(iStockphoto/35007)Anyone who has tried to pick up a Chick-fil-A sandwich on Sunday knows how religious belief affects organizational policy in that company. Chick-fil-A honors Christian beliefs and closes on Sunday. Whether it affects growth and profitability is a question for debate. And when the question is extended more broadly to organizations in general, there is little for us to go on in responding to the question.
The impact of culture on performance has interested me for several decades, having teamed in 1992 with John Kotter to explore the subject. We developed data suggesting that organizational culture has a significant impact on an index comprised of annual net income growth, annual return on invested capital, and annual growth of stock price. We found that strong cultures can have either significantly positive or negative effects on performance. However, when combined with values that support adaptability (among them openness, learning, and sharing), the result is very positive.
Our conclusions were reached after collecting and examining survey data from hundreds of senior executives identifying those US organizations with the strongest cultures, comparing that with performance data, and then performing field studies of a subsample of the firms identified to explain why some organizations with strong cultures had good and some had poor performance.
"The team found that firms exposed to Confucianism ... outperformed competitors located elsewhere."
Other research has concentrated on the influence that a CEO’s background can have on his or her attitude toward uncertainty and willingness to take risks, with subsequent outcomes for the organizations studied. But there hasn’t been much research on how senior management beliefs influence an organization’s shared values and behaviors and hence its performance.
That’s why a recent study associating Confucian beliefs with positive performance of Chinese firms caught my eye. In it, three scholars based in China and Singapore examined the current performance of Chinese firms located near the sites of Confucian schools that operated centuries ago in China. These are areas in which Mao-indoctrinated leaders—“whose ideology suppresses Confucianism,” according to the researchers—have less influence today.
The team found that firms exposed to Confucianism, correlating their locations with the incidence of several measures of religious belief and practice, outperformed competitors located elsewhere. These firms make “greater social contributions, provide greater employee protection, and have higher entertainment expenses, more patents, and more trade credits,” the researchers write.
"The researchers conclude that 'these corporate attributes match the five basic virtues of Confucianism.'"
The researchers conclude that “these corporate attributes match the five basic virtues of Confucianism: benevolence (compassion and altruism), righteousness (respecting and helping others), courteousness, wisdom (“use of knowledge in a prudent way”), and trustworthiness.
One can raise all kinds of questions about this research. First, the time line for cause and effect extends over a very long period of time. Obviously, religion is only one contributor to management behavior and performance. Correlation rears its usual ugly head as an analytic tool here, but there are other efforts in this relatively careful study to associate cause with effect. Putting those concerns aside, the value of this research, like other serious efforts, is most often in the questions it raises, not the ones it tries to answer.
Is it useful to try to measure the impact of ideological and religious differences on organizational cultures and therefore bottom-line performance? Where they are publicized, do they influence the nature of the people attracted to the organization?
If we continue to examine the effects of predominant religious or political beliefs on performance, will it influence who we hire, how we lead and manage, and how well we perform?
Does religious belief affect organizational performance? Does it matter? What do you think?
Share your thoughts in the comments below.
Editor's note: Heskett explores the leader's role in his book, Win From Within: Build Organizational Culture for Competitive Advantage.
References:
- John P. Kotter and James L. Heskett, Corporate Culture and Performance (The Free Press, 1992).
- Zhihui, Gu and Liang, Hao and Zhang, Hanyu, “Culture and Firms” (April 1, 2022), European Corporate Governance Institute—Finance Working Paper No. 822/2022
Your feedback to last month’s column
Have We Seen the Peak of Just-in-Time Inventory Management?
The majority of those commenting suggested that we have seen the peak of JIT. Jacob Navon framed the argument this way: “We have spent the (last) … 4 decades optimizing global production to the lowest cost denominator and just-in-time delivery… a global production system that is optimized for lowest cost is not very resilient. We will now optimize production for maximum resiliency. This will bring some costs back into the system …”
As Katherine Lawrence put it: “The current JIT rose out of both hubris and myopia.” Citing the Ukranian War and its impact on logistics, she points out that “our transportation networks and systems are susceptible to variables we cannot predict or control, and we should not be shocked when the house of cards collapses.”
Arijit Chakraborti mentioned a longer-term predictable trend that bolsters Katherine Lawrence’s argument. He said, “With the net zero (environmental) pledges by organisations and nations, optimal inventory levels will get recalibrated,” to favor least-polluting, slower forms of transportation such as rail and water over the use of JIT strategies.
Shoshanah Cohen commented, “I wouldn’t say those days are over, but … until we get back to the point where lead times are both short AND consistent, manufacturers will need to carry more inventory.”
On the other hand, Raj Ramaswamy reminded us that, “With data science and AI coming into mainstream, gone are the days of inventory at (auto) dealership lots.”
Finally, John Thorbeck asked, “must our inventory model be either/or? … data science makes this adaptation possible, cutting excess production into its material and capacity components.” Do those who believe we have seen the peak of JIT usage carry the day? What do you think?