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1、Corporate Culture and the Bottom LineERIC FLAMHOLTZ, University of California at Los AngelesThe paper deals with the effects of corporate culture on financial performance. Previous authors have suggested that culture has an impact on financial performance. Unlike previous studies which have only exa
2、mined the effects of culture on financial performance using cross sectional data, this study was done in a single organization. The company had twenty relatively comparable divisions, and provides a somewhat rare, if not unique, opportunity to assess the effects of corporate culture on financial per
3、formance. The results, using a regression analysis, suggest that there is a statistically significant relationship (at 0.05 level) between culture and financial performance (measured by EBIT, or earnings bienfteoreest and taxes). Thus these results provide support for the previously hypothesized rel
4、ationship between culture and financial performance with significant implications for management theory and practice 2001 Published by Elsevier Science Ltd. All rights reserved.Keywords: Corporate culture, Organizational performance, Financial performanceDuring the past decade it has become recogniz
5、ed that corporate culture has a significant impact on overall organizational performance (Siehl and Martin, 1990; Kotter and Heskett, 1992).Explicitly or implicitly, it has been presumed that corporate culture affects the overall financial performance of a firm.In spite of this presumption, there ha
6、s been very little empirical research dealing with the financial effects of corporate culture. In one notable exception, Kotter and Heskett (1992) conducted macro-level research on different companies, and compared samples of (a prior)istrong culture companies with weak culture companies (1992, p. 1
7、9) from 22 different industries.However, neither they nor others have done much research on the effects of culture on financial performance of a single firm. In part, this might be due to the difficulties of gaining a suitable research site. Nevertheless, there is a gap in our understanding of this
8、phenomenon. Accordingly, the purpose of this article is to report the results of a field study of the impact of corporate culture on the bottom line, or financial performance, of a firm. It presents the results of a relatively singular opportunity to investigate the relationship between corporate cu
9、lture and financial performance in a single firm. The Nature of CultureThe concept of corporate culture has become embedded in management vocabulary and thought. Although there are many different definitions of the concept, the central notion is that culture relates to core organizational values. In
10、 turn, values are things which are important to organizations and underpin decisions and behavior. All organizations have cultures or sets of values which influence the way people behave in a variety of areas, such as treatment of customers, standards of performance, innovation, etc. An increasing n
11、umber of successful organizations have, at least in part, attributed their success to effective culture management. For example, Starbucks Coffee Company, which has grown from just two retail stores in Seattle (USA) to more than 2500 stores world-wide during the past decade, views culture as a criti
12、cal factor in the organizations success (Schultz and Yang, 1997; Flamholtz and Randle, 1998). Specifically, the companys paradigm is that: the way we treat our people affects they way our people treat our customers, and, in turn, our success, which includes financial performance. This belief has led
13、 the company to a number of human resource practices that are designed to enhance peoples feeling of being valued by the company. These include the widespread use of stock options and the practice of providing full benefits to all employees who work more than 20 hours per week. There are many areas
14、in which corporate culture influences behavior and decision-making. However, there appear to be four key areas in which all organizations must manage their culture or values: (1) the treatment of customers, (2) the treatment of an organizations own people or human capital, (3) standards of organizat
15、ional performance, and (4) notions of accountability. These are the key areas of cultural concern for all organizations. Naturally, there are also many other areas of organizational performance that are of concern, but these tend to be more idiosyncratic to specific firms. Such additional areas can
16、include beliefs with respect to innovation, corporate citizenship, openness to change, as well as others.Culture and Organizational PerformanceThe basic paradigm underlying the notion that culture affects performance is based upon a few key ideas. The first is that culture affects goal attainment. More specifically, com panies with strong cultures are more likely to achieve their goals than those with relatively weak cultures. So-called strong-culture o
