Relationship between employee productivity and organizational culture

This paper examines the relationship between employee productivity and organizational culture. Looking to understand what makes an employee productive, we must first recognize what is meant by the term ‘productive’. This term can have many definitions depending on who it concerns. For a teacher, productivity may signify not simply teaching, but inspiring. For an elderly grandmother, productivity may refer to the quality of life that she has led. However, for organizations, this word is almost universally associated with their profit and performance. In economic terms, productivity can be shown by looking at the “amount of output achieved from available resources” (Daft, 2001:55).

Organizations striving to increase productivity in the past have tried to do so in different ways; using Taylors ‘Bureaucratic control’ approach, or Mayo’s ‘Humanistic Control’ approach, but the most popular today seems to be a ‘Culture (symbolic) control’ approach, as the previous have become somewhat outdated and inapplicable in certain sectors (Ray, 1986). As it is believed that “a well-developed and business specific culture … can underpin stronger organizational commitment, higher morale, more efficient performance and generally higher productivity” (Furnham & Gunter, 1993:232), we must define culture.

Culture can be understood to be what makes certain group of people who they are, act the way they do, through a set of core principles, beliefs and codes of practice (Fincham & Rhodes, 1999). A firms culture is described from within with terms such as: “The way we do things around here”, “The rites and rituals of our company” or “Our basic values” (Schein, 1992:12). Schein (1997) adds that aspects of a culture cannot always be seen, and are unconscious. He defines culture at three different levels: artifacts (uniforms, interior design), espoused values (mission statement, written or spoken beliefs) & basic assumptions (hidden, unconscious norms & beliefs).

All three levels assist in creating a “social glue”, which will “hold the organization together by providing appropriate standards for what employees should say or do” (Robbins, 1996:687). It could be said that these standards are correlated to the increase (decrease) of overall performance of the organization, if they affect each employee’s productivity positively (negatively). Peters & Waterman (1982), perhaps the most popular text concerning culture between businessmen, identifies one of eight cultural characteristics that lead to ‘excellence’ as, ‘productivity through people’. According to the text, this is achieved by cultures which encourages employees to give their best efforts, and are rewarded accordingly.

Ouchi (1981) attributes the success of Japanese companies not to technology, but rather ‘a distinct corporate culture’, along with ‘long-range staff development’, and ‘consensus decision-making’. ‘Theory Z’ is a distinct management style which is perhaps humanistic in comparison to others, as it creates a culture of commitment by caring about employees, both with their work and home life (Cunliffe, 2008). This could lead to a lower turnover, higher employee commitment, and reflected by considerably higher productivity (Ouchi, 1981). High employee commitment could be demonstrated by an average absentee rate of less than 2 percent in the Japanese industry, as well as their productivity increases, which were “two to three times over the US rate of the past three decades” (Ouchi & Price, 1978:66).

Deal & Kennedy (1982) place emphasis on the employees’ commitment to organizational goals, as the recipe to a ‘strong culture’, as it leads to employee satisfaction, and in turn, higher productivity. Such a culture is built on shared values which are supported by a strong cultural network, and heightened by ‘rites and rituals’, such as ceremonies, alongside the corporate ‘heroes’, which serve as role models for success. Deal & Kennedy (1982) and Ouchi (1981) suggest that certain cultures will enable organizations to give a superior performance, which could not be achieved without them. Therefore, such cultures “have shown a positive economic impact on firms” (Barney, 1986:659).

Furthermore, Deal & Kennedy (1982) see the ‘external environment’ as a factor which dictates the type of culture that will be implemented. This could refer to the nature of the business that the culture is being implemented into. Denison (1990) focuses on different types of cultures that are present in organizations, with regard to their specific characteristics and needs, in achieving the highest productivity possible. Four different culture types are identified; ‘Bureaucratic’ culture, ‘Clan’ culture, ‘Mission’ culture and ‘Adaptability’ culture. According to the nature of the business, a culture ‘type’ is chosen. For instance, ‘Clan’ cultures are implemented in businesses where team work is important with regard to performance, such as in software developing.

