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International Journal of Accounting & Business Management

www.ftms.edu.my/journals/index.php/journals/ijabm

Vol. 3 (No.1), April, 2015 ISSN: 2289-4519 DOI: 10.24924/ijabm/2015.04/v3.iss1/128.137

This work is licensed under a Creative Commons Attribution 4.0 International License.

Research Paper

The Influences of Organizational Culture on Performance Management

Alicia Lorraine Dorai Ponnu

School of Accounting and Business Management FTMS College, Malaysia alicia_d19@yahoo.com

Zubair Hassan

School of Accounting and Business Management FTMS College, Malaysia

Zubai7@gmail.com

Abstract

This study investigates the influence of organizational culture on performance management in insurance industry. Based on the work of Goffee, Jones, O’Reilly, Chatman and Caldwell a structured questionnaire was developed and distributed and data are collected from 100 employees at Zurich Insurance Malaysia using convenience sampling techniques. This study used five variables to measure organizational culture: adaptive perspective, communal, network, mercenary and fragmented culture. The results showed that there is an association or relationship between organizational cultures on performance management. The findings also showed that different types of organizational culture have different levels of acceptance of performance management. This means that certain type of organizational culture is acceptable and instills to improve performance. The results show that there is a significant and positives correlation between organizational cultures and performance management. Future studies may consider more insurance based organization to generalize the finding throughout the insurance industry. Also this study can be conducted on other sectors as well with some modification on the variable use to measure organizational culture.

Key Terms: Organization, Organizational Culture, Performance Management

1. Introduction In recent years there is growing interest in examining the impact of organizational culture and performance , in particular employee performance (Racelis, 2010). These researches revealed that the right set of cultural values often create excitements, high morale, and intense commitment to a company and clarify the behaviors of employees (Rashid, Sambasivan & Johari, 2003; Ehtesham, Muhammad & Muhammad, 2011). Many theoretical models were developed throughout the years in exploring organizational culture and how to measure it. Some of the popular theories include O’ Reilly, Chatman & Caldwell (1991), Denison

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(1990) model and Schein (1992). These theories are the most well-known and acceptable theories on organization culture. Similarly many research focus on examining the impact of organizational culture and its impact on performance. Some studies found that there is strong correlation between organizational cultural elements and employee performance (Racelis, 2010; Ehtesham et al, 2011; Rashid et al, 2003). Also, a study done on Malaysian context shows that positive corporate culture has a significant influence on teamwork, communication and rewards (Zain, Ishak & Ghani, 2009). This research suggested that organization needs to be aware and should provide a favorable working environment instilling full commitment for organizational success. However it is also evident that most of the studies done on Malaysian context with relevance to organizational culture endeavor in examining the impact of culture on employee commitment and financial performance (Zahariah, Razanita & Erlane, 2009). This leaves many rooms for new research to be under-taken to examine the influence of organizational culture on performance management. Therefore the following key objectives are formulated for this research

To examine the impact of adaptive perspective culture on performance management To examine the impact of communal culture on performance management

To examine the fragmented culture on performance management To examine the network culture on performance management To examine the mercenary culture on performance management

This paper is organised as follows: first part is discussed above. Second part is the theoretical framework and research hypothesis development. Third part discusses the research design and methodology, data collection procedures and process. Fourth part presents the results and discussion. Final part is conclusion and recommendation, and implication for further research

2. Literature Review 2.1. Definitions of Key Concepts Culture can be defined as a collective programming of mind in which distinguishes the members of one category of people from another (Hofstede, 1984). Culture is a pattern of educated behaviors and results of behavior whose component elements are shared and transmitted by the members of a particular society (Linton, 1945). Culture is easy to understand by a number of ways that is by simply learned and shared behavior of a community of interacting human beings (Useem & Useem, 1963). This suggests that organizational culture is the set of shared mental of the employer and employee statement that channel the understanding and accomplishment in organizations (Ravasi & Schultz, 2006). Also organizational culture is define as beliefs, values, behavioral, norms, attitudes when it comes to the relationship on organizational culture on performance. Organizational culture also is defined as patters of shared values and beliefs over time which produces behavioral norms that are adopted in solving problems (Schein, 1990). Aguinis (2005, p. 2) defined performance management as a “continuous process of identifying, measuring and developing performance in organizations by linking each individual’s performance and objectives to the organization’s overall mission and goals”. Performance management is a process where individual goals are set in alignment of organizational goals, individuals set their goals and expectation from each individuals are clearly communicated and appropriate rewards will be given for their performance.

