Organisational climate and corporate performance:
an empirical investigation
Keywords
Organizational performance,
Knitwear industry, Electronics
Abstract
Interest in organisational climate
and its link with corporate
performance is gaining
momentum. The aim of this paper
is to contribute to this discourse
by examining the extent to which
``above'' and ``below'' average
performing companies also
exhibit different climate
measurements. A survey was
conducted on a sample of
electronic component
manufacturers, as a sunrise
industry in a growth phase, and
hosiery and knitwear
manufacturers, as a sunset
industry, in decline. In turn, sub-
samples of companies that
performed above or below
average for each of these sectors
were selected. Climate
dimension measurements
collected from staff of the
sample companies were analysed
against corporate performance
measurements. The results
showed a consistent association
between climate and
performance. Independently of
sector, companies performing
above average showed higher
values on climate dimensions
than those performing below
average. Although a link was
shown to exist between climate
and performance, it would be
premature to conclude that this
connection is causal and, if so, in
which direction.
Management Decision
38/8 [2000] 531±540
# MCB University Press
[ISSN 0025-1747]
Peter Kangis
Surrey European Management School, University of Surrey, Guildford, UK
D. Gordon S. Williams
Surrey European Management School, University of Surrey, Guildford, UK
Introduction
Since the start of the Industrial Revolution,
researchers have enquired about the
contribution of technological innovation
and management techniques to the
performance of an institution. It is a
paradox of ``high-tech'' discourses that
interest in ``other'' explanations of
organisational performance and methods of
management appears never to have been
greater. Sparrow and Gaston (1996) have
commented on the continuous change
experienced during the 1990s in the nature
and structure of organisations and the
challenges confronting employees (at all
levels) in accommodating and assimilating
such changes, e.g. employment
relationships, psychological contracts and
business processes. Sparrow and Gaston
(1996), who investigated the strategic
application of climate survey data, claim
that ``Researchers are, once again, seeking
broad metaphors and methodologies to
capture the phenomenon of change and
adaptation at the organisational level . . .
organisational climate, an area with a long
pedigree, represents a useful avenue in this
context'' (Sparrow and Gaston, 1996,
pp. 679-80).
There is a wide range of both anecdotal and
empirical evidence of what leads to business
success, e.g. leadership (Kotter, 1990);
mergers and acquisitions (Haspeslagh and
Jemison, 1991); re-engineering (Hammer and
Champy, 1993); quality (Deming, 1986);
general strategy (Peters and Waterman, 1982;
Ohmae, 1983; Kanter, 1992; Ansoff, 1990;
Porter, 1990; Schwartz, 1992; Mintzberg, 1994).
With some notable exceptions, e.g. Litwin
and Stringer (1968), Denison (1990), West et al.
(1998) and Patterson and West (1998), few
have attempted to explore the ``process'' of
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the suspected link between climate and
performance, even though considerable
debate has taken place concerning the
``content'' of climate in the form of, for
example, its dimensions and the validity of
different forms of aggregation. Some of the
debate can be found in the works of
Jackofsky and Slocum (1988, 1990) and Payne
(1990a, 1990b).
What is organisational climate?
Organisational climate, as suggested by West
et al. (1998), refers to the ``perceptions that
organisation members share of fundamental
elements of their organisation'' (p. 262). It has
been claimed by Schneider and Snyder (1975,
pp. 474-5) that the molar or holistic nature of
climate perceptions is such that perceptions
function as a frame of reference for the
attainment of some congruity between
behaviour and the system's practices and
procedures. Further, because satisfaction is a
personal evaluation of a system's practices
and procedures, people in the system will
tend to agree less on their satisfaction than
on their description of the system climate.
Moran and Volkwein (1992) defined climate
as:
a relatively enduring characteristic of an
organisation which distinguishes it from
other organisations and (a) embodies
members' collective perceptions about their
organisation with respect to such dimensions
as autonomy, trust, cohesiveness, support,
recognition, innovation and fairness; (b)
produced by member interaction; (c) serves as
a basis for interpreting the situation; (d)
reflects the prevalent norms and attitudes of
the organisation's culture; and (e) acts as a
source of influence for shaping behaviour
(p. 20).
