ROMANIAN ACADEMY COSTIN C. KIRIŢESCU NATIONAL INSTITUTE OF ECONOMIC RESEARCH ORGANIZATIONAL CULTURE - AN ESSENTIAL FACTOR FOR INCREASING THE COMPETITIVENESS OF A COMPANY Thesis Coordinator Prof. Univ. Dr. Corneliu RUSSU Doctoral Student Mihaela SPĂTARU (OŢELEA) 1
Table Of Contents Part I Current status of knowledge in the field 1. Organizational culture-concept, components, determinants 1.1. Organizational culture and personality of the company 1.2. The forms of manifestation of organizational culture 1.3. Determinants of organizational culture 1.4. Organizational culture and use of company resources 2. The concept of competitiveness and its dimensions in the conditions of globalization 2.1. Determinants of competitiveness 2.2. Global trends in the field of industrial competitiveness 2.3. Evaluation methodologies to business competitiveness and aggregate levels Part II-Methodology and research undertaken 3. Relationship between organizational culture and company competitiveness - ways to improve it 3.1. Proposed indices for coverage of organizational culture of a company 3.2. Proposed indices for the competitiveness of the company 3.3. Statistical and mathematical models used for highlighting the relationship between organizational culture and company competitiveness 4. Measurement model for the organizational culture - competitiveness relationship - conception, methodology, application conditions 4.1 Pilot survey on organizational culture competitiveness relationship 4.2. Measurement of the relationship between organizational culture and a company's competitiveness 2
4.3. Aspects of organizational culture-competitiveness relationship revealed by the research undertaken 5. Conclusions and recommendations concerning the relationship between organizational culture competitiveness of the Romanian enterprises 5.1. Relevant issues on organizational culture competitiveness relationship 5.2. The proposed action lines resulting from the application of the model 5.3. Original contributions. The prospect of continuing our own research Keyword: Organizational culture, competitive advantage, metrics of organizational culture, business performance measurement systems, globalization, flexible organizational culture, organizational culture, competitive business relationship. Motto: People are not assets... they are the fuel that sets the business in motion. James P. Hackett, President and CEO, Steelcase, Inc, SUA Organizational culture is one of the determinants of a company's competitiveness and, consequently, realistic analysis of the link between these two elements can provide relevant information to optimize it and, on this basis, to increase the company performance. In this light, the current situation of Romanian companies offers an extremely fertile ground for research into the link between the two elements mentioned, the purpose of highlighting determinants, the possibility of quantifying the relationship and to maximize its effects. We were motivated to start this research by the interest in organizational culture and the correlation between different types of organizational cultures and performances of a company. Throughout the paper, we followed the development of a methodology to assess the competitiveness at company level, shaping organizational culture, competitive relationship and outlining possible ways to improve it. Instruments used included questionnaires distributed among company managers, direct observation and study of relevant materials of the surveyed companies, statistical and mathematical methods and modeling. 3
Organizational culture, by its nature, has many facets. Some are better explored and assessed by qualitative methods and quantitative methods others. The application of both methods provides a better understanding of the research object. As a rule, successful companies have "something of their own" to distinguish them from others and to characterize the mode of action of their employees. Studies show that the cultural values present in high-performance businesses are as follows: - Orientation towards teamwork. People are willing to put the objectives of the team above their own; - Sincerity. Communication is sincere and open, ensuring the share of information and minimizing secrets; - Empowering employees. Authority and responsibility are decentralized and broadly delegated; - Respect for the individual. Companies are tolerant to cultural differences between people, professionally or socially; - Customer - orientated. It considers that the activity should be determined by market conditions and the obligation to satisfy customers; - Competitive spirit and desire to win. All employees are mobilized by the desire for success, achievement; - Entrepreneurial attitude. There is openness to innovation and risk-taking; - Assuming personal responsibility. It is assumed that the interest for results is critical for business success; - Continuous learning. Continuous renewal for skills and attitudes; - Trust. Employees are convinced that each of them fight as hard as they can for the interests of the company. Research on organizational culture is a way to evaluate staff without recourse to the use of psychological or social patterns. Culture allows observation of human behavior, bond and motivating it by the description of symbols, values and concepts existing within the company. Organizational culture is becoming more widely accepted by managers as a tool for improvement of business management, because the company incorporates facts which, although difficult to define, they are relevant to its competitive operation. To sustain a high level of performance over the long term, the organizational culture must meet three basic conditions simultaneously: - to be strong through a coherent and rigorous value system, communicated to all employees of the company by the leaders and shared widely; - to be strategically adequate; - to be adaptive. 4
