New research by two professors at the Kellogg School of Management at Northwestern University suggests that we should reexamine the impact of organizational culture on firm performance. They argue that strong cultures serve a useful purpose, but they become a liability when faced with the threat of disruptive innovation. A strong organizational culture enhances efficiency, because everyone is on the same page. They can coordinate their activities effectively. A weaker culture means a broader diversity of viewpoints. It diminishes efficiency, but it might enhance the organization's ability to adapt to a changing external world. The finding should not surprise you. We have been aware of this good news/bad news story about organizational culture for years. Nevertheless, it bears repeating... we all need the reminder that a strong culture is not all roses and rainbows. Here's an excerpt from Kellogg Insights that summarizes the findings of this research:
New research by Willemien Kets, an assistant professor of managerial economics and decision sciences at the Kellogg School, suggests that a strong culture serves a utilitarian purpose: it sets expectations, increasing the likelihood that, faced with uncertainty, members of a team will all be on the same page. Kets, along with her coauthor, Alvaro Sandroni, a professor of managerial economics and decision sciences at the Kellogg School, argues that cultural norms make interactions easier—a good thing much of the time. But in fast-changing industries, or in a tumultuous economy, the broader diversity of viewpoints that a weaker company culture engenders can lead to fewer missed opportunities.