IMPACT OF CORPORATE CULTURE ON

COMPANY PERFORMANCE

* To be published by CURRENT SOCIOLOGY 52 (6)

José A. Garmendia
Universidad Complutense Madrid

SUMMARY[

It has by now become a commonplace, in the context of organisations, to

assert that a strong culture has a positive impact on performance. The
relationship has been refined over time, and research has shown that the
more flexible an organisation, the more sustainable. It should be noted
that financial results have generally been taken to be equivalent to
success and even effectiveness of the organisation itself, the entire
organisation. This is obviously questionable, because what shareholders
may regard to be beneficial may have negative connotations for
management, staff, customers, and so on. In the present article, this issue
is addressed at higher levels of complexity, defining organisational
effectiveness as the achievement of a system of values (goals). Such a
system is assumed to accommodate more than just the organisation’s
financial results or one or a few of its stakeholders. The initial hypothesis
is that different types of organisation – defined in terms of a combination
of the variables financial success, cultural strength, flexibility and
adaptability to the environment – tend to respond to different
performance profiles. An analysis of the replies provided by respondents
from a sample of life and health insurance companies confirms our
hypothesis, particularly for the two extreme types. Their respective
performance profiles, measured in terms of the attainment of fifteen
values (goals), are likewise found at opposite extremes of the scale.
Subjective indicators prevail in the study, since both effectiveness and
corporate culture are treated from the standpoint of corporate image, as
perceived within the organisation and by the industry as a whole.

Introduction

A strong culture is now nearly generally assumed to have a positive

impact on performance. This, like any other platitude, is overstated, when
not altogether erroneous. The alleged relationship between satisfaction and
performance was similarly regarded until some authors (Lawler, E.L.,
Porter, L.W. 1967) not only questioned but reversed the premise. They
concluded that, whilst the degree of occupational satisfaction affects
performance – albeit less than generally assumed – there are sounder
arguments for sustaining the reverse. The translation of this observation to
the association between strong culture and success would entail playing
down the importance of the former, so as to avoid an implicit defence of
cultural determinism. Indeed, financial results themselves affect cultural
strength. Moreover, performance depends on many variables, and may
therefore be found to be very high in companies with weak cultures. One of
such variables is flexibility, which has often been taken into account
(Kotter, J.P. and Heskett J.L. 1992; Denison, D.R. 1990; Soerensen, J.B
2002) to refine and qualify the above relationship. Thus, a strong culture –
understood to be a “ system of values widely extended and intensely shared
in the organization “ (O’Reilly, C.A. and Chatman, J. 1991, 493) – may
even be detrimental to success if the consistency it involves leads to slavish
adherence to routine and conformist attitudes. In the concomitant process
of narcissistic internalisation the challenges of an increasingly restless and
competitive environment would go unmet, to the detriment of the P&L
account.
The literature on this subject has done much to clarify the influence
of culture on performance. There are, however, certain shortcomings which
we shall attempt to address hereunder. Some are related to the concept of
culture itself, others to the economic bias in the definition of success and
yet others to the limitations inherent in handling only a relatively small
number of variables, insofar as a more complex approach to the issue is
needed, particularly where a more ambitious theoretical focus is involved.
This article purposes to summarise recent research conducted on the
“impact of corporate culture in life and health insurance company
performance”, financed by the Ministry of Science and Technology. The
insurance industry has undergone radical restructuring in Spain, with
increased concentration as the outcome of mergers, acquisitions, strategic
alliances, etc. The result has been that over 15% of the companies have
disappeared in the last 15 years and, whilst insurance firms have doubled in
size since 1992, the market (in particular for life insurance) is still highly
atomised. Recently moreover, “bancassurance”, a new formula that
achieves substantial synergies by combining the banking and insurance
businesses, has made a forceful entry on the life insurance market.
In another turn of events relevant to industry development,
consumers have become increasingly demanding, giving rise to the
institution of an Ombudsman for the Insured, whose office has been
saddled with the growing demands resulting from new savings structures in
Spanish households, an ageing population, the uncertainties surrounding
the public pension system, labour market instability and supply-side
increases in pension plans and life and health insurance. The life insurance
industry has been growing at rates of over 30% in recent years, overtaking
non-life insurance in 2000 due partially to the success of unit -linked
formulas.
As far as health insurance is concerned, nearly eight million people
are covered by some sort of health policy, although only six million have
full cover. The industry has been enjoying cumulative growth rates of 6%
in terms of premium volumes over the last few years. This class of
insurance has benefited considerably from recent changes in tax
regulations. In both health and life insurance, sweeping transformation has
been taking place in a context of substantial economic and social change
which has in turn entailed organisational as well, naturally, as management
challenges and cultural change: among others, to attend to an increasingly
numerous and demanding clientele : see the UNESPA [Spanish assurances
association] and especially the ICEA [assurances research centre] reports .

