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Would You Build a Strong Culture?

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Submitted By kwlee121
Words 1269
Pages 6
Kyung Wook (Kyle) Lee
Elise Carey
MGMT 101.209
October 2nd, 2014
Is a Strong Organizational Culture Beneficial for an Organization?
Nowadays, it is hard to find a firm that doesn’t tout its corporate culture with a dedicated webpage. This trend testifies how corporate leaders, over the years, have come to appreciate the merits of a strong culture. However, a strong culture is not foolproof. Organizations with a strong culture outperform their peers, but only by embracing diversity and constantly reappraising their values can they avoid pitfalls in a rapidly changing corporate landscape. Firms benefit from a strong culture. Definition varies from a study to study, but it is agreed that a strong culture is one in which values are “simple, widely shared, and strongly held” (O’Reilly 1991). In a quantitative analysis by John P. Kotter and James L. Heskett, the correlation between two variables, culture strength and performance, was measured based on surveys from managers and return on investment. After removing market differences, relative performance and culture strength correlated 0.51 across 180 firms, generating a 7.4 t-test (exhibit 1; Kotter and Heskett, 1992). Simply put, 1 point increase in their culture strength scale translated into 3 percent increase in performance. Another empirical study proved a similar outcome. The performance of insurance companies strongly correlated with the strength of cultural values shared (Gordon and DiTomaso, 1992). Some critics note that such analyses ignore other variables by assuming a monotonic relationship; however, the strong correlation calls for an explanation.
Three interrelated benefits of a strong culture account for its influence on organizational outcomes: cooperation, control, and cost. First, a widely shared consensus on key values enhances cooperation (Kreps, 1990; Cremer, 1993). Shared values function as

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