This paper focuses on organisational climate
rather than the often associated concept of
organisation culture; it is useful to show
some of the areas where they differ. Burke
[ 531 ]
Peter Kangis and and Litwin (1992) define climate in terms of
D. Gordon S. Williams perceptions that individuals have of:
Organisational climate and how their local work unit is managed and
corporate performance: an
empirical investigation how effectively they and their day-to-day
colleagues work together on the job. The level
Management Decision
38/8 [2000] 531±540 of analysis, therefore, is the group, the work
unit. Climate is much more in the foreground
of organisational members' perceptions,
whereas culture is more in the background
and defined by beliefs and values. The level of
analysis is the organisation. Climate is, of
course, affected by culture, and people's
perceptions define both, but at different levels
(Burke and Litwin, 1992, pp. 526-7).
Linkages between organisational climate
and organisational performance
The character of an organisation's work
environment (particularly as perceived by a
member) has long been recognised as a
potent influence on employee cognitions,
attitudes and behaviour (Ostroff, 1993). Such
environment influences job satisfaction,
organisation, organisation commitment,
employee turnover, vocational adjustment
and occupational stability (Holland, 1985;
O'Reilly et al., 1991). While much work has
been done in the field of understanding
organisational performance and the
underlying objective determinants (e.g.
contextual features such as structure,
technology and size), little empirical work is
found in the literature identifying
discriminating influences that climate may
have on performance. Where studies have
taken place, they have tended to concentrate
on ``growth'' (sunrise) industries. Baker and
Hart (1989) and Guest (1992) have highlighted
some of the limitations of studies hitherto
(e.g. Peters and Waterman, 1982), especially
the evidence and the methodology tending to
examine only successful companies. Baker
and Hart (1989) further suggested that such
an approach could often mean that it is
difficult to say whether companies are
successful because of their climate or in spite
of it. The evidence for the impact of climate
upon performance is limited (West et al.,
1998); other sources, e.g. Campbell et al.
(1970); Payne and Pugh (1976); Schneider and
Reichers (1983); Joyce and Slocum (1984);
Rousseau (1988); Rentsch (1990) and
Schneider (1990) have made some useful
contribution through their review of climate
and organisations but have not reshaped the
discourse for the purposes of this paper.
The theoretical link between climate and
performance has been examined by several
researchers; some of those most relevant to
this paper being Denison (1990), West et al.
(1998) and Burke and Litwin (1992), where it
was claimed that when perception by
employees of greater involvement in decision
[ 532 ]
making, information sharing and
management support was favourable, then
greater corporate effectiveness was also
observed; reciprocal influence between
climate and performance was also suspected.
The theoretical underpinnings to such
research can be traced back to the Lewinian
theory (Lewin, 1951), which was
characterised as a method of analysing
causal relationships, rather than as a theory
per se. Schneider (1990), building on Lewin's
approach, suggested that there was
reciprocity to be found, i.e. that the
environment could be influenced by
performance, of both the person and the
group (aggregated).
Denison (1990), using behavioural data
collected between 1966 and 1981 in the USA,
measured aspects of climate and structural
variables such as communication flow,
decision-making practices, relationships
with colleagues, organisation of work, team
building and supervisory support. These
were correlated with a number of financial
performance measures in the five years
following the measurement of climate
variables. Several dimensions of climate
were significantly and positively correlated
with subsequent financial performance. Yet,
West et al. (1998) investigating possible
relationships between research excellence
and departmental climates in 14 universities,
concluded that ``. . . dimensions of climate did
not predict as strongly subsequent research
excellence rating. It appears that climate may
be an outcome as much as a cause of rated
effectiveness, at least in this context. . .''
(pp. 277-9).
This paper aims to contribute to the debate
on the discriminating influence of certain
organisational climate dimensions on the
corporate performance between companies
performing above and below average in the
same industrial sector. In the Denison (1990)
analysis, the behavioural data were collected
over the period 1966-1982 when, due to the
time span, considerable change could have
taken place in both perceptions and attitudes
of employees towards ``climate'' dimensions.
Particular consideration needs to be given to
what Sparrow and Gaston (1996, p. 679)
described as ``. . . a continuing revolution in
the nature and shape of organisations with
the emergence of new organisational forms,
concepts of business process, and basis for
employment and psychological contract''.
Such changes can influence how employees
might view over time factors such as ``worker
co-operation'' and ``manager-subordinate
relationships'' (Hirschhorn and Gilmore,
1992).