BACKGROUND

Drawing from human resource theory, attention has focused on the

positive relationship between human capital (Becker, G. 1964),
commitment to the organisation and corporate effectiveness (Argyris, C.
1964, Likert, R. 1961, Lawler, E.E. 1986, Siehl, C. and Martín, J. 1988).
Similarly, participation has been linked to performance (Tannenbaum, A.S.
1968, Parker, L.E. and Price, R.H. 1998). The closeness of this relationship
should not be overstated, however (Wagner J.A. 1994, Black S. and
Gregersen, H.B. 1997), because it is conditioned by a host of factors,
including the quality of decision-making - which may be dreadful -, the
environment and, naturally, purely economic aspects (Perrow, C. 1990,
107).
 As mentioned above, success is often defined primarily in economic
terms. Denison, D.R. (1990, 49) defends this position “because the
respective indicators are a summary of the measure of performance of the
organization as a whole…, and are widely regarded as such by those who
manage and invest in the company “. Consequently, this author related a
number of cultural (or rather, working atmosphere) traits – such as
involvement (an index combining type of work organisation and decision-
making), “emphasis on human resources” and “inter-unit coordination - to
two purely economic indicators of success or performance: the returns on
investment and returns on sales. He concluded from his findings on a
sample of 34 companies that the above traits had a positive impact on
financial results over a period of five years.
Kotter, J.P and Heskett, J.L (1992) studied the same subject on a
sample of 207 companies engaging in 22 areas of manufacturing in the
USA. The correlation proved to be acceptable, if only moderately so, and
required further explanation for a series of important exceptions: for
instance, that high performance was recorded for companies with weak
cultures whilst firms with strong cultures failed. In other words, the strong
culture/success relationship (Theory I) is sustainable, but is insufficient as
an explanation. The above relationship was refined by introducing the
“adjustment to the environment” variable (Theory II) to yield more results
better able to explain these observations: a strong culture, according to this
premise, would have a positive impact on performance if strategically
adapted to the environment. A corollary to this approach would claim that a
predictable and relatively static environment would call for less adaptable
cultures. Further qualification of the concept led to the formulation of
Theory III, whereby to produce good financial results a strong culture
would not only have to adapt to the environment, but anticipate change
(proactive content). In any event, cultural strength is an advantage in highly
competitive environments where such conditions are taken into
consideration (Burt, R.S. et al. 1994)
Refining the relationship between strong culture and financial
success even further by controlling the environment, Soerensen, J.B. (2002,
70) concluded from his analyses of a sample of companies from a wide
variety of industries that in relatively stable environments, performance is
less variable in organisations with strong cultures. However, in
environments subject to broad fluctuations, the benefits of such narrower
variability decline. The author adds that this is due to a decline in
organisational learning when a company is faced with internal or external
challenges, precisely because of its strength. In other words, a weak culture
could turn its lack of learned routine to advantage, whereas a strong culture
might feel comfortable and rashly self-sufficient when confronting
uncertain situations. In any case the impact of a strong culture on
performance is admitted to be due to the impetus it lends to staff
commitment and motivation, the social control it facilitates (O’Reilly, C.A.
and Chatman, J. 1996), the consistency of rules and values for staff vis-à-
vis management, and so on (Gordon, G.G. and DiTomaso, N. 1992).
The book In search of excellence (Peters, T.J. and Waterman, R.H.
1984) assigns corporate culture an important role – particularly if its values
hinge on customer service, innovation and proactivity/flexibility, action
orientation and human resource development – forging so-called excellent,
and therefore successful, companies.
Finally, mention is due to research that takes a more demanding
approach to the concept of culture. Gordon, G.G. (1985) is concerned less
with the degree of cultural strength than with the type of culture, viewed
from certain different angles chosen – or apparently chosen – in accordance
with no prior theoretical criterion. He then relates the respective profile of
traits to the line of business, the more or less dynamic nature of the
company and even to its success or otherwise, a concept not clearly
defined.
A number of shortcomings can, then, be identified in the treatment of
the subject hitherto, which are summarised below:
1. As far as the concept of culture is concerned, it has either been left
undetermined outside of whether it is weak or strong, sapped of
meaning by equating it to working climate, or defined in an
uncomprehensive manner, based on a rather short suite of values,
often with no substantiation that they represent “the whole picture”.
2. With regard to success or results (performance, organisational
effectiveness) – and here I refer not to specific results, such as
organisation/personality adjustment (O’Reilly, C.A. and Chatman, J.
1991) –, they are limited to the strictly financial domain. This,
however, diminishes the conceptual scope, because an organisation
produces not only financial results but at the same time more or less
solvency, more or less human resource development, more or less
innovation, and so on. A healthy P&L account may be accompanied
by serious setbacks in the form of meagre human resource
development, scantly innovative design, limited staff participation in
decision-making, sparing customer support, etc. Furthermore, what
management or shareholders may define to be a success may be
perceived as a failure by staff threatened with layoffs, or as fraud by
consumers. Taking account of all values and stakeholders is
imperative to any measure of effectiveness. Otherwise, the
culture/success relationship or its parallel, strong culture/success,
would be biased from the outset, regardless of which of the various
possible perspectives is adopted: the “natural systems model”,
 emphasising objective equilibrium, the “rational or goal-achievement
model”, emphasising the instrumental nature of the organisation, the
“decision-making model”, emphasising the fact what organisations
do primarily is to process information and decisions, or the
“population ecological model”, emphasising environmental control
aspects (Denison, D.R. 1990, 36).
Certain approaches have addressed the question the other way
around: for instance, by selecting companies known for their business
success and then deducing the reasons or aspects for such success, only
some of which can be regarded stricto sensu to be culture traits. Hence
Bueno, E. (1989) equated success to competitiveness and considered the
following:

