Analysis Of Organisational Culture And Performance Business Essay

There are two main aims of this study in the light of current research books. First is to test empirically the organisational culture and performance marriage in bank industry, especially in Indonesia framework. Second is to check empirically whether organisational culture could make a differentiation between the best and the worse performance of Indonesian banking industry.

To achieve those goals, the specific objectives are

To test empirically the partnership between strong organisational culture and performance (C-P) in a sample of Indonesian bankers industry.

To test empirically the partnership between organisational culture difference and performance in a sample of Indonesian lenders industry.

To test empirically the partnership between organisational culture and fraud (C-F) conception, in Indonesian banking context.

To test empirically whether organisational culture can differentiate between Islamic loan provider and conventional bankers, in Indonesian bank context.

Research contributions

There are academically and empirically some expected efforts from this research. It first of all relates to provide a framework for studying the organization culture in the banking Industry. Saffold (1998) highlights that organizational culture and performance studies reveal a general conceptual construction. This framework relates organizational culture account with organizational performance compared to the effectiveness of cultural traits. This study, however, differs from the existing platform. Besides providing good commercial culture of management methods, this study construction is also affected by societal, professional (specific bank industry), and specific culture of Islamic Bankers (see section 2. 8 literature review for more detail). This platform hopefully may help lenders' management in Indonesia to manage their corporate and business culture and eventually improve their performance and decrease the fraudulence as well.

Secondly, this research will elaborate new things relating to organizational culture and performance studies. For instance it'll compare the high and low performance of the lenders, between Islamic loan provider and the rest of the banks, test the relationship between organizational culture and scams, and use CAMEL (longitudinal) data in measuring loan company performance. The existing studies such as Peters and Waterman (1982), Kotter and Heskett (1992) do evaluation however predicated on convenience organization samples.

Thirdly, this research will also conquer methodological imperfections from previous studies. These imperfections such as engaging organisations on the analysis are in small amounts and can't be representing the whole industry; decided on respondents aren't representing the complete organisation civilizations (convenience examples), mostly top level managerial-up (Calori and Sarnin, 1992; Kotter and Heskett, 1992; Wilderom, Glunk and Maslowski, 2001). Incorporating with high and low performer banks, this analysis, however, will use bank examples more than 75% of the banking industry (in term of resources) or even more than 30% (30-40 banks) in terms of amount of bank in banking industry. Simple arbitrary sampling in selecting the respondents will be utilized to signify culture of the complete organisations.

Fourthly, this research will sophisticated the effect of organizational culture on organizational performance in Indonesian framework, a non-western and emerging countries. Such studies are uncommon. Those organizational culture studies are usually conducted in european countries, typically USA and European countries. This research will expose weather organizational culture may become an indication of bank performance so that related functions like the banking supervisory specialist may be beneficial in improving its guidelines on banking guidance and polices. Since this organisational culture - performance study emphasizing banking industry is also exceptional, this research will also good for the bank industry, especially both in Indonesia and rising countries and world bank industry.

Plan of the study

The thesis will consist of nine chapters altogether. The background, target of the analysis, and plan of the analysis will be presented in chapter one.

Chapter two provides the backdrop of Indonesia and Indonesia banking industry. Overview of Indonesian bank industry will be highlighted. This overview will include record, development and current condition of the Indonesian bank industry. The framework of Indonesian banking industry consisted of five classifications of loan company may also be presented. How to gauge the performance (CAMEL Ranking system) of every bank may also be provided.

Chapter three presents the literature overview of organisational culture and performance. A critical research of main factors: organisational culture, organisational performance, and relationship of organisational culture-performance will be offered. This chapter will show conceptualisation (including nationwide culture) and measurement of organisational culture. The key empirical studies of organisational culture-performance, major studies of culture including Indonesia, and the Islamic and conventional bank or investment company studies will be shown. Limitations of existing studies and research gaps to be stuffed may also be identified and the positioning taken in the literature will be justified. Research hypotheses produced will be provided.

Chapter four presents the study design of this study. Durability and weaknesses of research idea will be critically provided. An appropriate research way and strategy will be identified and justified. Operationalisation of the device used will be provided. Appropriate techniques to be used to test hypotheses are described and justified.

Chapter five presents the consequence of strong culture thesis using overall CAMEL ranking as the aim of bank performance. Section six presents the result of culture difference thesis using overall CAMEL ranking as the aim of bank performance. Section seven will test the partnership between organisational culture and specific perception of scam. In section eight, whether organisational culture can make a differentiation between Islamic and classic bank's performance will be examined.

Chapter nine offers a brief summary of results and conclusions. This chapter will be discussed implications of the results for theory, practise, and the Central Loan company Indonesia as the banking regulator and supervisor. Recommendations and interesting strategies for future research will be provided.

