A test of the leadership-culture-performance model within a large Dutch financial organization Wilderom, C.P.M.; van den Berg, Petrus t YKO~nG1~n~,c,t t'-t~~jleS t cvrpurAc-E Gcc c tc~r'C t cv~pcra t-e~~~~~~~~t i.~-~t~c r~D~nCi GA( l n~~:t~~h~nC G Yy~p~tc tt~ct~n .ocĨ SSN 0924-7815 A TEST OF TI[E LEADERSHIP-CCILTURE-PF,RFORMANCE~IOllEL 1~V'IT1iIN A LARGE, DU"I'CH FINANCIAL ORGAN[IA"1'101' CELESTE P.M. W(LDEROM~T ABSTRACT This study examines the notion that leadership style ( L) and

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... l culture (C) are significantly associated with organizational performance ( P). Despite many such claims in the literature, very few empirical studies have focused on the LCP model. Representative survey data from the personnel of 58 branches of a large Dutch bank were corrected for common me[hod variance, and reliable, objective performance data of these bank branches were made availahle The hypothesized LCP model was tested with LISREL. The results show that a balanced [ransformational leadership style is significantly related to both organizational culture ( gap) and ohjective performance. Moreover, the relationship between culture and objective performance appears to be suppressed by leadership and perceived performance. The findings suggestthat, instead of strieing for a sense of strong culture, organizational culture gap reduction pays off bettc~fo; mc~-r firrc~i thelong run. A TES'T OF THE LE.4DERSHIP-CULTURE-PERFORAIANCE MODEL WITHIN A LARGE, DUTCH FINANCIAL ORGANI7.ATION A practically relevant question in our field that receives relatively little research attention is: How do leadership and organizational culture jointly relate to organizational performance? These three constructs have rarely been explored simultaneously. This is not due to a Iack of relevance of each of the constructs but rather to a scarcity of researchers who operate across the various subdisciplines of Organization Studies within one research project. Leadership research in the context of organizations is usually carried out by organization psychologists or by those working in the area of Organizational Behavior (e.g., Bass, 1990) . Organizationa] culture is a construct typically studied by organization sociologists or by scholars who are specialized in Organization Theory (e.g., Trice 8c Beyer, 1993). The financial-performance variable is currently used most by those interested in Organization and Strategy issues (Shenav, Shrum, 8c Alon, 1994; Glunk 8t Wilderom, 1998). Focusing on organizational Leadership, Culture, and Performance (LCP) in one empirical project seems like connecting three islands with one bridge. Despite the many claims of interdisciplinarity, very few organization studies have been published with such a distinctively interdisciplinary flavor (Knights á Willmott, 1997), if a study on the Organizational Leadership-Culture-Performance model could be called interdisciplinary at all, since it truly comes within the scope of Organization Studies. This paper starts with a sunuttary of the organizational literature tha[ focuses on the LCP model under discussion: Leadershtp ----1 Ctdrure ----~Performance First, we will review representative literature concerning each link and present an overview of current thinking on the two independent variables of the model, as well as a more abstract theoretical approach to the LCP model. Subsequently, we will formulate our specific hypotheses, followed by [he Method, Results, and Discussion sections. One of the earliest pieces of academic writing in which all three constructs are mentioned is Schein's often cited book from 1985. In its preface, he states:'I hope to demonstrate that...culture can aid or hinder organizational effectiveness, and that leadership is the fundamental process by which organizational cultures are formed and changed.' It is noteworthy that the rest of the book does not contain the words 'effectiveness' or 'performance.' Much popular management literature also claims that culture and the promulgation of culture by leadership account for the success of firms (see, e.g.. Deal 8c Kennedy, 1982) . In stark contrast to the LCP claims, we know of only one empirical study to date that has tested the LCP model. Published in 1992, this study investi-3 gates a sample of 50 Dutch franchised food retailing organizations. Koene, Yemtmgs. and Schreuder (1992: 219) repotted 'significant relationships between leadership. organizational culture, and organizational outcome variables.' Their results show that some, but not all, measures of leadership correlate with aspects of what is called organizational culture and firm performauce. An examination of Koene's study leads to the question of whether the evidence for LCP would be more convincing if more reliable and valid measures of leadership and culture were employed fsee also Kcene, 1996). We hope our study will contribute to this discussion. Cultttre-Performance Of the two links in the LCP model, the connection between organizational culture and performance has so far received the most scholarly attention. !n 1984!n , Denison (1984 commented that there is 'little solid evidence about the impact of an organization's culture on performance.' His paper was the first in what can retrospectively be seen as a clus[er of nine empirical studies on the significant link between organizational culture and firm performar.ce see 'l'able 1). Only nomothetic studies that explicitly use the variables of organizational cultu:e and efïective-ness~performance are included in this table. Insert Table 1 about here Table l shows little variety in terms of sampling. Eight of the nirn; studies used US-based firms. Hence, the C-P relationship runs the risk of being associa[ed with North American culture. Some studies rely on data obtained only from managerial personnel, which is precisely not representative of an organization's culture. Very few studies have used represen[ative samples of respondents within each orgahization, a condition that, in our view, is pertinent [o a yuantitative assessment of an organization's culture. The definitions of organizational culture (OC) vary greatly from'perceptions of organizational practices' (most scholars reserve this for'climate') tò behavioral patterns'; most of the definitions also include'values' or 'beliefs.' Typical of the studies listed in Table l is an uncleaz connection between the conceptual definition of OC and the operationalization or measurement of OC. Moreover, the variety of (mostly financial) performance measures is noteworthy. The studies listed in Table 1 hardly deal with legitimation for aggregation of the data nor with common method bias. Hence, when designing a new C-P study, researchers aze advised to: 1) draw truly representative samples within organizations; 2) draw samples outside the US; 3) be more explicit in defining and operationalizing OC; 4) account for aggregation issues, and 5) for common method bias.