EXTERNAL INTERNAL
Market opportunity Innovative spirit
Aggregate expansive demand Flexible and professional management
style
Technological discoveries Clear mission and integrative culture
New resources Efficient and adaptive organisation
Incentive policies Product and management quality
Market and customer orientation
Financial solvency and independence
Productivity and quality of information

A fuller and more comprehensive approach is needed, then, as

regards performance and culture both. The mere consideration of the chief
components of the organisation or constituencies (management, staff,
clientele, shareholders, suppliers, the organisation itself) involves defining
performance as meeting both the organisation’s financial and its not strictly
financial goals (values). Indeed, neglecting the latter will ultimately have a
detrimental effect on financial success and overall performance.

METHODOLOGY

The following methodological decisions were adopted to better achieve the

aims pursued in the present research project:

Sample selection

1. Pursuant to an earlier survey of companies in the life and health

insurance industry, we defined the universe to be the set of all companies
ranked by the value financial “success”. This was defined by a combination
of objective indicators, such as premium and earnings growth over the last
five financial periods compared to the industry mean or solvency, and
several subjective indicators provided by experts and specialised
publications. A total of 100 companies were included.

2. This universe was purged by eliminating:

- 15 companies with very close ties with banking industry firms,
particularly in terms of staff
- 10 companies doing little or no life or health insurance business
- 2 rather small co-operatives
- 3 companies that is was difficult to contact

Therefore, in all, 70 companies were included and ranked in keeping with

the indicators referred.

3. Three groups were established on the grounds of financial success. That

is to say, one group comprising 20 companies ranking highest on the list
mentioned; a second group of 20 companies – randomly chosen from
among the 30 companies in intermediate positions – and finally a third
group of 20, ranked on the other extreme.

4. Once this classification was established, simple stratified random

sampling was conducted in accordance with the above criteria, fixing the
sample size at 10 units per group.

5. The kind of sampling can be considered to be exploratory. Nonetheless,

we feel that the sample is reasonably representative, statistically speaking,
for the purposes of the research, which sought essentially to contrast two
extreme types. It should be added that whilst information was gathered
directly from 27 companies, data were in fact available on all 30, given that
the survey was reputational in nature: i.e., each company was questioned
about itself and the other 29 in the sample.
(* The 30 organisations included were: Adeslas, Alico, Allianz, ARAG, Asisa, Atlántico Vida, Axa
Seguros, Biharko, Cahispa, Cardif, Caser, Catalana de Occidente, Génesis, Hércules Salud, La Boreal
Médica, Lepanto, Mapfre, Musini, National Nederlanden, Pelayo Mondiale, Plus Ultra, Previsión
Sanitaria Nacional, Prosperity, Reale, Sanitas, Seguros Corte Inglés, Seguros Vitalicio, Skandia,
Winterthur, Zurich España )

A questionnaire was forwarded to three executives in each company

surveyed, who provided a joint response.