Peter Kangis and
D. Gordon S. Williams
Organisational climate and
corporate performance: an
empirical investigation
Management Decision
38/8 [2000] 531±540
Table I
Industrial performance comparisons
Profit margin
Return on capital employed
Sales growth
Notes: all figures are percentage averages
Source: UK Industrial Performance analysis, 1997/98
The literature suggests that organisational
performance is dependent not only on the
aims of the organisation, but also on the
process for achieving such aims. Content and
variables in a dynamic strategy need to be
supported by the internal process and
cohesion of the organisation. The
relationship between internal drivers and
organisational performance highlights the
importance of climate as an internal
variable. It is recognised (West et al., 1998)
that the relationship might be interactional
and could depend on contextuality in either
direction. On the basis of the literature
reviewed, it is hypothesised that a strong
statistical association will be observed
between performance measures and climate
dimensions.
Method
Given that the investigation was based on
post hoc corporate performance observations,
it was deemed prudent to compare climate in
firms performing well as against those that
did not do so. This approach would address
some of the criticisms of previous work (e.g.
Peters and Waterman, 1982). Since there
could be significant differences between
firms in different sectors of the economy, it
was decided to focus the ``high-to-low''
performance and climate analysis to firms
from one industrial sector and to replicate
the analysis on another sector; in this way
there would be scope for broadening the
applicability of the findings. In turn, given
that performance of companies in a growth
sector (sunrise industries) could be different
from that of companies in a declining sector
(sunset industries), it was decided to include
firms representing both these phases in the
sample. The sampling frame was the
publication by ICC Business Publications
Ltd, UK Industrial Performance Analysis,
1997/98, which reported sales and financial
performance for the whole of the UK industry
by sector. Taking the average performance as
being the mid-point, one sector was identified
British Whole
industry sample Electronic components
as a whole (N = 40) sector
5.9 6.6 11.7
12.9 15.6 30.3
9.1 7.7 23.6
from the top quartile of the range, which was
the electronic components manufacturing
sector, and one other sector from the bottom
quartile of the performance range; this was
the knitwear and hosiery manufacturing
sector.
Performance measures
The literature considers several
approaches to measuring performance;
some relate to financial dimensions, others
to market positioning or to change (e.g.
Cron and Sobol, 1983; Weill, 1992; Teo and
King, 1996; Byrd and Marshall, 1997). The
selection of corporate performance proxies
for this paper was based on ease of access
and simplicity, even though some
limitations may ensue:
. average profit margin (percentage);
. average return on capital employed
(percentage);
. sales growth (percentage).
The investigation was cross-sectional,
comparing data between companies for the
same time period. To avoid some of the
fluctuations in measured performance that
could result from contingencies attached to
a single reporting cycle, it was decided to
average corporate performance over a
period of three consecutive years, in this
case 1993-1996.
Table I shows the performance of the two
industrial sectors chosen against that of
British industry as a whole; all
performance data were taken from ICC UK
Industrial Performance Analysis (1997/98)
and ICC Business Ratio Plus (1997a, 1997b);
these sources also provided the sampling
frame. It will be noted that the sample
(N = 40) performed very closely to the whole
of UK industry. The sample from the
electronic components sector also performed
closely to that sector as a whole. The
performance of the sample from the hosiery
and knitwear sector was not as good as that
of the whole sector, and this might have some
implications on the other data.
Hosiery and Hosiery and
Electronic knitwear knitwear sample
components sample sector (N = 20)
11.3 2.2 1.9
33.4 7.8 ±2.3
19.4 5.0 ±4.0
[ 533 ]
Peter Kangis and
D. Gordon S. Williams Climate measures
Organisational climate and
corporate performance: an Consideration was given to using either the
empirical investigation perceived work environment (PWE)
Management Decision instrument (Newman, 1977) or one of the
38/8 [2000] 531±540 other popular instruments (i.e. the Business
and Organizational Climate Index ± BOCI).
The original BOCI instrument was developed
by Payne and Pheysey (1971) from Stern's
Organizational Climate Index (Stern, 1970).
In its modified version (Payne and Mansfield,
1978) the BOCI has 17 scales, each with eight
items, requiring 136 items to be responded to.
This was considered a rather cumbersome
imposition on busy executives, with the
additional concern that, because of its length,
some respondents might not address all the
issues raised, or even rush its completion.