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2.3. Review of key theories There are many theoretical frameworks. One of the key frameworks is Schein model of organizational culture, which identifies three distinct levels that is firstly are artifacts and behaviors, secondly is espoused values and thirdly is assumption. According to Schein (1990) the three levels refer to the degree to which the different cultural phenomena are visible to the observer. Firstly artifacts and behaviors are the visible elements in a culture and can be recognized by people not part of the culture. That include any tangible, overt or verbally identifiable elements in an organization that is dress code, office jokes, and all exemplify organizational (Schein, 1990). Second is espoused that is organization’s stated values and rules of behavior it look at the member represent the organization both themselves and others. This look the professionalism of the employee is family first or work, this trouble may arise if espoused values by leaders are not in line with the general assumptions of culture. Lastly the assumptions where the shared basic assumptions are deeply entrenched, taken for granted behaviors which usually unconscious. These assumptions are typically integrated in the organization dynamic that it can be hard to recognize from within. Deal & Kennedy (1982)’s framework defined organizational culture as the way things get done around the organization. They argued that shared values affects organizational performance and act as an informal control system that notify people what is anticipated of them. This model focus on how quickly the organization receives feedback, the way members are rewarded and the level of risks taken (Deal & Kennedy 2010). The first type of organizational culture is ‘work-hard, play-hard culture’. This culture examined the rapid feedback or reward and low risk. It concluded that the stress comes from quantity of work rather than uncertainty and or high speed of recreation. Second, ‘Tough-guy macho’ culture observes that stress comes from high risk and potential loss or gain of reward by focusing on the present than the longer term possibilities. Third, process culture observes the sources pf low stress are plodding work, comfort and security as stress comes from internal politics and the system. Finally ‘bet the company culture’ observes the high risk stress which mainly originates from long-term planning. Denison (1990) model comprises four general dimensions (1) mission, strategic direction, goals and objectives of the organization. (2)Adaptability looks at the creating change, customer focus and organizational learning of the organization. (3)In involvement analysis the empowerment, team orientation and capability development of the organization. This adaptability is a cultural characteristic that is positively related to organizational effectiveness and premised on the reality that culture is one of the main means by which organizations are familiarly linked to environments. (4) Lastly consistency analysis the core values and agreement of the organization and employee, this model looks at the externally or internally of the organization culture (O’Reilly et al, 1991). The Double S Cube model is a two by two matrix that identifies four cultures by depending on high and low solidarity and sociability. Solidarity is which people think together in the same ways, allocation tasks and common interests. In the model there are positive and negative outcome. First positive solidarity gets the job done efficiently and effectively and whereas negative solidarity does not care for others and there is high levels of internal conflict or inefficient self interest (Goffee & Jones, 1998). Second sociability is about mutual esteem and concern for ones colleagues is the driving force for this is emotion . Looking at the positive sociability where people help one another to succeed whereas negative sociability covers up for other people and tolerating poor performance for friendship or saving face. When there is a low sociability , there is a greater task focus (Goffee & Jones, 1998). In this model the two dimensions of sociability and solidarity are placed and four cultures: (1) communal culture looks at the focus on face to face communication and highly visible of corporate symbols. (2) The fragmented culture looks at the communications between the people in organization, that by communicate by having little talk or focused on specific topics. When the fragmented organization is low sociability and solidarity this seems to leave it rudderless and ungovernable.