Definitions and indicators

 The three executives’ opinion with respect to the definition of strong
or weak culture and success was respected, although the introduction to the
question insinuated the generally accepted definition of strong or weak
culture. They were all deemed to be reasonably knowledgeable about the
situation prevailing in other industry companies in this respect. When they
did not agree, efforts were made to reach a consensus and only rarely was it
necessary to take a vote. Indeed, what was essentially pursued was the
image of the different organisations within the sector: with respect to
success, for instance. This procedure has been used by other authors, in
particular beginning with Woodward, J. (1965), who measured the
financial success of companies based on replies to various questions on a
scale of three: above, below or around the industry average. In our survey,
respondents were also asked not to focus solely on the financial aspect
(solvency, size, increase in market share, premium volume, profits or return
on capital, etc.), and expressly reminded to take other aspects –
management per se, expert and specialised press opinion – into
consideration in their replies. The interviewer also invited the executives to
discuss A. Schumacher’s motto “small is beautiful” along with the question
of how reasonable it is not to automatically equate economic or financial
achievement with success. Such equivalence seems to be particularly likely
in the case of size. Indeed, earlier research has usually found a high and
statistically significant correlation between size and success. The team
warned the respondents of the danger of contagion between the two
variables, a factor which may have contributed to the rather loose
correlation found: Pearson’s r: .4561 (p < .05), Spearman’s rho .4581 (p<
.05). Size was defined on the grounds of premium volume.
A similar procedure was employed in connection with the equally
subjective definition of “strong culture”. The preamble simply offered a
few guidelines – staff identifying closely with company objectives and
general management, scant and weak presence of dispersive subcultures,
existence of a consolidated organisational style and philosophy – based on
criteria conventionally found in the literature: namely, cultural “strength”
as consistency (Deal, T. and Kennedy, A.. 1982), congruence(Schall, M..
1983), internal control (DiTomaso, N. 1987), value penetration(Louis,
M.R. 1985), etc. For this same reason, no a posteriori formulation was
conducted, contrary to frequent practice, in which “cultural strength” is
equated to the reciprocal of the variance of the distribution of replies. As
mentioned, this procedure was deemed to be appropriate for two reasons:
firstly, executives were assumed to have a certain amount of expertise;
secondly, the survey sought to identify the organisation’s image as
perceived by the respondents.
 As far as the concept of culture is concerned, the 15 traits considered
purpose to embrace all the relevant values, following prior approaches
inspired by the respective literature:
- solvency, dedication to customers, quality/price (value for
money), pursuit of profit, productivity, pursuit of expansion,
human resource development, staff participation, staff
remuneration, effective leadership, importance of rules,
importance of hierarchy, business ethics, flexibility/adaptability,
innovative spirit/ proactivity.
Special account was taken of the following:
1. A previous survey by the author (Garmendia, J.A. 1992), in which the
above values were derived from classical papers on values, and more
specifically Maslow, A. (1959), Herzberg, F. (1959) and Parra Luna, F.
(1993 ).
2. The basic orientations chart (Hofstede, G. 1990, and other of the
author’s standard charts) in the study of corporate organisational
culture, as well as the now classical Blau, P. and Scott, W. R. (1962)
typology based on the “cui bono” principle.
3. Research team discussions
The purpose was to gather information on corporate culture and
concomitant effectiveness from the standpoint of the image each
organisation has of itself, and the image it has portrayed to other companies
in the industry. Indeed, image is also reality and its management necessary,
bearing in mind W.I. Thomas’ classic premise: “If men define situations as
real, they are real in their consequences”.

Profiles and hypotheses

In order to identify priorities among the cultural traits or values –
i.e., to hierarchically rank the system of values – questions were formulated
with the intention of mapping the reply on the axis between the two
extremes “very characteristic” and “wholly uncharacteristic”, following the
Q-sort profile procedure (Block, J. 1978), applied in particular by O’Reilly,
C.A. et al. (1991). Thus, respondents were asked to class the 15 indicators
(traits) listed above into five categories following the pattern:
2-3-5-3-2
In this pattern, the two traits judged to be the most characteristic of
the organisation are positioned at one extreme and the two least
characteristic at the other. Classification continues by defining the three
next most and next least characteristic traits. The central point comprises
the five traits not included in any of the four previous classes. (See TABLE
7 as an illustration of the profiles actually obtained).
 An ordinal scale running from 1 (the least characteristic value) to 5
(the most characteristic) was set up to determine the different intensities of
such values – another way of establishing the system of values.

One of the aims pursued with this methodology was to discover

significant differences in the cultural profiles of more and less successful
companies with respect to the said 15 traits. A more aggregated analysis
sought to detect such differences between types. A total of eight such types
were defined in terms of three basic variables: cultural strength, degree of
success and degree of flexibility/proactivity (TABLE 1. NOTE: the letters
in the different cells designate the companies in the sample, whose
anonymity has been respected):
 TABLE 1