Research model

Based on the distillation of strong culture and culture gap thesis, a proposed model of this research is shown in body 1. The degree and rapidity of change in the external environment where organisations operate are enormous and constant. This environmental stresses and changes such as new rules, new and existing competitors, information technology and communication change will lead to adaptation and successful organisations. Experiencing this learning process, company gradually learns and develops a much better understanding to make effective and effective responses.

This learning process and evidence company success will have a home in organisational assumptions, values and values. Based on this, organisations develop management plans, systems and control to keep its learning success. It is expected that organisations can maintain internal coordination / integration, control and reliability of inside process. Strong shared values influence worker motivation and engagement that will lead to more costumer concentration and service orientation. Thus, overall loan provider performance will be influenced. The first hypothesis to be analyzed is

H1: There's a significant romantic relationship between strong culture and overall standard bank performance, using overall CAMEL rating

The differentiation between identified culture and preferred culture will lead to a culture distance. The culture distance reflects employees' agreement with each other towards both organizational culture and the continuing future of organisation. The larger the gap is the harder it is because of its organization to control key functions in coordination, integration and control. Small the distance is the better the organisation function in creating adaptive changes and reacting to customer needs and services. Thus, overall loan provider performance will be influenced. The second hypothesis to be examined is

H2: There is a significant relationship between strong culture and overall standard bank performance, using overall CAMEL rating.

Strong company culture is the fact to influence individual commitment, inspiration, and cultural control in company. Control systems work when those who are monitored are aware that someone is attending to and will probably service when things aren't going in line with the plan. In a solid culture, common contracts can be found among people about what constitutes appropriate behaviour and tendencies. Thus, culture has a function of public control in company. The third hypothesis to be tested is

H3: There's a significant romance between strong culture and scam perception of people and organisation in the Indonesian banking context.

Islamic banks are governed by Islamic rules that prohibited interest on loan and debris. Profit-and-loss showing (PLS) paradigm is the principle of Islamic banks. However, Islamic and standard banking companies have the same characteristics of business as a loan company and operate in the same industry. Presuming organizational culture-performance exists in conventional finance institutions, whether it also is present in Islamic banking companies. Thus, organizational culture can distinguish between Islamic banks and conventional banking institutions. The fourth hypothesis to be examined is:

H4: Organisational culture can identify between Islamic lenders and conventional finance institutions, in Indonesian banking context.

Environmental pressures and changes: societal and professional culture

Figure 1 A Proposed Model

Overall bank performance (CAMEL score)

H5: Differencing high and low performance

H5a: Islamic bank and conventional bank

Organisational assumptions, values, and principles (Schein, 2004)

Good corporate culture (process): Management insurance policies, system, procedures and adjustments specifically give attention to corporate culture


Organisation learning and response (Schein, 2004)

Adaptive change and flexibility

Black brand = Influence

Blue collection = Feedback

Source: Designed from Kotter and Heskett (1992), Offer and Kennedy (1992), Peters and Waterman (1992), Denison (1990), O'Reilly (1989), Hammer (2004), O'Reilly and Chatman (1991), Cameron and Quinn (2006), Wilderom and Van den Berg (1998), and Gup (1991)

Individual behaviour information and performance

Culture gap


Good corporate culture



Customers emphasis and service orientation

Fraud perception


Coordination/integration, control, drive, and involvement

Strong culture


Cek list ada strong culture di

Wallach 83

CAMEL Rating standard bank compliance. .

Rating of management is the score of the managerial capacity of the

Bank management in performing its business, adequacy of risk

management, and conformity of the lender with applicable legal

provisions and commitments made to Standard bank Indonesia and/or other


Bank compliance is defined as the conformity of the Bank with

applicable legal provisions, including however, not limited to the Legal

Lending Limit, Net Open Position, and Know Your Customer


Schein 418 Learning and change cannot be enforced on people. Their engagement and participation is necessary in diagnosing the proceedings, in figuring out what to do, and in actually causing learning and change. A lot more turbulent, ambiguous, and out of control the world becomes, a lot more the learning process must be shared by all the users of the public unit doing the training.

Kilmann (Schein) p. 38 In summary, organizational midlife is the time when

managers contain the most choice as to whether as well as how to manage

cultural issues which is which means time when they need to

be most alert to how to diagnose where the firm is and

where it is certainly going. As organizations face significantly turbulent

environments, flexible cultures, civilizations that encourage diversity

rather than uniformity, may be more advantageous

than strong ethnicities.

1 Kilmann p. 144

Culture IS NOT ONLY an Internal Affair Stanley M. Davis

In brief summary, OPEC, industry economics, and government

regulation all damaged the petrol companies more than did their

customers and challengers; and they influenced the oil companies'

cultures as well as their strategies.

1p. 150

routine supervision.