The version of the PWE instrument
developed by Newman (1977, pp. 523-4), as
used in this study, consists of only 31 items
grouped into six climate dimensions. Each
item was measured on a 5-point Likert type
scale (anchored on ``strongly agree/strongly
disagree''). The PWE is based on the
assumption that the behaviour of an
individual is a function of both the person
and the environment. Such emphasis on the
perceptual nature of behaviour is Lewinian,
on which the theoretical frame for this study
is based (Lewin, 1951). Five replication
studies of the PWE were undertaken by
Newman (1977), concluding that the
instrument was stable and also displayed
satisfactory psychometric characteristics.
Further support for the validity of PWE come
from Jackofsky and Slocum (1990) and
Ashforth (1985). Direct contact of one of the
present authors with both Newman (1977)
and with Jackofsky, who with Slocum
undertook the longitudinal study of climate
(Jackofsky and Slocum, 1988), using the PWE
instrument, contributed to increasing
confidence on the ``fitness for purpose'' of the
PWE. The PWE uses five-point (agree-
disagree) scales. Respondents were asked to
show how they perceived their firm as a
place in which to work. Newman (1977,
pp. 521-2) stated:
These perceptions are, theoretically, non-
evaluative. This is extremely important. We
are asking organisational members to tell us
what they see in their work environment . . .
we are not asking the employees to evaluate
(good or bad).
Ashforth (1985, p. 837) emphasised the
importance of these dimensions in
representing key aspects of climate with
further endorsement that:
(a) climate is a perceptually-based
abstraction; (b) climate perceptions reflect
what is psychologically meaningful to the
[ 534 ]
individuals concerned; and (c) climate
perceptions tend to be both shared and
resistant to change.
The dimensions and description given by
Newman (1977) are:
. Supervisory style: the extent to which
company management is open,
supportive, considerate.
. Co-workers: the extent to which co-
workers are described as trusting,
friendly, co-operative.
. Work motivation: the extent to which
employees show concern for the quality of
their work, try to get ahead, are involved
in their work, etc.
. Employee competence: the extent to which
the employees have the proper
background training and ``know-how'' to
do what is expected of them.
. Decision making: the extent to which
employees take part in decisions that
affect their work situation.
. Performance rewards: the extent to which
rewards such as promotions and salary
increases are based on performance
rather than other considerations such as
favouritism.
The original PWE instrument included seven
dimensions for climate measurement;
however, following the argument by Payne
(1990b) that the dimension ``task
characteristics'' was a subjective measure of
a structural variable rather than a climate
variable, it was decided by the present
authors to remove this dimension and to use
only six of the seven original dimensions for
this study.
Sample selection
Data were collected from four non-
overlapping samples of employees in 40
companies. Ten companies with above and
ten with below average performance from
the mean for each industrial sector, one set
from a ``sunrise'' (growth sector) and one
from a ``sunset'' (declining sector).
Questionnaires were sent out to 35
electronic component manufacturers and 42
hosiery and knitwear manufacturers.
Telephone follow-ups were undertaken
until ten firms agreed to participate from
each of the four sections. The response
rates are shown in Table II.
Interestingly, companies with
performance below the average for their
sector showed a lower response rate
(p < 0.05) and needed reminders by
telephone before responding. Similarly, the
response rate of individuals within
Peter Kangis and Table II
D. Gordon S. Williams Response rates for companies and for
Organisational climate and
corporate performance: an individuals within companies
empirical investigation
Companies Individuals
Management Decision
38/8 [2000] 531±540 AA BA AA
Electronic components 67 50 90
Hosiery and knitwear 62 38 87
Notes: AA = above average performance for sector;
BA = below average performance for sector; numbers
represent response rate as a percentage
companies performing above average for
their sector was higher than that of
respondents within companies performing
below average. This relationship held in
both sunrise and sunset sectors.
Survey: procedure
A battery of 25 questionnaires was
distributed among employees of each
company by the senior executive responsible
for human resources. Before the
questionnaires were sent out, the chief
executive of each company gave support to
the survey and emphasised voluntary
involvement. It was also agreed that the
human resources executive would distribute
questionnaires as randomly as possible
across the main functional departments and
among different levels of the hierarchy. It
was not possible to follow up the
questionnaire distribution by strata within
each company. Along with each
questionnaire was a separate letter from one
of the authors, with instructions for
completion and guaranteeing anonymity.