Company typology

STRONG CULTURE WEAK CULTURE

MORE LESS MORE LESS

FLEX/PROACT FLEX/PROACT FLEX/PROACT FLEX/PROACT

MORE 1 2 3 4
SUCCESS
a,b,c,d,e,f,g h,i,j k,l,ll m,n,ñ

LESS SUCCESS 5 6 7 8

o,p q r,s,t,u v,x,y,z,A,B,C

Effectiveness or performance would, then, be measured as the degree

of attainment of the 15 traits referred above by the eight types of companies
as defined by their respective profiles.
Such profiles are considered to be equivalent to the organisation’s
results or overall effectiveness (organisational performance), which
includes the degree of success. The intention, therefore, was to broaden the
scope of this study beyond that of previous findings on such effectiveness
or results, which are considered from the overall perspective of the culture
itself as a result, as reflected in the profiles. This transcends the boundaries
of other approaches, based essentially on financial performance.
The above enabled us to address hypotheses, some prior to the
survey and others serendipitously extracted, relating to prior theories or
typologies: for instance, the classical theory of mechanical/closed and
organic/open systems (Burns, T. and Stalker, G.M. 1961; Buckley, W.
1967), the best-known of those on action-related orientations (environment,
profit, growth organisation, human resource orientation, etc.), the chart of
“excellent” company characteristics (Peters, T. and Waterman, R.H. 1984):
action orientation, a certain degree of de-bureaucratisation, customer
orientation, obsession with culture, organic management, specialisation in
core business, etc.
 The present research is not unlike prior well-known studies cited
above in its concerns and conclusions. However, it attempts to introduce a
more complex approach by breaking down the concepts culture and
organisational performance. The profiles technique was used to study both,
in order to suitably identify them within a system of values (goals). The
hypotheses themselves are posed based on that approach:

1. The performance profile found for successful

organisations is closer to “excellence” than the
others, and closer as well to organic
management.
2 The performance profile found for the extreme
types – defined, respectively, as those with
maximum or minimum degrees of strong culture,
success and flexibility – contrast significantly, in
close analogy to the above hypothesis
3 An environment orientation is crucial to the
relationship between cultural strength and
results. Such an orientation is based essentially
on “customer dedication” and the
organisation’s flexibility/proactivity.

RESULTS

The correlation between cultural strength and success – the mean of

the correlation coefficients found for all the companies in the sample – is
only moderately positive (r: .254; p<.005), an indication that there are
successful companies with weak cultures and unsuccessful firms with
strong cultures.
The companies surveyed were classed into the 8 types mentioned
above (TABLE 1) to refine the culture/success relationship, and
dichotomised around the mean values for the three variables, degree of
success, cultural strength and flexibility/proactivity. The letters in the cells
stand for the companies in the sample. The more successful organisations
(the ones in the upper row of the table) show a different mean performance
profile – i.e., the scores in the 15 traits considered – than the less successful
companies (TABLE 2). Indeed, the former proved to be more
environment-oriented (adaptability/flexibility, innovation/proactivity,
solvency, business ethics), more oriented towards human resources
development (staff training, fulfilment, participation and remuneration,
effective leadership), more customer-oriented (value for money or
quality/price, but less customer dedication: this latter circumstance would
be compensated by the more successful firms’ higher scores in factor 1,
“environment-orientation”, in which the trait carrying the greatest weight is
“customer dedication”. See below for the description of the factor analysis
conducted), but less organisation-oriented (importance of rules and
hierarchy, i.e., a tendency to be more bureaucratic) and less profit-oriented
(in terms of pursuit of profit).
 TABLE 2
Comparison of successful-unsuccessful companies

5
4
3 SUCCESSFUL
2 UNSUCCESSFUL
1
0
nt y

tive m tion

Im ort gem n
Hu exp ctivity
it o rice
tio nc

Im ana ratio
Qu cust

rsu Pr fits

Pa ces

Inn ility thics

sp ty
n R sion

nc of r t

o
n
vo lve

fh s
fec Re ipa
rsu y/P

ve xibili

Pr
po anc e
e o ule
ro

Ad usin ra...
r

m une
it o odu
De So

ou
o

ma an

rtic

tab s e
fp

irit/
Pu alit

ov /Fle
es

B ie
ap es
sta e
f

ati
p
Pu

Ef

Cultural traits

We ensured the internal consistency of the replies under the different

items, for which an acceptable reliability coefficient was obtained:
Cronbach’s alpha =.78 to .85. Moreover, the difference between curves –
while small in terms of absolute quantities and spacing on the graph due to
the short scale used, with values ranging from 0 to 5 only – was statistically
significant for all traits: the values obtained in T significance testing were T
< .001. The differences between type profiles likewise proved to be
statistically significant, in particular between the two extreme types 1 and
(8), which correspond to the most densely populated cells, compared in the
table below:

