Going far beyond previous empirical work, John Kotter and James Heskett provide the first comprehensive critical analysis of how the "culture" of a corporation powerfully influences its economic performance, for better or for worse. Through painstaking research at such firms as Hewlett-Packard, Xerox, ICI, Nissan, and First Chicago, as well as a quantitative study of the relationship between culture and performance in more than 200 companies, the authors describe how shared values and unwritten rules can profoundly enhance economic success or, conversely, lead to failure to adapt to changing markets and environments.

With penetrating insight, Kotter and Heskett trace the roots of both healthy and unhealthy cultures, demonstrating how easily the latter emerge, especially in firms which have experienced much past success. Challenging the widely held belief that "strong" corporate cultures create excellent business performance, Kotter and Heskett show that while many shared values and institutionalized practices can promote good performances in some instances, those cultures can also be characterized by arrogance, inward focus, and bureaucracy -- features that undermine an organization's ability to adapt to change. They also show that even "contextually or strategically appropriate" cultures -- ones that fit a firm's strategy and business context -- will not promote excellent performance over long periods of time unless they facilitate the adoption of strategies and practices that continuously respond to changing markets and new competitive environments.

Fundamental to the process of reversing unhealthy cultures and making them more adaptive, the authors assert, is effective leadership. At the heart of this groundbreaking book, Kotter and Heskett describe how executives in ten corporations established new visions, aligned and motivated their managers to provide leadership to serve their customers, employees, and stockholders, and thus created more externally focused and responsive cultures.

Basically, these books are the result of sharp minds drawing conclusions from their own experience. This approach is certainly valuable and has contributed many valuable ideas about the various means of improving business performance - and probably many more faulty notions that have led management up the garden path.

John Kotter and James Heskett's "Corporate Culture and Performance" sits at the other end of the spectrum from this norm. The book is in effect a report on their scientific investigations of a hypothesis. The authors set out a number of hypotheses and then test them against the hard data of long-term business performance. In doing so, they present solid insights into some of the conventional wisdom spouted by management consultants and authors of business books.

The fundamental source of their hypothesis is the question "What is the relationship between corporate culture and business performance?" The fruits of their research yield important observations on the nature of this relationship.

The authors' well-structured research study, and their sharp analytical abilities permit them to trek deep into the jungle of issues surrounding corporate culture. By speculating and then testing their notions against the research data, they uncover some insights that might be undervalued because they seem so intuitively obvious. One of these is central to the book, namely that "adaptive" cultures - ones that help organizations anticipate and adapt to environmental change - are the most effective at helping a company achieve good long-term financial performance.

If the book and - more important - the research were not infused with the analytical skills of the authors, the book would leave the reader with a great many empirically verified observations about culture and management and an understanding of the key issues, but with no practical way of dealing with the issues.

However, the authors have a lot to offer in the way of practical tips. For example, in presenting a fundamental dilemma, they follow it up with a research-tested approach for dealing with the issue:

"Holding onto a good culture requires being both inflexible with regard to core adaptive values and yet flexible with regard to most practices and other values....And it requires providing strong leadership, yet not strangling or smothering delicate leadership initiatives from below....

"...executives need to differentiate basic values and behaviors that aid adaptation from the more specific practices needed to perform well today. This distinction needs to be made explicit when talking about culture...although executives need to foster pride among employees, they also must be as intolerant as possible of arrogance in others and in themselves. They need to confront, and make others confront, as many of their failings as is practical."

In spite of its many qualities, it is easy enough to see why the book isn't likely to top any best-seller lists. In many places it reads too much like a doctoral thesis, severely limiting accessibility. The academic lingo - "Within the limits of this methodology, we conclude from this study...." - and the occasional embalming of the text in footnotes don't add to the readability, and certainly don't lend the text the "personality glamour" that appeals to the mass-cult audience of best-sellers.

However, the writing does have style and a dry humor, and - above all - important empirically verified, occasionally illuminating facts that business people would be better off knowing and using, rather than stumbling along in the dark.


important research on company performance   January 3, 2001
Jeffrey L. Seglin (Boston, MA USA)
16 out of 20 found this review helpful

If you buy into the argument that the only responsibility of a business is to its stockholders and that paying attention to areas outside of this will result in a lesser-performing company, the research of two Harvard Business School professors suggests just the opposite. John Kotter and James Heskett studied the performance of 207 large firms over an 11-year period. They wrote of their findings:

"Corporate culture can have a significant impact on a firm's long-term economic performance. We found that firms with cultures that emphasized all the key managerial constituencies (customers, stockholders, and employees) and leadership from managers at all levels outperformed firms that did not have those cultural traits by a huge margin. Over an eleven-year period, the former increased revenues by an average of 682 percent versus 166 percent for the latter, expanded their work forces by 282 percent versus 36 percent, grew their stock prices by 901 percent versus 74 percent, and improved their net incomes by 756 percent versus 1 percent."

Consider that final finding again: The companies that paid attention equally to customers, stockholders, and employees outperformed those that didn't in growth of net income over the 11-year period by a factor of 756. Paying attention to more than just returning profits to stockholders can have a huge payoff.

Heskett and Kotter's research presented in this book is important reading for anyone tracking company performance in relation to its culture.


important research on company performance   February 3, 2002
Jeffrey L. Seglin (Boston, MA USA)
3 out of 4 found this review helpful

If you buy into the argument that the only responsibility of a business is to its stockholders and that paying attention to areas outside of this will result in a lesser-performing company, the research of two Harvard Business School professors suggests just the opposite. John Kotter and James Heskett studied the performance of 207 large firms over an 11-year period. They wrote of their findings:

"Corporate culture can have a significant impact on a firm's long-term economic performance. We found that firms with cultures that emphasized all the key managerial constituencies (customers, stockholders, and employees) and leadership from managers at all levels outperformed firms that did not have those cultural traits by a huge margin. Over an eleven-year period, the former increased revenues by an average of 682 percent versus 166 percent for the latter, expanded their work forces by 282 percent versus 36 percent, grew their stock prices by 901 percent versus 74 percent, and improved their net incomes by 756 percent versus 1 percent."

Consider that final finding again: The companies that paid attention equally to customers, stockholders, and employees outperformed those that didn't in growth of net income over the 11-year period by a factor of 756. Paying attention to more than just returning profits to stockholders can have a huge payoff.

Heskett and Kotter's research presented in this book is important reading for anyone tracking company performance in relation to its culture.


Organizational Culture and Performance   December 26, 2009
Curt F. Dombecky (Grand Ledge, Michigan)
Book is a comprehensive easy to read and digest account of the landmark study done that demonstrates the relationship between the Quality of the culture of the organization and the outcomes achieved.
The biggest revelation to me was that the strength of an organizational culture has little to do with what it can achieve.
The factors of leadership, entreneuralism and focus on 4 key contingencies were of much greater impact.
I would suggest this as mandatory reading for any leader in these changing, globally influenced, economic times we are in.


A great foundation for understanding corporate culture   December 15, 2003
Eric Kassan (Las Vegas, NV USA)
5 out of 6 found this review helpful

This book, while very academic, gives a solid understanding of several theories about corporate culture and its effects on performance (both short-term and long-term). Rather than starting out with an agenda, they studied hundreds of companies taking analyst's and insider's opinions for information about the culture and then looked at the results. Probably the best finding was that the most successful cultures were those that valued all three interests- customers, shareholders, and employees- consistently.