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(3) The networked culture looks at the open physical spaces including social areas, talk more including informal meetings, socializing during work hours and attention to communicating. When the networked organization that has high sociability is by having regular conversations and going lunch with colleagues and having social gatherings outside workplace and low solidarity is the opposite of high sociability. (4) The mercenary culture looks at not particularly friendly but people do need each other to get the work done. When the mercenary organization with high solidarity it focused confrontational and have low sociability. 2.4 Conceptual Framework

Figure 1 – Conceptual Framework of organisational culture and performance management

3. Research Design and Methodology This research adopted both descriptive and explanatory research design. Data are collected using cross-sectional approach. This research study used quantitative method for data collection. Because this method allows testing theories and hypotheses, collect large number of data, which is more appropriate to answer the question, similarly this method is more objective and reliable yet not influenced by the personal opinion of the researcher in representing the phenomena. Also this method enabled to explain and test theory unlike qualitative method where the researcher is not aware of the important variables to examine and the data collection is sensitive and flexible to the social context. Primary Research is adopted as there is no formal and reliable data currently available on this research topic in the research context. Also primary research provides satisfactory results and is appropriate for intensive investigations, similarly the target issues are addressed; the interpretation of data is more effective, addresses the specific research issues, the data collected is decent and the researcher has greater control .

A likert-scale questionnaire was used to collect the data from respondents. This approach helps to collect information and to have various cultures or attitude to answer the questionnaire. This helps to have different response patterns when responding to questionnaires. Structure of the questionnaire is designed in three section that is Section A (Demography), Section B (Organizational Cultural) and Section C (Performance).

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The study is a cross – sectional research and therefore primary sample was used. This is a form of quantitative sampling, which is normally used, in descriptive research (Hayes, 2013) where the researcher collects sample from a random group of people. A total of 120 questionnaires were distributed and a total of 108 questionnaires were returned. However, among these returned questionnaires some of the questionnaires were excluded because it was incomplete which means 100 completed questionnaires were used (sample size is 100). The respondents were employees currently working in the Zurich Insurance Company. The sampling techniques used to select employee for this survey is convenient sampling method. It is difficult to use simple probability sampling as most of the staff are not based in the office, but in different locations. Therefore once the company grant the permission, researcher approaches any employees who are available in the office. Once the procedure is explained and when respondent gave the consent, then the questionnaire was given and requested to complete it as truthfully as they can. The completed questionnaires were collected immediately after the respondent completed the questionnaire.

3. 6. Ethical Considerations Before the questionnaire was being distributed to respondents are well-informed by the researcher. Attached with the questionnaire is the participant consent form where each participant was asked to sign as they are agreed to take part in this research voluntarily. The collected data are kept confidential that do not contained any specific information except some demographic questions such as name, age group and so on. Each company has given a permission letter allowing this research to be conducted at their companies.

4. Results and Discussion 4.1. Demographic Analysis The study engaged 100 employees from one insurance company in Malaysia. Majority of the respondents were male 57%, female 43%. Most of the employees are aged between 21-30 years constituted 57% followed by aged group 31-40 years with 31%. 54% of the respondents are married. 51% of staff have only diploma. The detailed table 1 illustrated the information about respondents.

Table 1: Socio-demographic Profile of the Participants

Variable

Frequency Percent Valid Percent

Cumulative Percent

Age Group 21-30 57 57.0 57.0 57.0

31-40 31 31.0 31.0 88.0

41-50 10 10.0 10.0 98.0

51+years 2 2.0 2.0 100.0 Gender

Female 43 43.0 43.0 43.0

Male 57 57.0 57.0 100.0 Marital status

Divorced 2 2.0 2.0 2.0

Married 54 54.0 54.0 56.0

Single 44 44.0 44.0 100.0 Occupation

Chinese 9 9.0 9.0 9.0

Indian 81 81.0 81.0 90.0

Malay 9 9.0 9.0 99.0

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Others 1 1.0 1.0 100.0 Level of Education