With each questionnaire a stamped
addressed envelope was provided for direct
return to one of the authors, so as to ensure
anonymity. The PWE instrument was
pretested in two ways: first, ten copies of the
questionnaire were issued to staff in three
companies; then a group discussion took
place with a small number of executives
(between three and five) from the same
companies with a view to ascertaining
understanding and ease of completion. Both
of these methods gave acceptable results.
Analysis
The data were analysed on SPSS. Table III
shows the reliability measures on different
levels of aggregation of the sample.
It will be noted that the Cronbach alphas
were high for climate measures, suggesting
an acceptable level of consistency in the
responses. The low alpha scores and
probabilities on performance measures
reflect the deliberate inclusion of high and
low performing companies in the sample.
The data in Table IV show the matrix of
correlation coefficients between the
BA
variables for the whole sample of 40
81 companies from the two industrial sectors. A
82 strong and statistically significant
relationship is observed between climate
variables and between performance
variables, thus confirming the consistency of
the analysis shown in Table III. Interestingly,
high levels of correlation are also shown
between most of the climate variables and
performance, but the weakness of the
relationship between ``performance rewards''
and several of the other variables will need
further investigation. Thus, if a conclusion
were required at this stage, it could be stated
that there is a statistical association between
most measures of climate and the
performance proxies, meeting conventional
levels of significance.
Table V shows that statistically significant
associations are observed within the six
climate variables and also within the three
performance variables of the electronic
components sector. A strong and positive
association is also observed between climate
and performance. The limited relationship
between ``performance rewards'' and some of
the other variables will require further
investigation. It can be concluded that there
is a statistically supportable association
between most of the dimensions of climate
and performance for the sample of 20
companies from the electronic components
manufacturing sector.
As in the case of the electronic components
sector, the sample responses from the hosiery
and knitwear sector, displayed in Table VI,
show statistically significant associations
within the climate dimensions, but these are
rather inconsistent in the case of
associations within performance
dimensions. Similarly, the statistical
associations between climate and
performance were not consistently
significant across the matrix.
Differences between high and low
performing companies
Table VII shows a comparison of the scores
between above average and below average
performing companies in the sample, from
both the electronic components and the
hosiery and knitwear sectors. As would be
expected from the deliberate selection of the
sample to include both high and low
performance, the differences in corporate
[ 535 ]
 Peter Kangis and Table III
D. Gordon S. Williams Reliability of data collected
Organisational climate and
corporate performance: an Climate measures Performance measures
empirical investigation
Cases F p alpha F p alpha
Management Decision
38/8 [2000] 531±540 Whole sample 40 53.07 0.000 0.88 0.98 0.38 0.55
Electronics sector: whole sample 20 35.49 0.000 0.88 2.33 0.11 0.51
Electronics sector: above average 10 19.54 0.000 0.63 3.89 0.04 0.13
Electronics sector: below average 10 19.19 0.000 0.82 0.43 0.66 0.45
Hosiery sector: whole sample 20 20.13 0.000 0.89 0.22 0.81 0.43
Hosiery sector: above average 10 27.32 0.000 0.87 6.14 0.01 0.20
Hosiery sector: below average 10 3.92 0.005 0.89 0.91 0.42 0.19

Note: reliability measures from Cronbach's alpha

performance observed in companies from
both sectors are statistically significant. In
support of the central issue in this paper, it is
noted that companies with above average
corporate performance also reported higher
scores on most of the six climate dimensions.
In the case of the electronic components
sector the differences in climate were
consistently in the same direction and highly
significant on five out of the six dimensions.
In the case of the hosiery and knitwear
sector, although the differences were in the
same direction for five of the dimensions,
these were statistically significant in only
three out of the six climate dimensions. It is
worth noting that the levels of significance
for the hosiery and knitwear sector (sunset)
were consistently lower than those of the
electronic components sector (sunrise) on all
the dimensions measured.