TABLE 3

Types 1 and (8). Comparison of main traits

Solv Cust Qual/ Prof Prod Exp HR Lead Rules Hier Ethic Flex Pro
Price
4.23 3.12 3.45 3.56 3.05 3.63 2.34 3.15 3.22 3.34 3.05 2.83 2.97
(3.86) (2.89) (3.18) (3.62) (2.83) (3.61) (2.29) (2.77) (3.32) (3.44) (3.02) (2.57) (2.85)

As expected, the contrast is greater here, since the comparison is

between extreme situations: on the one hand, corresponding to Type 1,
characterised by greater success as well as a strong culture and flexibility,
and on the other, the opposite situation or Type 8 (TABLE 1). Hence,
compared to Type 8 organisations – their “opposites”, so to speak – the
Type I firms are more customer-oriented (solvency, customer dedication,
value for money or quality/price), human resources-oriented (human
resources development, leadership), environment-oriented/adjusted
(flexibility, adaptability, proactivity, innovation, business ethics), and
productivity-oriented. However, they are less organisation–oriented
(importance of rules, hierarchy) and less profit-oriented. The “effective
leadership” trait was included under the heading human resource s
development for several obvious reasons, one of which is the correlation
between the two traits (Pearson’s r: .353). The “business ethics” variable,
in turn, was included under the environment orientation grouping in view
of the institutional thrust of the concept. Thus, ethics may be regarded to be
the organisation’s “should be” or the greater or lesser degree of harmony
between its goals and its institutionally mandated mission or environmental
demands, including moral imperatives such as good governance –
incumbent upon the board of directors, for instance -, the avoidance of
consumer fraud, etc.
The fact that the less successful organisations concur with Type 8
companies in their greater emphasis on the pursuit of profits is worthy of
note. Since they also place less emphasis on human resources development,
it is reasonable to relate the two from the standpoint of human capital
theory. It may be sustained, then, that Type 1 fits the organic management
system or so-called excellent company pattern more closely and,
analogously, is more in line with product than function or procedure
orientation company models. Similar differences have been detected in
value attainment in more and less dynamic industries and, within a given
industry, companies adapted to the environment have also been reported to
be the most profitable (Gordon, G.G. and DiTomaso, N. 1992, 786).
Consequently, the contrast of results between the more and the less
successful companies is similar to that of the two extreme types, 1 and 8.
Such results are set out on a continuum that runs from successful,
flexible companies with a strong culture, to less successful, scantly
flexible companies with a weak culture. The contrast found is much the
same as between organic and mechanical systems, in which the former
tend to fit the conventional definition of “excellent company”.
These conclusions corroborate the first two of the hypotheses discussed
above.
Finally, the correlation matrix was used as a basis for varimax
rotation factor analysis, from which 5 factors, accounting for 72.796 per
cent of the variance, were extracted:
Factor 1 ADJUSTMENT TO THE ENVIRONMENT
.741 Dedication to customers
.736 Innovation/proactivity
.703 Pursuit of expansion
.601 Adaptability/flexibility
Factor 2 ETHICS and ECONOMIC EFFECTIVENESS
.759 Business ethics
.730 Pursuit of profit
.604 Solvency
.548 Productivity
Factor 3 EFFICIENCY and HUMAN CAPITAL
.853 Quality/price (value for money)
.796 HR development
.617 Leadership
Factor 4 ORGANISATION ORIENTATION
.542 Leadership
.855 Importance of rules
.781 Importance of hierarchy
Factor 5 STAFF ORIENTATION
.861 Staff remuneration
.736 Staff participation

Adjustment to the environment, at 21 per cent, is the factor that

contributes most to the variance. At the same time, this and the other four
factors are the ones that stand out in the comparison between Type 1 and
Type 8 organisations in the manner commented above (TABLE 3), as
shown in TABLE 4:

TABLE 4

TYPE 1 factor_1 factor_2 factor_3 factor 4 factor 5

Mean 1.7823110E-02 2.227604E-02 5.3230764E-03 -4.939494E-02 5.823655E-02
1 N 23 23 23 23 23
Std dev. 1.0185696 1.0163680 1.0221270 .9920868 .9799790

TYPE 8 factor_1 factor_2 factor_3 factor 4 factor 5

Mean -.2521879 -.1267157 -.3537893 -.1407225 .4794276
8 N 8 8 8 8 8
Std dev. .8292534 .8958666 1.1024917 .7844553 1.3974185

Similarly, the most successful companies score substantially higher

in this factor than the least successful companies (TABLE 5). This
conclusion is not unexpected for one of the characteristics attributed to
excellent companies, namely adaptability, a synonym for what Peters, T.
and Waterman, R. call “action orientation” plus “risk assumption and
innovation” (Gordon, G.G. and DiTomaso, N. 1992,789).
 TABLE 5