On the other hand, recently, claims of the existence a ‘strong’ culture, and its presence in successful organizations as the reason for their performance, have come into question. Thompson & McHugh (2002) point out that that in research looking to support the culture-performance link, research methods can be flawed. For example, when examining organizations ‘superior’ performance, financial success is attributed to strong culture, using evidence such as manager interviews (stories of strong leadership, inspiring commitment from employees), while variables such as the economic climate at the time are ignored (Huczynski & Buchanan, 2007). It seems unsuitable that evidence which could be seen as bias should be considered with such strong weight in determining the culture-performance relationship.

However, apart from somewhat inadequate research methodologies, there are other problems in measuring how ‘strong’ a culture may be. Using Faux’s (1982) study of an automobile plant, showing “the highly complex interrelationships among the plants subcultures,” Saffold (1988:547), demonstrates that it is unreasonable to measure the culture of an organization, under the assumption that a ‘single’ culture exists. Subcultures of different employee groups, such as management, labour or even ‘teams’ within labour can be dissimilar, but appear unitary. Siehl (1984) highlights that this may be due to similar cultural traits visible to the eye, which create the impression of a unitary culture, while in fact a range of subcultures are present. Also, the researcher, as an ‘outsider’ to realize differences between some subcultures, may be impossible.

Apart from the ambiguity of the meaning of a ‘strong culture’, there are problems with research which relies deeply on “broad-brush cultural profiles that are typical of high-performing organizations” (Saffold, 1988:548). Furthermore, Miller and Mintzberg (1983) suggest that there are some cultural characteristics that are present in both high-performing organizations and in low-performing organizations. Likewise, other literature suggests that cultures can be nation-specific (Fombrun, 1984), industry-specific (Barley, 1983) or even organization specific (Smircich & Morgan, 1982). Therefore, it is clear that the use of a common ‘profile’ of characteristics to identify how ‘strong’ a culture is, or to identify which cultures lead to higher performance in organizations, can be fairly inaccurate and misleading.

Finally there are other issues which should be taken into consideration, as the link between culture and performance is sometimes oversimplified. Firstly, cultural values may alter organizational behavior due to the creation of cultural control, in a way which “enhance[s] performance by ensuring that organizational priorities are uniformly established” (Saffold, 1988:549). However, if cultural control becomes too great, resistance may form, and is likely decrease performance. Furthermore, some traits seen in strong culture organizations can be negative and positive. For example, ‘shared meanings’ may be affect performance positively by steering the work of the employees, and its value in a single direction (Saffold, 1988). Or they may be ‘shared delusions’ (Kets de Vries, 1980), and limit the organizations capacity to adapt to new situations, potentially decreasing performance.

Assuming that organizations with strong cultures also have high or higher performance in comparison to organizations which do not have strong cultures, it is important to see the significance of strong cultures which allow for adaptability. This is especially important now, with the financial crisis which may require that some organizations restructure to survive, with innovation in technology taking place almost continually, and globalization changing even some of the most simple production processes. Akin & Hopelain (1986:21) report that employees of organizations which are distinctly productive describe themselves as “the right kind of person for the job”, but as times change, job requirements may also change, and the ‘person’ will have to adapt to these requirements.

The way in which employees will adapt and accept change individually may be understood by looking at their personal characteristics, such as their openness to change or their self efficiency beliefs (Jones et al., 2005). Looking at a national insurance company, Miller et all (1994) suggests that a change such as introducing a new method of working, team-based working, can be made more successful by supplying employees with information about the changes to be made. This notion was supported by sample of 168 employees who showed readiness for change. However, perhaps even more important than personal characteristics of employees, is the kind of culture which is present in the organization, because it may, in turn, shape and influence the employee’s characteristics, and their willingness to accept and embrace change in the workplace.

It is reasonable to assume that organizational cultures which have flexible structures, and a provide a supportive environment for their employees are more likely to adapt to change successfully, than those which are rather inflexible in structure, and exercise great control over their employees (Zammuto & O’Connor, 1992). Jones et al. (2005) suggests that the employees of organizations where the culture allows for employee participation in terms of decision making, open communication and includes ongoing training and development, are better equipped for change than employees of organizations with differing values. It should be noted that there may be cultural values which are significant to specific industries. For example, the importance of adaptability to change and readiness for innovation may apply strongly to the industry of technology, in achieving high or higher performance, but less on other industries.

