 80s’ of the last century witnessed the real emerge of the corporate or organisational culture term, as a very important aspect in the field of organisational studies and management. This happens through the publication of some very important books in corporate culture between years 1981-1982: (1) “Theory Z” by Ouchi, (2) “The Art of Japanese Management” by Pascal and Athos, (3) “Corporate Cultures” by Deal and Kennedy, (4) and “In search of Excellence” by Peters and Waterman. Such four books were published in the US at a time where most of its organizations in particular and the US economy in general were facing some difficulties. That bad economical situations pushed people to look for untraditional answers that justify the variance in performance between one decade and another and between country and another. Yet, in spite of the fact that those books were more into practice than theory, however, they drew the attention, for the first time, to the importance of organisational culture in the success of companies. Authors of those books argue that the difference between successful and not-so successful organisations rest with the values and principles that underlie their internal organisation. Furthermore, that group of authors emphasized a set of elusive soft variables, (together comprising something like ‘organisational culture’), that are usually regarded as important, but are often seen as having little direct and predictable impact on the fate of an organization [2].

Research Objectives

• Diagnosing and describing the most dominant culture type, perceived by employees, existing in both local and multinational companies in the Egyptian market.

• Testing the significant difference and similarity between the dominant type of culture, perceived by employees, found in both local and multinational companies in the Egyptian market.

• Testing the differences and similarities between both local and multinational companies, perceived by employees, in terms of work related attitudes, work behaviour, organisational performance in order to analyse why multinational companies are more effective, in most cases, than local companies.

• Testing the differences and similarities with regard toemployees' demographics in their relationships with work-related attitudes, work behaviour and organisational performance in local and multinational companies.

• Developing and testing a theoretical framework that combines organisational culture in relationship to other suggested variables gathered from organisational literature (work related attitudes, work behaviour, employees' demographics and organisational performance).

Theoretical Development and Hypotheses

Culture to an organisation is what personality is to an individual. It is that distinctive collection of beliefs, values, work styles, and relationships that distinguish one organisation from another. According to Cameron and Quinn [3], each culture enjoys a unique language, symbols, rules, regulations and feelings that are different from that of other cultures. Such a culture might also be different inside the same organisations through different sub occupational, religious, educational or social groups that their differences represent sub cultures; yet, each of those subcultures contain common attributes of the dominant type of culture of the entire organisation. However, according to Rollins and Roberts [4], when managers hear the word culture and its role in developing and enhancing organisations’ success and effectiveness, they get surprised and tend to deny such role. At the end of the day they only believe in their experience and technical expertise as the only way to move them and their organisations ahead. According to Gallagher [5], the values of organisations are passed along with unmistakable certainty from coworkers to coworkers, and from manager to employee, in the form of each of the many daily work-life decisions that form our jobs. Mayers [6] defines attitudes as relatively lasting feelings, beliefs, and behavioural tendencies directed toward specific people, groups, ideas, issues, or objectives. Similarly, Greenberg [7] define attitudes as relatively stable clusters of feelings, beliefs, and behavioural predispositions. Yet Rajecki [8] argues that most of the early researchers had a narrow sight with regard to attitudes. Accordingly, he confirms that attitudes consist of three components; A - the Cognitive Component that represents all information gathered from different sources towards something which is the base of thinking and believing, B - the Affective Component that represents the like or dislike process towards same thing which is based on the information gathered (cognitive component), C - then the Behavioural Component that represents the set of either positive or negative actions towards that thing. Meanwhile, Luthans [9] believes that among the three components of attitudes, only the behavioural component can be directly observed and the rest are unseen.

Hypothesis 1: There is positive linear relationship between dominant organisational culture type and work-related attitudes.

