Is Your Organizational Culture Competitive?
“Organizational Culture: Can It Be a Source of Sustained Competitive Advantage?”
Jay B. Barney (1989)
What is the researcher interested in?
Although dated, this article provides invaluable information regarding organizational culture – information which organizations are still able to use. Barney (1986) is interested in how and when are cultures of an organization competitive? He suggests that with sustained superior financial performance, they will be characterized by a strong set of management values that define the ways that they conduct business.
To this day, we see strong cultures as pointed out by the excellent management of their employees. For example, Google, Netflix, Zappos, and many more. How is it that these companies can constantly survive through trials and tribulations and other companies can't? A strong culture allows a company to not only succeed in its objectives but allows employees to be working at their maximum potential. Here, the researcher focuses on how a competitive culture can lead to sustained financial performance.
What method did they use?
Unlike most psychology research, this paper is focused on a review of a few key points rather than conducting a full-fledged experiment. The researcher will aim to do three things:
Key concepts of analysis will be defined
Attributes that firm’s culture must have for sustained superior performance
Organizational cultures of some firms will be examined and see if they meet the criteria
The concepts he used were all aligned towards a sustained superior financial performance, citing research such as Kennedy (1982) and Peters & Waterman (1982). Concluding that, superior financial performance, “is a rate of return greater than above-expected returns, [and is sustained throughout multiple cycles of the business]’. Importantly, superior financial performance can either be temporary or sustained. The former is described to be common due to the competitive dynamics of microeconomics, let us give you a scenario:
Say, a particular firm is able to obtain a superior financial performance, which will allow other firms to observe this state and will seek to obtain the same level of this performance by duplicating its initial characteristics.
To that end, firms who are still earning greater than normal economic return – despite natural business cycles– and if this return is not affected by new entries and imitation then they will enjoy a sustained superior financial performance.
What did they end up finding?
Through the research on competition by strategists such as Porter, economists Hirshlelfer, and researchers who have done extensive research on organizational culture (Clark, 1970) the below requirements should be met for sustained financial competitiveness:
Why does this matter for organizations?
To reiterate, although dated, we will use this model and explain Netflix's culture and hopefully prove its timeless significance. As we all may know, Netflix is by far untouchable in the tech and entertainment industry and comfortably captures around 222 billion of the market itself. It is valued at 30 billion dollars with only 9000 employees worldwide, how did Netflix get/stay so successful? The culture of Netflix is a precedent to why they have remained undisputed, notably, Reed Hastings has been an advocate for “Freedom & Responsibility” and noted that this is the main reason why Netflix is so successful to this date and was always able to adapt to the market demands. When looking at the three requirements for a company to have sustained financial competitiveness - Netflix' meets all three. Their company of “Freedom & Responsibility” is valuable, rare, and imperfectly imitable. For a deeper insight - we highly recommend you to read No Rules Rule.
References
Barney, J. B. (1986). Organizational culture: can it be a source of sustained competitive advantage?. Academy of management review, 11(3), 656-665.