Table IV
Whole sample: relationships between variables
Mean SD 1 2 3 4 5 6 7 8 9
Climate variable
1. Supervisory style 3.09 0.44 1.00
2. Co-workers 3.55 0.46 0.57** 1.00
3. Work motivation 2.91 0.35 0.81** 0.61** 1.00
4. Employee competence 3.18 0.63 0.76** 0.61** 0.74** 1.00
5. Decision making 2.80 0.52 0.77** 0.52** 0.73** 0.77** 1.00
6. Performance rewards 2.41 0.54 0.42** 0.33* 0.39* 0.34* 0.31 1.00
Performance variable
7. Percentage profit margin 6.62 12.05 0.48** 0.53** 0.47** 0.54** 0.41** 0.29 1.00
8. Percentage return on capital 15.55 59.30 0.41** 0.41** 0.39* 0.47** 0.27 0.20 0.78** 1.00
9. Percentage sales growth 7.72 21.23 0.46** 0.67** 0.36* 0.39** 0.42** 0.09 0.60** 0.39* 1.00

Notes: mean, standard deviation and Pearson correlation coefficients; *p < 0.05; **p < 0.01; N = 40

Table V
Electronic component manufacturers: relationships between variables
Mean SD 1 2 3 4 5 6 7 8 9
Climate variable
1. Supervisory style 3.08 0.43 1.00
2. Co-workers 3.65 0.33 0.64** 1.00
3. Work motivation 2.9 0.35 0.82** 0.69** 1.00
4. Employee competence 3.28 0.66 0.75** 0.54* 0.69** 1.00
5. Decision making 2.85 0.55 0.74** 0.49* 0.79** 0.78** 1.00
6. Performance rewards 2.33 0.54 0.42 0.50* 0.38 0.37 0.26 1.00
Performance variable
7. Percentage profit margin 11.31 13.87 0.69** 0.58** 0.63** 0.67** 0.59** 0.49* 1.00
8. Percentage return on capital 33.35 61.58 0.65** 0.27 0.49* 0.63** 0.45* 0.19 0.70** 1.00
9. Percentage sales growth 19.39 17.85 0.69** 0.70** 0.62** 0.41 0.36 0.32 0.59** 0.33 1.00
* **
Notes: mean, standard deviation and Pearson correlation coefficients; p < 0.05; p < 0.01; N =20

[ 536 ]
Peter Kangis and
D. Gordon S. Williams
Organisational climate and
corporate performance: an
empirical investigation
Management Decision
38/8 [2000] 531±540
Discussion
The present study examined the relationship
between organisational climate and
organisational performance. Although there
is limited evidence to support the influence of
climate on corporate performance, based on
the work of Denison (1990) it was expected
that companies with higher corporate
performance would show a different
organisational climate from those with a
lower performance. Denison's evidence
supported, to some extent, the suggestion by
Payne and Pugh (1976) that climate may be
viewed as a predictor of organisational
performance.
Two levels of analysis were undertaken.
First, the general relationship between
climate dimensions and corporate
performance dimensions was examined at
the level of the whole sample and at the level
of each of the two industrial sectors. The
correlation coefficients between these two
sets of variables at the whole sample level
(N = 40) were all positive and were also
statistically significant (p < 0.05) in 14 out of
the 18 cells of the matrix. In the absence of
other qualifying factors it may be concluded
that the evidence, at this level, gave support
to the proposition that there is a relationship
between climate and performance. The
correlations at the level of the industrial
sector were generally in the same direction
but with some notable differences. In the case
of the electronic components sector (a
sunrise industry), the relationship between
the two sets of variables held generally, all
the correlation values being positive; they
were also statistically significant (p < 0.05) in
12 out of the 18 cells of the matrix. The
correlation coefficients were also higher than
those of the whole sample in 15 out of the 18
cells. In the case of the hosiery and knitwear
sector (a sunset industry), although the
general relationship between performance
and climate was positive, it was noted that
the correlation coefficients were weaker than
those for the whole sample in 12 out of the 18

Table VI
Hosiery and knitwear manufacturers: relationship between variables
Mean SD 1 2 3 4 5 6 7 8 9
Climate variable
1. Supervisory style 3.09 0.46 1.00
2. Co-workers 3.45 0.55 0.58** 1.00
3. Work motivation 2.92 0.36 0.80** 0.62** 1.00
4. Employee competence 3.08 0.59 0.81** 0.69** 0.83** 1.00
5. Decision making 2.75 0.48 0.82** 0.58** 0.67** 0.75** 1.00
6. Performance rewards 2.49 0.54 0.43 0.31 0.39 0.37 0.41 1.00
Performance variable
7. Percentage profit margin 1.92 7.72 0.33 0.56* 0.40 0.27 0.05 0.25 1.00
8. Percentage return on capital ±2.25 52.52 0.20 0.47* 0.33 0.19 ±0.01 0.34 0.91** 1.00