Antecedents to job satisfaction and associated work behavior

Job Satisfaction is a topic of wide interest to both people who work in organisations and people who study them. In fact, it is the most frequently studied variable in organisational behaviour research [10]. According to Greenberg, job satisfaction can be defined as individuals’ cognitive, affective, and evaluative reactions towards their jobs. Similarly, according to Spector, job satisfaction is simply how people feel about their jobs and different aspects of their jobs. According to Luthans although most people assume a positive relationship between job satisfaction and employee’s performance or productivity, the evidence from researches indicates that there is no strong linkage between satisfaction and productivity and that there is a moderate relationship between satisfaction and turn over, yet the indication from researches indicate a strong inverse relationship between job satisfaction and absenteeism. More importantly, according to Sepctor, concerns have been raised that both physical and psychological health might be influenced by job attitudes. Individuals who dislike their jobs could experience adverse health outcomes. These outcomes include both physical symptoms and psychological problems. It has also been suggested that job dissatisfaction results in a shortened lifespan. Thus high levels of dissatisfaction might indicate to managers that problems exist, with working conditions, the reward system, or the employees' roles in the organisation.

Antecedents to organisation commitment and associated work behaviour

According to Luthans organisational commitment is important factor to understand and predict organisational behaviour. According to Meyer and Allen [11] commentators typically describe the committed employee as one who stays with the organisation through thick and thin, attends work regularly, puts in a full day, protects company assets, shares, company goals, and so on. In view of the above, Meyer and Allen believe that considerable evidence across a wide variety of samples and performance indicators suggests that employees with strong affective commitment to the organisation will be more valuable employees than those with weak commitment. As with continuance and normative, employees who believe that strong costs are associated with leaving their organisation are unlikely to do so, while research evidence shows that Affective commitment by an employee to his/her organisation is the strongest and most consistent relation among the three different components of commitments with desirable outcomes. In this regard, According to Mowday et al., [12] and Luthans, organisational commitment is manifested through three main factors: (1) A strong desire to remain a member in a particular organisation. (2) A willingness to exert high levels of efforts on behalf of the organisation. (3) A definite belief in, acceptance of, the values and goals of the organisation.

Meanwhile, Welsch and Lavan's [13] research directly associated organisational climate with organisational commitment. Specifically they found that five organisational climate variable (communication, decision making, leadership motivation, and goal-setting) were significant predictors of organisational commitment. Blau and Boal, [14] argue that empirical research on organisational commitment generally has shown commitment to be a significant predictor of turnover. Similarly, Luthans, research's findings support a relationship between organisational commitment and some desirable outcomes such as employee performance, turn over, and absenteeism

Antecedents to job involvement and associated work behavior

Job involvement is defined as the degree to which a person identifies psychologically with his or her work and the importance of the work in the person’s total self-image. Thus, according to Pathak [15] there have been spirited efforts in recent years throughout the world by top management consultants to redesign jobs in order to increase job involvement. This is apparently based on the belief that job involvement is conducive to both productivity and job satisfaction. Furthermore, according to Liao and Wen Lee, organisations need to know how to achieve the highest degrees of job involvement, despite all organisations likely aspire to encourage a high degree of job involvement, this effort is extremely difficult, largely because of the inherent differences in the degrees of job involvement among employees. These differences may be due to variations in personality, a key individual difference variable. On the other hand, according to Blau and Boal, organisations with low job involvement level pay a high cost in terms of lower employees’ productivity and higher absenteeism and turnover rates. Such cost is one reason why much effort has gone into understanding the causes or antecedents of these of job involvement. Brown, [16] argues that both personality variables and concept of work ethics are antecedents of job involvement. Similarly, Chih Ho [17] believes that available evidence supports the argument that personal and situational factors are strong influences on job involvement and that Job involvement is also an important factor in other work-related attitudes, and is linked to work behaviours. While according to Hao researches' findings show a positive relationship between perceived organisational support and job involvement, and a positive relationship between peers relationship and job involvement through perceived organisational support. Thus, they consider both perceived organisational support and peers relationship as antecedents of job involvement. Meanwhile Yoshimura [18] believes that antecedents of job involvement can be classified into 3 categories: (a) individual personality variables that include locus of control-growth need-working values-individual career, (b) organisational variables that include participation in decision making-job type-job satisfactionorganisational commitment-human resources management, and (c) non-organisational variables that include non organisational involvement-family involvement. In terms of job involvement work behaviour, according to Blau and Boal Job involvement seems to more consistently predict turnover than absenteeism. Elloy et al. [19] argue that Job involved individuals who perceive opportunities for growths in their job have less intention to leave or suffer burnout. Meanwhile, Pathak believes that job involvement has also been the mainspring energising the symbiotic relationship between job involvement, performance, and the quality of working life, because individuals who have their ego development tied into the jobs have a higher stake in performing well and that there is often a strong desire to satisfy the need for ego identity and development in their job. In this sense, Greenberg and Baron, believe that when employees are dissatisfied with their jobs, they find ways to escape and stay away from them; this phenomenon is called employee withdrawal which comes through two forms; absenteeism and voluntary turnover, by not showing up to work or by quitting to take a new job, people may be expressing job dissatisfaction or attempting to escape from unpleasant aspects they may be experiencing.

