Connecting organization culture and business success

Dick Clark, Merck's (a pharmaceutical company) CEO, when asked about his strategy for restoring the pharmaceutical company to greatness in the face of lawsuits over its painkiller Vioxx, expiration of patents and a weak product pipeline, said his strategy was to put strategy second and focus on changing the company's culture. "The fact is culture eats strategy for lunch," Clark explained. "You can have a good strategy in place, but if you don't have the culture and the enabling systems that allow you to successfully implement that strategy, the culture of the organisation will defeat the strategy."
The implication of his statement is that a 'good' strategy will bring business success (usually equating to solid financial performance). Further there seems to be an assumption that execution of the 'good' strategy is dependent on a 'strong' and/or 'healthy' culture.

Even without delving into notions of 'good strategy' or 'healthy' and 'strong' cultures there are conflicting views the connection between organisation culture and performance (business success) which is not surprising as there is little consistent empirical evidence of a link between the two, but plenty of anecdote and intuition making the connection.

A short academic paper Culture-Performance Research: Challenges and Future Directions* describes the issues and summarizes by saying,

"the proliferation of … propositions related to both culture and performance, has limited researchers' abilities to draw stable conclusions about these relations, most notably in the strategy management literature. While many attempts in the strategy literature find support for the link between culture and firm performance, generalizability, and thus construct validity, is extremely limited.

Specifically, the various measures of performance and culture provide limitations to understanding the culture-performance link (Denison, 1984; Petty et al., 1995). As a result of the inconsistencies in measurement, there is limited agreement as to how culture may impact firm-level performance of an organization."

So thinking there is a connection does not necessarily make the connection but it still seems an attractive proposition to pursue.

*Weinzimmer, L. G., Franczak, J. L. and Michel, E.J. (2008) Culture-Performance Research: Challenges and Future Directions. Journal of Academy of Business and Economics, Volume 8, Number 4, 2008 158

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