In summation, the culture at Lincoln is dependant on the strong

convictions of the company's founders and is well developed

vertically, horizontally, and historically. It really is similar in many

ways from what Sethia and Von Glinow (see Chapter Nineteen)

call an "integrative" culture. The culture is pervasive and affects

the company's framework, compensation systems, physical facilities,

relations with customers and stockholders, and personnel

policies as well as the daily action of professionals and employees.

p. 160 Summary

Specialized corporate civilizations have numerous advantages,

including strong member determination to the principles inherent in

the culture. However, such pervasive civilizations are less tolerant of

divergent principles, which creates potential issues with morale

and turnover. Careful recruitment and selection of members

predisposed to accept a preexisting or new culture should minimize

these problems. However, another downside is the inability

of specialized ethnicities to adapt quickly to changing environmental

conditions. The benefits of uniformity and

commitment must be balanced against the negatives of potential

stagnation and reduced flexibility. It appears that specialized

cultures may be better suited to environments where

fundamental changes have a minimal probability of event because

as much work must maintain particular cultures

as is required to create them. The managements of Lincoln Electric


Moreover, a number of writers have begun

to develop a variety of theories of culture change that

might assist managers in their efforts to "manage" their civilizations.

For example, Pettigrew (1979) shows that since leaders

are the "creators" of culture, culture change is supported by

a change in leadership; thus, management succession is the essen-'

tial component in culture change. From a fairly different perspective,

O'Toole (1979) argues that culture is imbedded in

organizational structures such as a company's incentive system or

hierarchy of authority. Therefore, to improve culture the key

structures supporting confirmed culture must be changed. Others,

such as Ouchi (1981) and Peters and Waterman (1982), believe

that culture can be changed by creating a new set of values,

or "management school of thought, " which is then inculcated into employees.

The change process will involve the development of new

company goals and ideals and the socialization of both old and

new employees to this new group of values. The creation of new

symbols as a big change strategy in addition has been reviewed by Peters

(1978). He argues that market leaders can transform culture simply by

changing their activities, agendas, or interpersonal styles to reinforce

new manners. Thus, the management of symbols and

their accompanying meanings is the agent of ethnic change.

Other writers, such as Silverzweig and Allen (1976), Baker

(1980), Schwartz and Davis (1981), and Sathe (1983), have also

outlined similar strategies that might be used to change organizational


While these writers present a number of potentially useful

approaches to controlling culture change, they tend to focus immediately

on specific techniques or approaches for change somewhat than

first attempting to uncover the root operations of culture

change. Instead of present simply another strategy for managing

culture change, the purpose of this section is to spell it out the

conditions and techniques under which such change occurs.

After we are able to describe the process of culture change, we

can then get started to explore meaningfully how it might be managed.

The style of culture change that'll be described was

derived by analyzing the histories of five organizations that

have experienced significant changes in their ethnicities: General


Tn ssummary, culture is hard to improve when it is deeply

held. Because of long experience, people often cannot see

alternatives easily. Many will are suffering from personal stakes in

the current way of operating and therefore do not need to change.

And when those who have both an extended history and a personal

stake in current ways are powerful, they do not have to improve,

and they can enforce their reticence on the business.

The implication of the explanation of culture is the fact that culture

is most powerful when it's least apparent; that is, when it

is overlooked because it spent some time working before as a way

of seeing the globe and working within it. Further, unless culture

is changed in any way three levels-assumptions, beliefs, and practices-

and especially at the amount of assumptions, an organization's

culture has not really been modified.

As we consider the elements creating an "ideal culture, "

we will concentrate on assumptions, because they are the component

of culture most difficult to change. However, our examples

will also suggest worth and practices regular with the

assumptions of a great culture.

P 354

What Are Adaptive Civilizations?

Even if we allow the idea that the term culture will always

be a little vague and unwell defined, unlike a lot more superficial

and tangible areas of organizations, it is still important to consider

what makes a culture good or bad, adaptive or dysfunctional,

Wallach (1983, p. 32) provides a conclusion of what cultures

do for the organization: "You will discover no good or bad

cultures, per se. A culture is good-effective-if it reinforces the

mission, purposes and strategies of the organization. It could be

an asset or a liability. Strong social norms make an organization

efficient. Everyone know what's important and how things

are done. To be effective, the culture must not only be reliable,

but appropriate to the needs of the business enterprise, company,

and the employees. "

Why does indeed one organization have a very adaptive culture

while another has a culture that shows only days gone by? Is one a

case of fortune, and the other due to misfortune? To the

contrary, it seerns that any group will get itself with an

outdated culture if its culture is not explicitly supervised.

If left exclusively, a culture eventually becomes dysfunctional.

Human fear, insecurity, oversensitivity, dependency, and paranoia



Managerial efforts to build, reinforce, or change culture

will have a high probability of success only when such initiatives are

accompanied by parallel efforts to create (or redesign) the organizational

reward system for ethnical compatibility. The reason

for this is the fact if the incentive system is in tranquility with the

culture, it will reinforce and invigorate the culture, but if it is

inconsistent with the culture, then it'll undermine and stultify

the culture. On this chapter, a construction of four types of

cultures and their corresponding reward systems have been defined.

Managers can use this platform to diagnose the current

situation in their organizations and create appropriate

reward system




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