Degree 30 30.0 30.0 30.0

Diploma 51 51.0 51.0 81.0

High School 17 17.0 17.0 98.0

Master 2 2.0 2.0 100.0 Position

Administrative

staff 19 19.0 19.0 19.0

Agent 22 22.0 22.0 41.0

Co-workers 1 1.0 1.0 42.0

Consultant 4 4.0 4.0 46.0

Management

Staff 13 13.0 13.0 59.0

Manager 19 19.0 19.0 78.0

Other 7 7.0 7.0 85.0

Supervisor 15 15.0 15.0 100.0 Length of employment

1-2 years 32 32.0 32.0 32.0

3-5 years 34 34.0 34.0 66.0

3-6 months 26 26.0 26.0 92.0

6-8 years 8 8.0 8.0 100.0

4.3. Scale Reliability For this research reliability is measured using Cronbach’s Alpha. Cronbach’s alpha measures the internal consistency. Cronbach’s alpha coefficient is widely used to measure reliability, if the Cronbach’s alpha value is 0.70 it ensures the reliability of the internal consistency of the questionnaire (Ringim, et al., 2012).

Table 4 – Reliability Statistics for the whole scale

Cronbahc’s Alpha Cronbach's Alpha Based on

Standardized Items

Organization Culture and Performances (N=100) 0.906 0.918

Source: SPSS generated

The value of Cronbach’s Alpha is referred to the reliability coefficient ranges 0 and 1. If the Cronbach’s alpha coefficient is closer to 1 it designate of the reliability of the questions is high. Cronbach’s alpha is considered excellent is when it is >0.9, good >0.8, acceptable >0.7, questionable >0.6, poor >0.5 and unacceptable <0.5. In this study the Cronbach’s Alpha in table 2 of all question under organization culture and performance is 0.906. This shows that a variable of Adaptive Perspective, Communal Culture, and Fragmented Culture, Networked Culture, Mercenary culture and Performance has an excellent reliability. The table 3 show the Cronbach’s alpha on Adaptive perspective is 0.710 the reliability is acceptable, Communal Culture is 0.820 the reliability is good, Fragmented Culture is 0.715 the reliability is acceptable, Networked Culture is 0.703 the reliability is acceptable, Mercenary Culture is 0.715 the reliability is acceptable and Performance Management is 0.809 the reliability is good.

Table 3 – Reliability Statistics for each Variable

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Variables Number of

Items

Cronbach’s Alpha Cronbach’s Alpha Based on

Standardized Items

Adaptive Perspective 8 .710 .804

Communal Culture 7 .820 .820

Fragmented Culture 6 .715 .733

Networked Culture 6 .703 .710

Mercenary Culture 5 .715 .715

Performance Management 6 .809 .810

4.5. Sample Adequacy Test

Table 4 – KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .829

Bartlett's Test of Sphericity

Approx. Chi-Square 2223.370

Df 703

Sig. .000

Source: SPSS generated

The 38 question in the survey describe on organization culture and performance management at Zurich Insurance Company. Factor analysis was check after checking the reliability and validity scale, this test on whether the data collected is appropriate. Most of other research or study that was carry out by Racelis (2010) and Rashid et al (2003) have shown the minimum sample size is depends on other aspects of design of the study. (KMO) measure varies from 0 to 1. If the value closer to 1 is better, 0.6 is a minimum accepted value. In this study the value on KMO shows very large of 0.829 meaning sample is adequate.

