Corporate culture and financial performance: an empirical test of a UK retailer

Abstract

Purpose

The purpose of this paper is to assess claims that culture is a significant factor in accounting for corporate financial performance (defined as sales intensity (SI)) in the retail sector at store level. The paper provides a critical analysis of the “strong culture‐good performance” thesis.

Design/methodology/approach

Company data were used which included the annual employee survey (at store level), store characteristics data, and store sales data (SI per square foot). Multiple regression was used to predict SI. Stepwise cross‐lagged regression analysis was used to infer cause and effect linkages.

Findings

Contrary to the strong culture thesis, the results show that a physical factor, store format, is the most important element in explaining SI. Employee morale is the most significant human cultural variable, followed by employee perception of manageable workloads. Interestingly, whilst job satisfaction is a significant predictor, it is in a negative direction. The more employees are satisfied, the more SI decreases.

Research limitations/implications

This is a very large study at store level, and the literature suggest the methods adopted are the best available. The key limitation of the research lies in the reliability of the inference that behavioural and managerial attributes are causally related to performance outcomes measured in sales data. Many other external factors also influence store sales in any given period (ranging from macroeconomic to store level promotion factors). The research accounts for 32.7 per cent of total variance, so other factors beyond the scope of this study are also likely to have significance.

Originality/value

This paper is one of the first contributions to empirically analyse corporate culture compared to other factors that explain store performance.

Citation

Booth, S.A. and Hamer, K. (2009), "Corporate culture and financial performance: an empirical test of a UK retailer", International Journal of Retail & Distribution Management, Vol. 37 No. 8, pp. 711-727. https://doi.org/10.1108/09590550910966204