Hypothesis 2: There is a positive linear relationship between workrelated attitudes and work behaviour.

Hypothesis 3: There is a positive linear relationship between workrelated attitudes and organisational performance.

Hypothesis 4: There is a positive linear relationship between work behaviour and organisational performance.

According to both Greenberg and Baron, culture plays a prominent role in the success of organisations; it provides a sense of identity to its members, it generates commitment to the mission of the organisation, objectives and goals, and it determines a set of standards expected behaviours among an organisations members, so things and actions are shared and accepted by all members of the organisations. Similarly, Lismen et al. believe that culture drives its employees to develop effective skills and capabilities, it guides them with regard to the future plans of their organisations and their strategies, it builds the sense in them for the need for creativity, and it formulates their attitudes toward everything related to work life. Accordingly culture enhances the capabilities and performance of organisations. Therefore, according to Cameron and Quinn, most organisational scholars and observers now recognise that organisational culture has a strong impact on the welfare of organisations in both short and long term. They argue that many studies have shown the impact of organisational culture in enhancing organisational performance, as well as its impact on individuals in improving their quality of life in terms of increasing employee's morale, job satisfaction, commitment to their job and organisations, productivity and job performance in general, as well as improving employees’ health both physical and psychological. According to Kotter and Heskett, corporate culture will probably be an even more important factor in determining the success or failure of firms in the next decade.

Hypothesis 5: There is a positive linear relationship between dominant organisational culture type and organisational performance.

Method

Participants

Population of this study includes both local and multinational companies' employees and managers located in Cairo. Meanwhile, since the researcher could not find an official source of information, whereby he could indicate the total number of population, therefore, he has adopted sampling size equation for large populations, which is the case of this study. Cochran, [20] developed an equation to yield a representative sample for proportions as follows:

image

Which is valid where n0 is the sample size, Z2 is the abscissa of the normal curve that cuts off an area at the tails (1 - equals the desired confidence level, e.g., 95%), e is the desired level of precision, p is the estimated proportion of an attribute that is present in the population, and q is 1-p. The value for Z is found in statistical tables which contain the area under the normal curve.

In view of the above, and due to the estimated large number of study population (all employees in both local and multinational companies located in Cairo) the researcher has adopted the practice with regard to large population, therefore he has assumed p=0.5 (maximum variability), a 95% confidence level and ±5% precision. When calculating the study sample size based on Cochran's sampling size equation for large populations, the sample size of this study has been determined by the hereunder equation:

image

Therefore, the sample size of this study has been determined based on the above equation to be 384 respondent gathered from 14 companies (10 local and 4 multinational) where a random stratified sample applied that included (clerks-supervisors-middle management senior management). The share of local respondents has been estimated to be 75% versus 25% of the multinational respondents. This is based on the researcher's practical and professional experience. Same has been applied while determining the share of every stratum that the researcher assumes to be 60 % employees and senior employees, 20% supervisors, 15% middle managers and 5% senior managers.