4.5. Descriptive Statistics

Table 5-Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

AP 100 3.00 5.00 4.0900 .43811

CC 100 3.14 5.00 4.2786 .44410

FC 100 2.17 5.00 4.1617 .47168

NC 100 3.00 5.00 4.1900 .44635

MC 100 2.00 5.00 4.1200 .50772

PM 100 3.17 5.00 4.3417 .45896

Valid N (listwise) 100

The Table 5 shows the overall mean and standard deviation of the 38 items on the six

dimensions on organizational culture. Overall the mean is high that is the majority agree with

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the organizational culture on performance. The Adaptive Perspective mean is 4.0900 (SD=0.43811), Communal Culture mean 4.2786 (SD=0.44410), Fragmented Culture mean 4.1617 (SD= 0.47168), Networked Culture mean 4.1900 (SD= 0.44635), Mercenary Culture 4.1200 (SD=0.50772) and Performance Management is 4.3417 (SD=0.45896). This indicates that predominant organizational culture is communal culture. Performance management is evident and perceived positively by the respondents.

4.6. Correlations

This describes the correlation analysis of organizational culture to performance management. All the variables including adaptive perspective, communal culture, fragmented culture, networked culture and mercenary culture has significantly strong positive relationship with performance.

Table 6-Descriptive Statistics Variable Correlation with Performance

Management p-value

Adaptive Perspective 0.490** 0.000

Communal Culture 0.602** 0.000

Fragmented Culture 0.351** 0.000

Networked Culture 0.328** 0.001

Mercenary Culture 0.418** 0.000

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).

The Table 6 shows all variables of organizational culture have a strong and highly significant (p<.01) relation with performance management. The Adaptive Perspective (r=.490, p<.01), Communal Culture (r=.602, p<.01), Fragmented Culture, (r=.351, p<.01), Networked Culture (r=.328, p<.01), and Mercenary Culture (r=.418, p<.01) has a strong and positive correlations with Performance Management. Previous studies confirm this result indicating there is a significant relationship between organizational culture and performance management (Rashid, Sambasivan, Rahman, 2004).

4.7 Regression

For the purpose of this study, by measuring the regression analysis is to predict the influences of organization culture on performance management. All of the independents variables (AP, CC, FC, NC, and MC) were included.

Table 7: Model Summary

Model R R Square Adjusted R Square

Std. Error of the Estimate

1 .656a .431 .400 .35541 a. Predictors: (Constant), MC, NC, AP, FC, CC

In model of regression, dependent variable is PM and independent variable are AP, CC,

FC, NC, and MC. R=0.656, R2 =0.431 and Adjusted R2 = 0.40. This table shows the F statistic is significant at .000 which shows the fitness of the model. Hence organizational culture is a strong predictor of performance management. As a general rule, the model fitness is determined by using adjusted R square, where the value should exceed 60% to be a ‘good fit’. In this case the overall model is not a ‘good fit’ as R square is less than 60% (R2 = 0.40).

Table 8: Coefficientsa

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Model Unstandardized Coefficients

Standardized Coefficients

t Sig.

B Std. Error Beta

1

(Constant) .902 .449 2.009 .047

AP .207 .102 .197 2.036 .045

CC .434 .109 .420 3.978 .000

FC -.050 .102 -.051 -.486 .628

NC .045 .102 .044 .445 .657

MC .183 .078 .202 2.346 .021

a. Dependent Variable: PM

The results shows that out of the five factors three variables have positive and significant impact on PM. The Tabe 8 shows that AP(p=0.045), CC(p=0.000) and MC(p=0.021) indicating that the Beta Coefficient for each of these variable is positive and significantly influences PM. However the other two variables are found not significantly influences PM. This finding is partially confirmed by previous studies such as Ehtesham et al (2004).

5. Conclusion and Recommendation The main purpose of this research is to examine the impact of organizational culture on PM. The following conclusions are derived from the findings

The adaptive perspective, communal and mercenary culture has a positive and significant influence on organizational performance management. This means that if any of these cultures are building and sustained, it will enhance organizational performance. Therefore it is ever important to foster these three types of culture within the organization. However again, it is important to note that the fragmented and network culture do not have much influence on performance management.

Further Research Direction: Since this study was conducted only on Zurich Insurance Company in KL, Malaysia. This requires including more employees from various companies to identify the various organizational culture exhibits in these organizations. Also to generalise the finding, it is important to include a larger sample from various parts or sectors of Malaysia.

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