Smith (2003) examines that as change enfolds, it is possible that organizational culture will also be attempted, in ways in which encourage transition (new computer information’s system, or a merger) to be successful. However, data shows only 19 percent of companies undergoing culture change programs to be in the top quartile organizational change attempts which were successful (Smith, 2002). Furthermore, Troy (1994), surveyed 166 Western organizations undergoing organizational change, reporting that only 32 percent were successful in altering the organizations original ‘vision, values and culture.’ Putting aside dubious methodologies used in measuring and diagnosing culture, it may be that the ‘strongest’ cultures, where ‘basic assumptions’ are most deeply rooted, are in fact those which are most difficult to change.

Barney (1986) suggests that if an organizations culture is to serve as a ‘competitive advantage’, it must ensure that it is open to change. Apart from a culture having to achieve ‘internal integration’ between employees to be deemed successful, it must also ensure an element of ‘external adaption’, which ensures that it will change and develop with the outside market climate and environment (Denison et al., 2004). The importance of this ability can be seen in a statement from an IBM Senior Vice president, which stated: “you have to have an organization that senses change and by itself identifies a working team that can go after opportunities” (Hindle, 2006). For organizations such as IBM, the flexibility and the ability to adapt to new situations and opportunities may be some of the most important characteristics of culture that induce high performance.

Looking to see if a new corporate culture can truly induce employees to believe in shared organizational values, which are said to boost commitment to their work and firm, Thomas & Findlay (1999) examined evidence over a ten year period. Far from ‘governing the souls’ of their employees, evidence suggests that organizations were faced with negative outcomes, such as cynicism and deep acting, rather than positive, shared values (Huczynski & Buchanan, 2007). It may be that the introduction of a new culture may influence the performance of the organization negatively, as the effect on employees seems to be counter-productive. For example, if the introduction of a new culture also involves tighter control over employees, such as setting up surveillance to observe how work is being done, this may decrease levels of ‘shirking’, and increase productivity.

Also, there are cultural values that are brought into the workplace that may be independent of the organizations values, which may increase or decrease the outcome of the values present in the workplace. Values and attitudes towards work may be gained from an employee’s national or societal culture. Laurent (1989) believes that the values gained from national cultures are more powerful than those implemented though organizational culture. Social stereotypes dictate that Americans are brash, the French romantic and the Japanese inscrutable (Huczynski & Buchanan, 2007). Although not always true, there is a case for national culture in the workplace. For example, success of Japanese companies seems to partially rely on cultural norms. Surveys show alcoholism in Japan is only a quarter of the US rate, and that 85 percent of the Japanese workforce would give up their seat to their superiors on the bus (Ouchi & Price, 1978). Perhaps a reason for lower absentee rates in Japan, and an explanation to why hierarchy in organizations is not as important is in the West.

There are no clear cut guidelines to installing an ‘ideal’ culture into any firm, in attempt maximize employee productivity and overall performance. Taking into consideration the above, it may be reasonable to observe nature of the industry in which the organization operates, in order to see what exactly needs to be achieved by it. After observing the traits needed to be successful in an industry, these could be molded with the relevant social values, and exploiting relevant norms, to create a culture. An organizational culture which reflects on a national culture is not likely to cause resistance, as it is already deeply rooted in employees. The former may reduce individual resistance to the culture, but not necessarily. It could be said that this is especially true with the rise of multinational companies, which cannot rely on realized societal norms of any one national culture. Finally, the successful implementation of this ‘ideal’ culture may not be possible in organization where a cultural change is required, depending on the type of culture which was present previously, and the organizational traits which were developed by it.

In conclusion, we can see that there is a relationship between organizational culture and employee productivity in terms of overall performance. However, any measurement of this relationship, without taking into consideration both internal and external factors, cannot be seen as accurate. Furthermore, even if we assume that a ‘strong’ culture is the key ingredient to an increase in performance, it is precisely this ‘strong’ culture that may stagnate and make change difficult for organizations, which may decrease performance. Adaptability to change is not a ‘trait’ of all cultures, but does appear some organizations. Cultures brought into organizations, both individual and national, can either increase or decrease the strength of an organizational culture, and in turn, its performance. Although the methodologies used to demonstrate the strength of this relationship are less then accurate, evidence clearly points that it is existent.