Of possible indices for coverage of organizational culture, those that we have appointed to determine its influence on competitiveness, the performance of the company, are as follows: - The number of hours of employee training. Vocational training is an attribute and a continuing concern of the company. Thus, investing in continuous training, into increasing the skills of employees will have a positive effect on the general objectives of the company; - The degree of staff stability. For a company, it is primary to maintain and retain the staff under labor mobility conditions. A trained employee already has and knows the processes, technologies, internal communication; he/she has assimilated the company organizational itself. Therefore, a high degree of stability of the staff ensures the prerequisites for outstanding performance; - The average level of qualification of the staff. Qualification of staff represents the support necessary to ensure increased productivity of the company. It can be said that a high level of staff qualification is a starting point in developing the subsequent skills and abilities; - Expenditure on social responsibility actions. Companies need to balance social responsibility and profit. Assuming the company social responsibility creates a range of opportunities for business development by cultivating harmonious social relations and social improvement in company image. Social responsibility of business can be seen on two levels - the general level, with implications for local, national and internal society, and the internal one which aims to support and involvement in the lives of their employees. Both levels create a sense of belonging to the company, awareness and personal overlay image of the company and its products; - The level of risk accepted in the company. Risk and turbulent, dynamic external environment are defining for the work of companies. A high risk accepted in the company is considering the investments in innovation, in the development of new products, the continuous training of employees. All these will create the support of growing performance; - Number of work litigations. Ensuring harmony, understanding organizational climate conducive to generating employees development and 5
competitiveness of the company. The existence of conflicts in labor disputes leads to negative effects on the company's image that will be recovered within a considerable period of time; - The degree of absenteeism. Absenteeism is a product of the lack of staff involvement, lack of identification with the company, which has negative effects on productivity enhancement and the company image. Under conditions of strong competition, a company's success can be measured not only on the basis of the economic indices. Thus, the degree of satisfaction of clients, optimizing the relations within the company, innovation capacity and flexible organizational structures are elements of the company's competitiveness. Competitiveness is determined by the quality and productivity as a result of synergistic action of management, technology and material and human resources, which are factors that need to be taken through innovation and improvement. Competitiveness is closely linked to the level that generates and maintains. Thus, competitiveness is generated at the micro level and a country becomes competitive when it manages to build that environment to enable each company producing added value to become effective and be able to develop economic environment, not just internally but especially international. Given that consideration of too many indicators that reflect the competitiveness of the company would have made almost insurmountable the approach that we have proposed to model the relationship between organizational culture and performance of the company, and would have made unnecessarily complicated calculations, we considered that the following six variables are sufficiently relevant for the competitiveness of companies: turnover; profit rate; the average productivity of labor; market share; the quality of our products and services; company image. The paper consists of a linear regression model of the original concept, explained, able to capture with sufficient accuracy correlation organizational culture-business competitiveness. A regression model explaining the statistical relationships, meaning that for each value of the variable X, the corresponding values of Y have a systematic variation that can be expressed through a law, distribution and whether these distributions vary systematically in relation to values of X. Model validation we carried out two sociological surveys, of original conception, their results being published in scientific articles. With the pilot survey, conducted in September, concerning the influence of organizational culture on company competitiveness, we identified the following unfavorable features to support company performance: 6
- lack of trust and openness; - short term orientation; - inner orientation. It should be emphasized, however, the coexistence of positive values conducive to developing a culture of performance and competitiveness, namely: - predisposition for creativity; - assuming of a high degree of risk; - change and flexibility. It is recommended that these values be supported consistently by an appropriate management within the framework of well-designed systems, with specific quality practices and long-term performance for Romanian companies can successfully adopt, not only formal approaches to increase competitiveness on the global market. The research conducted on a sample of 100 firms generally aimed to quantify the influence of organizational culture on a firm's competitiveness. To achieve the proposed model type linear regression between organizational culture and competitiveness was necessary to standardize the values entered for the seven variables of organizational culture, respectively the six variables of competitiveness because variables have different units (percent, absolute units, monetary values). With these standardized values we proceeded through aggregation, to obtain synthetic organizational culture values, respectively for competitiveness. Note that in situations where the intensity was achieved on ranges of values, there has been taken into account the interval. Correlation analysis of selected variables that define the organizational culture of the company and those chosen for its performance was carried out on three levels: A) that of synthetic influence of organizational culture of synthetic performance of a company; It has been calculated a Pearson correlation coefficient of 0.533, an R 2 adjusted of 0.277, with a level of significance of 0.000. This certifies that there is a direct link between the variables considered as powerful and, at the same time, that almost a third of the company's achievements, so recorded performances, are due to viable organizational cultures. After applying the linear regression type model: Y= a+ bx, 7
