Dissertation – The Influence of Organizational Culture on the Performance of Philippine Banks
A summary of my dissertation appears in the Sept. 2010 issue of UPDiliman Research News Magazine
The Influence of Organizational Culture on the Performance of Philippine Banks
Introduction: A number of organizational researchers have established or supported the hypothesis that successful companies tend to possess specific cultural traits. This study determined the nature of the relationship between such cultural traits and organizational performance in the Philippine banking sector. Specifically, this research verified the notion that organizational culture ―especially when it is strong and adaptive― can influence an organization’s financial performance.
The Culture Strength Perspective suggests that strong cultures, defined as a set of norms and values that are widely shared and strongly held throughout the organization, enhance firm performance. This is based chiefly on the idea that organizations benefit from having highly motivated employees dedicated to common goals. In particular, the performance benefits of a strong corporate culture are thought to derive from three consequences of having widely shared and strongly held norms and values: enhanced coordination and control within the firm, improved goal alignment between the firm and its members, and increased employee effort.
The Culture Adaptiveness Perspective suggests that an effective organization must develop norms and beliefs that support its capacity to receive and interpret signals from its environment and translate these into internal cognitive, behavioral, and structural changes. Adaptiveness entails a risk-taking and creative approach to organizational as well as individual life. This pervasive innovation and nimbleness has come to be called intrapreneurship in the innovation literature, and this characteristic has been shown to be correlated to corporate effectiveness and financial success.
Methodology: A questionnaire survey was administered to managers of 60 Philippine banks as the source of data for organizational culture —its strength, its adaptiveness. [The final survey questionnaire is available with the author upon request.] Along with the survey questionnaire, an independent collection of financial performance data on the various banking institutions was made. This has made possible the correlational analysis between the banks’ culture —as revealed by a factor analysis of the responses to the culture survey— and their organizational performance, measured through the institutions’ financial performance data.
Results: The evidence in this study lends support to the above theoretical relationship, as follows: There is a significant and positive correlation between corporate profitability and the banks’ clarity of vision and consensus (clarity and consistency in corporate vision and values, corporate consensus and coordination, and goal alignment).
Managerial Implications: The findings of this study, involving a survey of 60 banks operating in the Philippines, appear to confirm the suggestion that organizational values do interrelate with organizations’ financial performance, lending evidence to the theory that an organization’s ideology and culture is indeed likely to influence managerial action and decision-making, especially that which could lead to greater organizational effectiveness. For an industrial environment as dynamic and rapid as that of banks and financial institutions, this result is important, as it suggests recommendations for organizations in relation to the formation of a corporate culture that is meaningful enough to possibly lead to enhanced net profits. While the findings refer more specifically to banks, a great deal of applicability may be drawn for other industries as well, so that executives and managers may re-think the value and importance of organizational culture.
This article shall be published soon in Social Science Diliman.