WEIGHT OF FACTORS IN SUCCESSFUL AND UNSUCCESSFUL COMPANIES

1,2

0,8

0,6
FACTOR VALUES

factor 1
factor 2
0,4 factor 3
factor 4
factor 5

0,2

0
No éxito Éxito

-0,2

-0,4
Successful/Unsuccessful

Attention should, then, be drawn to the fact that environment

orientation accounts for a large fraction of the variance in the cultural
trait correlation matrix and that the differences in that respect between
the two extreme types of companies, and between successful and
unsuccessful companies, are significant. This circumstance would
corroborate the third of the hypotheses, pursuant to the management
demands of systems increasingly open to the environment, including
greater competition. Indeed, open systems are systems in which the
exchange with the environment is a factor essential to system viability
(Buckley, W. 1967, 83).
Nonetheless, the verification of the working hypotheses discussed
above is subject to certain limitations, due to the existence of conspicuous
exceptions. These may involve the organisations mapped in intermediate
positions between the two extreme types, 1 and 8. Hence, in intermediate
positions the scope of the conclusions, conceived for ideal types or
configurations in which what is deliberately sought is the prominence of
certain traits, would be limited. Moreover, the differences in the profile for
the extreme types are not particularly striking in terms of the intensity
observed for each value compared; even the profiles for different
companies differ only moderately, as far as the indicators success and
cultural strength are concerned (TABLE 6).

TABLE 6

Success and cultural strength. Statistical descriptors

Statistical descriptors

N Minimum Maximum Mean Std dev. Variance

Success mean 24 4.84 6.83 5.9486 .5344 .286

Culture mean 24 5.38 7.72 6.5710 .5660 .320

The differences in the priority of certain values over others are even
less notable: hence, “human resource development” is relegated to the
bottom of the list, as the least characteristic trait, in both extreme types, 1
and 8; it is in any event true that we included “staff remuneration” and
“staff participation” in that value as well. Similar findings are recorded for
flexibility/adaptability, innovation/proactivity, importance of hierarchy,
productivity and dedication to customers.
 TABLE 7

TYPE 1 PROFILES ------------ X

TYPE 8 PROFILES --------- 0

2 3 3 3 2

I --------------------------------------- I

MOST CHAR ........................... LEAST CHAR

SOLVENCY 0X

DEDIC CUST 0X

QUALITY/PRICE X 0

PURS. PROF 0 X

PRODUCTIVITY X0

PURS. EXPANSION X 0

HUM RESOURCES X0

LEADERSHIP X 0

RULES 0 X

HIERARCHY X0

ETHICS 0 X

FLEXIBIL/ADAPT X0

PROACTIVITY X0
 Therefore, from the standpoint of corporate culture there are no
prominent differences between the two types of organisations considered,
although such differences may be found between specific companies.
Indeed, the oddity and by the same token, peculiarity – in the sense of
being scarcely imitable – of a culture usually carries some competitive
advantage. According to this assertion, generally accepted in the literature
(Barney, J.B. 1991), a culture must be not only “good” but distinctive in a
given industry. This conclusion is also reached by Ogbonna, E. and Harris,
L.C. (2002, 812) in their research, who sustain that cultural similarities in
many industries may reduce the competitive impact of an organisation’s
culture and that very few companies are likely to make strategic use of this
circumstance. The modest difference between profiles 1 and 8 should, then,
be viewed in the light of this circumstance, while acknowledging that
culture has a scant impact on the success of the organisations studied.
Furthermore, account must be taken of two notable exceptions,
observed in the cases of Types 4 (successful yet scantly flexible companies
with weak cultures: i.e., the companies designated by the letters m, n, ñ in
TABLE 1) and 5 (less successful yet highly flexible companies with strong
cultures: i.e., the companies designated as o and p in TABLE 1). The
explanation for this “paradox” may be found in contingency theory itself;
in other words, under certain circumstances (which would have to be
researched), less flexibility and/or a weaker culture might be more suitable.
Too much flexibility may translate into ineffective leadership or other
scenarios detrimental to success - such as in companies where the works
committee has an inordinate say in the way business is conducted - whilst
an unduly strong culture may degenerate into slavish loyalty to the mission
established by the founders. Case studies are unquestionably in order here,
along with reference to organisational history, market and competition
behaviour and, in general, an in-depth review along the lines of the Weber
thesis on “understanding” to attempt to deduce the most convincing
explanation.
There is no call to unconditionally sustain – this is the essence of
organisational contingency theory – that there is a positive relationship
between strong culture and success, that one type is definitively more
“excellent” than another, or that a specific management style is
unquestionably good: Perrow, C. (1990, 107), for instance, notes that we
are inclined to say that an organisation has done well because it has an
exceptional leader, but that what we actually mean by that is that good
decisions have been made respecting products or services, quality control,
new technologies or other areas, and not that leaders have necessarily
demanded even one more ounce of co-operation or motivation from staff.
 Finally, we would note that explanatory variables such as market
behaviour or organisation size were not introduced in our research because
it was not our intention to study the possible impact of such variables on
the profiles or overall performance. Nor has such an aim been pursued in
previous surveys in the literature on the subject which, has, on the contrary,
preferably addressed the three fundamental variables: success, culture and
flexibility.