Procedure

The competing value frames developed by Quinn and Rohrbaugh [21] has been used to collect such data as one of the most known and wide used by many researchers. The JSS assesses nine facets of job satisfaction (Pay, Promotion, Supervision, Fringe benefits, Contingent rewards, Operating conditions, Coworkers, Nature of work Communication) as well as over al satisfaction. The scale contains 36 items and uses a summated rating scale format. Meyer and Allen [22] organisational commitment scale has been used. This scale consists of 3 sub scales; 1 - Affective commitment scale item that includes 8 statements, 2 - Continuance commitment scale items that includes 9 statements, and 3 - Normative commitment sale items that includes 6 statements. Kanungo [23] job involvement scale has been used. This scale was developed to fix the problem that most of the job involvement had. The researcher has designed a questionnaire to test the absenteeism rate based on Meyer and Allen studies and results. Meyer and Allen believe that to determine an employee's absenteeism rate, you ask him/her to provide two estimates of absenteeism: a) the total number of days in which he/she was absent and b) the number of absent days because the employee "did not feel like going to work". The researcher has designed a questionnaire to test the turnover intention rate based on Blau [24] studies and results. Blau believes that to determine the turnover within an organisation, you ask its employees questions related to job search behaviours as follows: a) contacted an employee agency, b) prepared or revised CV, c) sent CV to employers and d) went on a job interview. Due to the impossibility of obtaining the job performance rates through companies' Human Resources files (Job Appraisal Forms), the researcher has designed a questionnaire to test the perceived performance based on Motowidlo and Van Scotter's, [25] overall performance definition that consists of both task performance which is related to the technical core of the job and contextual performance that is related to the behavioural non-technical part of the job that supports the organisation in a broader manner. To test the task performance sub variable, respondents have been asked to determine: (1) their standard of job performance as measured by themselves that ranged from “does not meet standard” valued as a “1” to “exceeds standard” valued as a “5”, (2) performance as compared with other of the same rank that ranged from “low level” valued as a “1” to “high level” valued as a “5”, and (3) job contribution to the organisation as compared to other members of the work unit that ranged from “less contribution” valued as a“1” to “more contribution” valued as a “5”. Meanwhile, to test the contextual performance sub variable, the researcher has adopted Borman and Motowidlo [26], five categories of contextual performance. The categories are (a) volunteering to carry out task activities that are not formally part of the job; (b) persisting with extra enthusiasm when necessary to complete own task activities successfully; (c) helping and cooperating with others; (d) following organisational rules and procedures even when it is personally inconvenient; and (e) endorsing, supporting, and defending organisational objectives. In the meantime, since the financial results of the companies in the sample study are not published and due to the difficulty to get figures through companies' financial reports, the researcher has designed this questionnaire based on Kotter and Heskett's three different methods that they have developed through their studies to capture the concept of economic performance. This questionnaire tackles the following three organisational economic and financial results: 1 - average yearly increase in net income that they believe it is the least valid because it is most vulnerable to accounting manipulations and can be distorted to merger and acquisition activity, 2 - average yearly return on investment that they believe that it is less subject to distortion, 3 - average yearly increase in stock price that has the virtue of being an external measure as they believe, yet, due to the fact that not all companies in Egypt are stock exchange registered, thus we replaced the company's annual increase in net profit instead of increase in stock price. This questionnaire has been applied on CEOs, Presidents or Financial managers of companies only to determine the company's overall economic performance.

The Structural Equation Modelling has been used in order to test the relationship between the research's variables, as well as to statistically test the hypothesis' model in order to determine the extent to which it is consistent with the data obtained from the sample.

