THE INFLUENCE OF ORGANIZATIONAL CULTURE ON THE PERFORMANCE OF PHILIPPINE BANKS

Abstract

This study examines the relationship between organizational culture and organizational performance in the Philippine banking sector.  Based on a sample of 60 banks operating in the Philippines, this study sought to verify the notion that organizational culture — especially when it is “strong” and “adaptive” — can influence an organization’s financial performance.  The results show that there is a significant and positive correlation between corporate profitability and the banks’ Culture Strength.  This observation is especially relevant in environments characterized by rapid, unpredictable change, given that being too focused on clearly defined visions and goals may cause organizations to lose sight of emerging threats and opportunities and thus make them less adaptive.  Moreover, more detailed analysis reveals the critical importance of bank size (represented chiefly by number of employees) for both deposits performance and profitability. The study further finds that it is the Profitability measure, not the Deposits measure, that relates to Culture Strength.  This is an important result, as Net Profits are an after-cost measure of bank profitability, i.e., a key corporate effectiveness measure.