Duality in Diversity: How Intrapersonal and Interpersonal Cultural Heterogeneity Relate to Firm Performance

How does diversity of cultural ideas and beliefs affect organizational performance?

 

While cultural diversity can undermine employee coordination and motivation, diverse ideas also promote creativity and innovation. Are organizations, then, forced to choose between a homogenous, productive culture or a diverse, innovative culture? No. My co-authors and I find two independent types of cultural diversity with different effects: disagreement among employees about cultural norms and values undermines productivity, but organizations with broad, diverse, multidimensional cultures have a greater capacity to innovate.

Divergence amidst Volatility: Cultural Fragmentation and the Dynamics of Organizational Culture

Why do organizational cultures fragment over time? 

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Some organizational cultures become increasingly fragmented when consensus among members about the norms and beliefs guiding work breaks down. Given the benefits of cultural cohesion for coordination and productivity, cultural fragmentation can dampen firm performance and have deleterious effects on member morale and well-being. Yet, the determinants of cultural fragmentation and the broader dynamics of how organizational cultures change over time are poorly understood. When is cultural fragmentation in organizations most likely to emerge? Building on schema- and norm-based cultural models suggesting that divergent interpretations and behaviors among individuals can result in fragmented cultural beliefs, this paper proposes that such divergence is more likely when organizations exhibit increasingly volatile performance. Members can exhibit varied interpretations and behavioral responses during these volatile, uncertain, and highly ambiguous periods. Support for this proposition is found using a language-based model of organizational culture derived from employee reviews on the career intelligence website Glassdoor, which facilitates measuring cultural fragmentation over time for a diverse sample of nearly 500 publicly-traded firms. The implications for understanding the origins of cultural fragmentation, the dynamics of organizational culture, and the relationship between culture and firm performance, are discussed.

When are Contract Gigs Good versus Bad Jobs? Unpacking Heterogeneity in Wages and Job Satisfaction

© 2019 by Matthew Corritore