Results

First, Confirmatory analysis involves the testing of a measurement model with latent variables. Yet, we will not apply the first field of application in this study due to the fact that the researcher depends only on well-known and frequently used questionnaires that, from one hand, have been tested and validated several times in different cultures, from the other hand, the reliability analysis conducted on those scales within this study shows that all scales are highly reliable. Meanwhile, it is worth mentioning that both exploratory and confirmatory analysis are two steps that complete each other and that confirmatory analysis should not be confused with exploratory analysis. The essential difference is that in performing an exploratory analysis, it is not yet known which variables will determine a certain factor or dimension, whereas with the confirmatory analysis, it is assumed (hypotheses) that certain variables correctly measure a certain factor. On the basis of a hypotheses test, confirmatory analysis, then, be used to find out to which degree the different assumed variables also truly measure that certain factor. Second, Path analysis involves the estimation of structural relationships between latent variables. Therefore, the general idea behind the SEM method is to estimate the model in such a way that the sample covariance matrix corresponds as closely as possible to the model covariance matrix. This part will empirically test the research hypotheses and reports at the end the structural model fitness result (see Table 1 that shows the three selected model fit measures and the cut-offs values for models acceptance, collected and developed by Elseidi [27-30], Table 2 the structure model regression weight and Table 3 shows the standardized regression weight). The statistical analysis results show that there is a significant positive relationship between the dominant type of culture (Clan culture) and work-related attitudes and work behavior within companies operating in the Egyptian market. P=0.000, thus the result rejects the null hypothesis 1. The statistical analysis results show that there is a significant positive relationship between work-related attitudes and work behavior within companies operating in the Egyptian market. P=0.000, thus the result rejects the null hypothesis 2. The statistical analysis results show that there is a negative relationship between work-related attitudes and organisational performance. P=0.01, thus the result fails to reject the null hypothesis 3. The statistical analysis results show that there is a significant positive relationship between work behavior and organisational performance within companies operating in the Egyptian market. P=0.01, thus the result rejects the null hypothesis 4. The statistical analysis results show that there is no significant relationship between dominant organisational culture type (Clan culture) and organisational performance within companies operating in the Egyptian market [31,32]. Thus, the result fails to reject the null hypothesis 5. While Figure 1 shows the research structural model result that indicates that there is a significant correlation between dominant type of culture (clan culture) found in both local and multinational companies operating in the Egyptian market and work-related attitudes (job satisfaction-organisational commitmentjob involvement), meanwhile, work-related attitudes have a significant correlation with work behaviour (turnover intention-absenteeism- job performance). At the same time, the structural model shows that there is a significant positive relationship between work behaviour and organisational performance in both local and multinational companies operating in the Egyptian market. However, the structural model does not show any significance relationships with regard to company type (local or multinational) as well as employees' demographics with other variables included in this model (Dominant type of culture-workrelated attitudes-work behaviour-organisational performance).

economics-and-management-sciences-structural

Figure 1: The research finding structural model.

Fit measures Minimum acceptable value for model fitness
Absolute Fit Measures  
Likelihood-Ratio Chi-square Statistic ( CMIN, X2 ) p-value ≥0.05
Normed Chi-Square (CMIN/df,X2/df) Acceptable ratio ≤2-5, not over 5
Goodness-of-Fit Index (GFI) No absolute threshold, recommended 0.90 or above
Adjusted Goodness-of-fit Index (AGFI) No absolute threshold, recommended 0.90 or above
Root Mean Square Error of Approximation (RMSEA) Acceptable ≤ or =0.03 to 0.08; not over 0.1
Incremental Fit Measures  
Tucker Lewis Index (TLI) No absolute threshold, recommended 0.90 or above
Comparative Fit Index (CFI) No absolute threshold, recommended 0.90 or above
Normed Fit Index ( NFI) No absolute threshold, recommended 0.90 or above
Incremental Fit Index (IFI) No absolute threshold, recommended 0.90 or above
Parsimony Goodness-of-fit Index (PGFI)  
The Parsimony Goodness-of-fit Index (PGFI) No absolute threshold, recommended 0.60 or above
The Parsimony Comparative Fit Index (PCFI) No absolute threshold, recommended 0.60 or above

