The Relationship Between Organisational Culture, Strategy And Performance - A Survey Of Companies Listed In The Nairobi Stock Exchange

Abstract

This researcher aimed at establishing the relationship, if any, between culture, strategy and performance of firms listed at the Nairobi Stock Exchange. Available literature showed that most corporate leaders understand that a clear and directed strategy is needed to achieve business success. However, they often disregard the role of culture with regards to strategy, yet the two factors are critical for the success of an organisation. The researcher noted that in order to study these two factors and the third one, performance, the ideal population was that which espouse known performance measure variables such as share prices, price index, and public declaration of their performance. The companies listed at the stock exchange, not only met these considerations, but also were known to be bound by certain minimum requirements to qualify for listing. Those requirements would generally require that the firms undertake certain culture and strategy choices geared towards the attainment of high performance. Whereas a number of studies had been undertaken in the certain aspects of culture and strategy types, strategic planning, strategy formulation and implementation, many of such studies, had left a number of research gaps. Many of them, such as Gregory (2003),Frese et al (2003),Aosa (1992),Mahindra (2002), Kariuki (2001)were either broad or only addressed certain aspects of culture or strategy. None of these studies considered the relationship between the culture, strategy choices and their resultant influence on performance. The researcher set to find this relationship. The researcher had two objectives, first, to establish the extent to which firms listed at the Nairobi Stock Exchange consider organisation's culture in their strategy, and second, establish the relationship between corporate culture types, strategy types and performance by these companies. The researcher used a survey of all the 48 firms that were listed at the Nairobi Stock Exchange as at 15th September 2005. Likert Scale questionnaires with questions framed on the basiS of pre-designed operational definitions of the Schneider's four culture types - control, collaboration, cultivation and competence; and Miles and Snow's strategy types of defender, prospector, analyser and reactor, were designed, and used, in collecting primary data from the company managers responsible for planning and strategy, human resources or finance. This was aimed at collecting relevant data. Secondary data on companies share prices for the previous thirteen months were then collected to obtain the share price for the first Wednesday of the month. This was to reduce costs of the research while at the same time deriving the share prices over a period of high performance and that long enough to observe a trend. The average thirteen - months share prices were used to rank the companies from number one to sixteen as these was the total number that participated. The primary data was analysed using the SPSS and a chi - square test was run to test the relationship between culture, strategy and performance. To do this, a null hypothesis was set that, the choice of culture and strategy types do not determine performance levels, and the alternative hypothesis was that they do determine performance. The researcher observed that the chi - square test could not be relied on as the counts, that is, the observed frequencies, were less than the minimum required count of 5 for the correct use of the chi - square statistic. Consequently, the researcher used tabular analysis of the culture, strategy and average share prices to determine the relationship. The first objective of the study was established as the researcher found that 94.5 per cent of the firms listed at the Nairobi Stock Exchange considered culture in their strategy. It was not, however, noted that the response was rather low to be able to determine the relationship and that whereas the relationship existed to some extent, there were no clear and consistent observation of the relationship between culture, strategy and performance. Hence, it was noted that some factors other than the culture-strategy choices could be the main contributors to performance of these companies.