UC Berkeley

The relationship between organizational culture and financial performance remains elusive even though researchers have studied it for some time. Early research suggested that a strong culture that aligns members' behavior with organizational objectives boosts financial performance. A more recent view is that, because strong cultures promote adherence to routines and behavioral uniformity, they are less effective in dynamic environments. We suggest that the relationship between culture and performance can be reconciled by recognizing that culture encompasses three components: (1) the content of norms (norm content); (2) how widely members agree about norms (culture consensus); and (3) how intensely organizational members hold particular norms (norm intensity). We hypothesize that "strong cultures"-where a high consensus exists among members across a broad set of culture norms-can contribute to better financial performance even in dynamic environments if norm content intensely emphasizes adaptability. We test this hypothesis in a sample of large firms in the high-technology industry. Firms characterized by higher culture consensus and intensity about adaptability performed better three years later than did those characterized by lower consensus, lower intensity about adaptability, or both. We discuss how parsing culture into content, consensus, and intensity advances theoretical and empirical understanding of the culture-performance relationship. © 2014 John Wiley & Sons, Ltd.