How Do CEOs Shape Corporate Culture?

In some ways, corporate culture is the personality Meeting Board Roomof a company, and just like human personalities, corporate cultures can vary widely. Many factors impact a company’s culture, but perhaps the most significant determining factor of culture is the values and actions of an organization’s senior leaders. In their article, “The Promise and Problems of Organizational Culture: CEO Personality, Culture, and Firm Performance,” published in the December 2014 issue of Group & Organization Management, authors Charles A. O’Reilly III of Standford University, David F. Caldwell of Santa Clara University, Jennifer A. Chatman of UC Berkeley, and Bernadette Doerr of UC Berkeley delve into the topic of organizational culture. Their paper specifically discusses how much a CEO’s personality impacts organizational culture, and how culture can in turn impact organizational performance.

home_coverThe abstract:

Studies of organizational culture are almost always based on two assumptions: (a) Senior leaders are the prime determinant of the culture, and (b) culture is related to consequential organizational outcomes. Although intuitively reasonable and often accepted as fact, the empirical evidence for these is surprisingly thin, and the results are quite mixed. Almost no research has jointly investigated these assumptions and how they are linked. The purpose of this article is to empirically link CEO personality to culture and organizational culture to objective measures of firm performance. Using data from respondents in 32 high-technology companies, we show that CEO personality affects a firm’s culture and that culture is subsequently related to a broad set of organizational outcomes including a firm’s financial performance (revenue growth, Tobin’s Q), reputation, analysts’ stock recommendations, and employee attitudes. We discuss the implications of these findings for future research on organizational culture.

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