Table 1: The three selected model fit measures and the cut-offs values for models acceptance Source:Elseidi[27]

Estimate S.E. C.R. P Label
Att c_1 0.01 0 3.87***  
Beh Att 0.48 0.07 6.95***  
Perf Beh 1.65 0.66 2.51 0.01
Perf Att -1.07 0.44 -2.44 0.01
q_9_2 Perf 1.58 0.06 25.44***  
q_2 Att 1      
q_3 Att 0.32 0.06 5.68***  
q_4 Att 0.87 0.14 6.04***  
q_5 Beh 1      
q_6 Beh 0.21 0.11 1.85 0.06
q_7 Beh 1.23 0.12 10.03***  
q_9_5 Perf 1      
q_9_4 Perf 1.34 0.06 21.55***  
q_9_3 Perf 1.49 0.1 14.32***  
q_9_1 Perf 1.25 0.06 19.74***  
q_5 q_9_2 -0.03 0.01 -2.83 0

Table 2: The structural model: regression weights.

  Estimate
Att c_1 0.26
Beh Att 0.79
Perf Beh 0.57
Perf Att -0.61
q_9_2 Perf 0.88
q_2 Att 0.7
q_3 Att 0.41
q_4 Att 0.46
q_5 Beh 0.79
q_6 Beh 0.12
q_7 Beh 0.79
q_9_5 Perf 0.79
q_9_4 Perf 0.99
q_9_3 Perf 0.9
q_9_1 Perf 0.95
q_5 q_9_2 -0.14

Table 3: The structural model: standardized regression weights.

To sum up: the results show that the overall structural model demonstrates a very good fit with the sample data, they eliminate the relationship between both organisational culture and organisational performance.

Discussion

The study's findings indicate that there is no direct or indirect relationship between organisational culture and performance. The model indicates that organisational culture correlates with workrelated attitudes (job satisfaction, organisational commitment and job involvement); work-related attitudes correlate with work behaviour (turn over intention, job performance and voluntary absenteeism); then both work-related attitudes and work behaviour correlate with organisational performance. Meaning, the structural model eliminates the relationship between organisational culture and organisational performance. This issue has taken and still takes lots of debates and discussions among organisational scholars.

Conclusion

Through an extensive literature review, this study has identified the importance of organisational culture in organisational performance through covering its various definitions, importance, different corporate culture diagnostic tools, and culture change strategies. It has also covered both attitudinal and behavioural variables in terms of their relationship with organisational culture from one side and organisational performance from the other. In the meantime, the study's findings eliminate the role of corporate culture in financial performance's difference between multinational companies and local one operating in the Egyptian market. In addition, this result indicates the necessity of conducting a study that aims at investigating the reasons behind the financial performances differences between both local and multinational companies in order to come up with a model that uncover good financial performance antecedents. To this end, the study also indicated statistical differences between both local and multinational companies in terms of job satisfaction level, job involvement, job performance and organisational performance to the favor of multinational companies, which is a logical result, yet, organisational commitment level was the same which is a questionable result. The study's findings indicated a very important academic and theoretical implication representing in its structural modelling result that shows that there is no direct or indirect relationship between organisational culture and performance, such relationship is occurred through moderated variables which are work-related attitudes and work behaviour. The model indicates that organisational culture correlates with work-related attitudes (job satisfaction, organisational commitment and job involvement); work-related attitudes correlate with work behaviour (turn over intention, job performance and voluntary absenteeism); then both work-related attitudes and work behaviour correlate with organisational performance. Meaning, the structural model eliminates the relationship (either direct or indirect) between organisational culture and organisational performance. This issue has taken and still takes lots of debates and discussions among organisational scholars. Meanwhile, the study also eliminates the relationship between demographics factors and organisational performance as moderated variables. This study recommends that scholars should conduct more studies on the real reasons behind how to improve financial and economic performance, to explain the gap between some companies than others, in order to come up with a business model that indicates the antecedents of high and constant organisational performance.

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