CONCLUSIONS

Whilst our conclusions do not differ substantially from those

obtained by other authors, a more complex approach, with fuller attention
to the organisation as a whole, enabled us to redefine the relationship
between culture and performance more exhaustively. Thus, organisational
results or performance were defined in terms of differential attainment of a
total of 15 basic traits comprising a profile that corresponds to the
corporate culture in place. This approach addresses organisational
complexity: what is seen as effective by shareholders, for instance, may be
viewed negatively by staff. Moreover, success was measured subjectively
in inter-company reputational replies and an effort was made to avoid
undue emphasis on strictly financial or economic parameters. The
intention, then, was to obtain insight on both corporate culture and
organisational performance in terms of corporate image, both as perceived
by the organisation itself and by the rest of the industry.
The methodology used was essentially quantitative, although it also
entailed the ideal type approach. For this reason, we focused on a
comparison of opposites, namely Type 1 versus Type 8 on the one hand
and the most successful compared to the least successful companies, taken
as a whole, on the other. This is a strategy geared to highlighting
differences found in extreme situations. Exaggeration, which
unquestionably involves the dichotomisation around the presence/absence
of certain basic conditioning factors – cultural strength, success and
flexibility – constitutes a useful procedure even for “understanding”. In any
event, there is clearly a need to complete the study with qualitative tools.
This constitutes a new stage in the research, which is indispensable for two
fundamental reasons:
- to understand (“verstehen”) the deviations: for instance, the
paradoxes observed in Types 4 (successful yet scantly flexible
companies with a weak culture) and 5 (less successful yet highly
 flexible companies with a strong culture). All of this, naturally, also
calls for a study of the context, essentially the context surrounding
life and health insurance - even though, in this case, due
consideration was given from the outset to the data referring to the
economic behaviour of the industry as a whole and each of the
companies studied. Much the same procedure has been used in other
research, both classical – by Kotter, J.P. and Heskett, J.L. (1992) or
Denison, D.R. (1990), for instance – and more recent – Ogbonna, E.
and Harris, L.L. (2001). The latter authors focused in particular on
the cultural systems of the two organisations compared, and then
included references to the environment, namely the life and health
insurance industry, to render the results more meaningful. The above
contextual approach, then, constitutes a new stage in the research,
which will also consist of participant observation and in-depth
interviews.
- “to understand” to better explain what are regarded to be “normal”
cases. This calls for deeper study of the meaning of corporate culture
or image as subjectively construed in the first stage, which would
lead us to an investigation into the deepest roots of corporate culture
in the Spanish economy: in other words, its basic presumptions
(Schein, E.H.) or general values (Hofstede, G. Schwartz, S) (Ros, M.
2002).

Like previous researchers, we can conclude that a strong culture has

a positive impact on organisational performance (results), particularly if the
organisation adapts to the environment and interacts proactively with it.
Account should be taken, however, of the laxity of that relationship, in
which the perspective of organisational contingency theory would help
explain the deviations detected. Finally, that very laxity necessitates
acknowledging that A may have excelled despite a weak corporate culture
and scant flexibility, or B may have performed poorly in spite of its strong
corporate culture or dynamism and flexibility. The explanation for this
paradox would have to be sought in other factors, such as differential
relationships with institutional powers, more or less suitable decision-
making, market behaviour, and so on. All of this, of course, should detract
from the enthusiasm for corporate culture as the basis for explaining
organisational performance.
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 ABSTRACT

Prevailing research claims that strong corporate cultures improve

firm performance. This paper addresses an unexamined implication of
this argument by analysing the effect of different types of corporate
cultures on firm performance defined as the attainment of a complex
system of values (goals). The approach goes beyond a concept of firm
performance merely as economic success, which may entail negative
consequences for some constituencies. I hypothesise the use of different
organisational types defined as a combination of economic success,
strength of corporate culture, flexibility and adaptability to the
environment to obtain different effectiveness profiles. The results of the
analysis of a sample of firms in the life and health insurance sector
confirm this hypothesis, particularly as regards extreme types, whose
performance profiles, measured as the attainment of a system of fifteen
values also show extreme positions. Finally, organisational effectiveness
and corporate culture are viewed mainly as the image perceived by the
organisation itself on the one hand, and the rest of the industry on the
other.