where Y is the company's competitiveness, and X is the organizational culture, the value of the coefficient b was 1.837, which shows that an increase in the absolute unit within the organizational culture of the company, its competitiveness with rise 1.837 units. The linear model is used most often for exploring the link between variables because many of the forms can be linearized, non-linear and necessary calculations estimate the parameters can take advantage of the facilities of the least squares method. F test checks whether the prediction we make is better than the one based on chance, chance, in other words validate the model. As F calc = 38, 924 and F tab =3,84, It is subsequent that it is very unlikely that the observed connection seems plausible to chance.. B) the influence of each variable on the synthetic performance of a company; After calculating the Pearson correlation coefficient it was found that variables: the value of social responsibility expenditure, number of hours of training / employee, average qualification, absenteeism rate of employees and staff have influences on firm competitiveness. This certifies once again the vital importance of human resources in its creative and unique business. Regarding variables: the degree of stability of staff, number of labor disputes and the degree of risk accepted in decision-making, have not found statistically significant links with firm performance. This can be explained by the particular sample studied, namely the largest share of firms in the provision of services. C) the influence of each variable on each firm's performance variables (highlighting the bilateral relations). The most judicious relations from the perspective of the theme dealt with between the variables of organizational culture and those of the company competitiveness are: - the number of hours of employee training-bridging directly proportional to the average productivity of labor and turnover; - the degree of stability of the personnel-related directly proportional to the quality of products and corporate image; - -the average level of qualification of personnel-correlation directly proportional to the average productivity, firm image, product quality and market share; 8
- expenditure on social responsibility-correlation directly proportional to your company image and inversely proportional to the rate of profit; - the level of risk accepted - correlation directly proportional to the rate of profit, market share and company image; - the number of work-related disputes be inversely proportional to the image of the firm; - absenteeism rate - inverse correlation with turnover, average labor productivity and company image. The study on the impact of organizational culture on the competitiveness of firms has highlighted the need to raise awareness of the importance of organizational culture in order to obtain components for superior performance. Such factors are "responsible" for the success of firms analyzed are: quality of products/services - which received 24.0% of the responses, organizational culture, chosen by 22.3% of respondents and training / qualification of personnel with weight 19, 9%. These factors are interdependent and need special attention to supporting and developing each recorded performance by firms. The management key to record profits, productivity, innovation and organizational processes consistently continues lies, ultimately, in the vision of the Organization and its employees, in attitude and perspective. With a correct attitude and perspective, managers can determine how to implement high-performance in management practices. Companies in Romania in certain failures occur, the elimination of which requires, above all, an effort to change attitudes entire research and innovation chain-implementation-production. For many Romanian companies was preserved traditional pyramid organizational structure with many hierarchical levels, which perpetuates barriers to communication, maintaining structural rigidity and reduces the ability to adapt to change. To avoid these drawbacks is also necessary rethinking ways to boost employee. Rewards should be based on the achievements of all functional departments and not only on the successes of individuals or departments separately. In terms of topic, I concluded that Romanian companies are dominated by crop type "role", which makes management practices often have strong bureaucratic accents with clear procedures, but rigid. Culture of type "task" is better tailored to the complex and fluctuating environment, similar to the current one. However, the adoption of strong leadership change is needed, hence the need for elements of culture type "power". 9
Performing companies are defined by a high degree of adaptation of information systems on organizational structure, the existence of systems to motivate employees, reduced conflicts and adopt a proactive behavior. In our opinion, the priorities of Romanian companies in the coming years would be to: - increase capacity to provide products at competitive prices subject to modernization and upgrading of productive and thorough understanding by employees of "industrial culture", characterized by professionalism, technological and administrative discipline, rigour, strict adherence to deadlines, care for our heritage; - development of innovation ability; - developing the capacity of marketing (promotion) in international markets; - attracting foreign direct investment, including the "green field". Strategic orientations of the primordial gyrations during the same period will be: - increase of the existing market share; - entering new markets; - outsourcing of activities; - horizontal integration (mergers, acquisitions, joint venture); - vertical integration upstream-downstream. In conclusion, the reasons for the success or failure of companies are multiple, but they are closely linked with the resources, skills and characteristics of the environment in which it operates. The main contributions of this work that we believe represents a significant note of originality are as follows: - Identification of possible indicators range used in the literature, those which we considered the most representative to reflect the organizational culture of a company and evaluate its competitiveness; - Realization of a linear regression model meant to highlight the defining parameters of the influence of organizational culture on the company's economic-financial performance of its final; - Integration of indicators selected as input variables in a linear regression model; - Choosing a diversified sample of companies as concerned with their activity profile, size and geographical location, so as to present sufficient relevance in their relations between organizational culture and performance determined based on the responses of managers of 10
medium and peak to questions two questionnaires designed for this purpose; - Integration of answers to questionnaires in input variables in the model, the model, the analysis of variables, running out and model validation; - Formulation, based on the analysis performed, of the conclusions concerning organizational culture-the competitiveness of business is the printing of a general nature applicable to this type of relationship. In the context of the current economic and financial crisis is of vital importance to know the factors generating success for activity of companies and how they can be measured. The conclusions drawn as a result of the theoretical studies, and, most importantly, practice undertaken may constitute useful suggestions for improving the activity of companies. 11