9. Percentage sales growth ±3.95 17.89 0.43 0.69** 0.29 0.31 0.54* 0.10 0.41 0.22 1.00
* **
Notes: mean, standard deviation and Pearson correlation coefficients; p < 0.05; p < 0.01; N =20

Table VII
Differences in climate scores
Electronic component manufacturing Hosiery and knitwear manufacturing
Above average Below average t p Above average Below average t p
Climate dimensions
Supervisory style 3.46 2.71 8.31 0.001 3.29 2.89 2.08 0.05
Co-workers 3.86 3.45 3.48 0.003 3.74 3.16 2.71 0.01
Work motivation 3.16 2.64 4.82 0.001 3.09 2.75 2.40 0.03
Employee competence 3.65 2.92 2.90 0.01 3.29 2.88 1.63 0.12
Decision making 3.20 2.50 3.60 0.002 2.89 2.62 1.27 0.22
Performance rewards 2.47 2.20 1.13 0.27 2.47 2.51 ±0.16 0.87
Performance dimensions
Profit margin 20.23 2.2 3.72 0.002 6.86 ±3.03 3.71 0.002
Return on capital 67.09 ±0.39 2.90 0.01 21.45 ±25.95 2.22 0.04
Sales growth 31.89 6.9 4.40 0.001 7.10 ±15.00 3.50 0.003
N 10 10 10 10
Note: except for N, t and p, the values shown are the means
[ 537 ]
Peter Kangis and cells of the matrix, and also weaker than
D. Gordon S. Williams those of the electronic components sector in
Organisational climate and 15 out of the 18 cells. The results were
corporate performance: an
empirical investigation statistically significant (p < 0.05) in only four
Management Decision out of the 18 cells. It may thus be concluded
38/8 [2000] 531±540 that, although the link between corporate
performance and climate dimensions held at
the level of the industrial sector, this link
was clearer (in the statistical sense) in the
sunrise than in the sunset sector.
The second level of analysis consisted of
comparing the climate responses of
companies performing above average for
their sector with those performing below
average. This was done for each of the six
climate dimensions. The electronic
components sector (sunrise) showed higher
mean values for all six of the climate
dimensions; five of these being statistically
significant (at least p < 0.01). In the case of the
hosiery and knitwear sector, companies with
above average performance also showed
higher climate values on five out of the six
climate dimensions. The differences were
statistically significant (at least p < 0.05) in
only three out of these six dimensions. The
persistent inconsistency of the values for the
climate dimension of ``performance rewards''
would need further enquiry on both the
validity and reliability of this variable within
the instrument used. Taking the two
industrial sectors together, it may be
concluded that companies with higher than
average performance for their sector also
returned higher values on their climate
dimensions than did companies performing
below average for their sector.
Thus, within the methodological
limitations that are embedded in a small
investigation like the present one, the
evidence collected lent support to the
proposition that there is a statistical
association between organisational climate
and corporate performance. What this
study did not seek to establish is the extent
to which these two concepts are sequential
in nature, interactive or jointly dependent
on some other variable; different
methodologies would need to be considered
to address such issues. Further, the
performance data were gathered for the
period 1993-1996, which preceded the
fieldwork for data collection on climate in
1999; it may thus not be claimed that the
``subsequent'' variable of climate had an
effect on the ``precedent'' variable of
performance as measured within this
project. If a statistical association is
observed between these two variables and if
that relationship is sequential, further
work would need to be undertaken to
establish the length of the lag period (the
[ 538 ]
time lapse between stimulus and response),
the enduring effect of the independent
variable (confirming the claim by Moran
and Volkwein, 1992) and if regression to the
mean effects is observed over a time series.
On the assumption that the link
established holds true in other situations,
what could be the implications and potential
for managers? If they wished to improve
organisational climate, would they aim for
performance improvement first? If they
wished to improve corporate performance,
should they attend to factors that improve
organisation climate first? It is worth noting
two studies reported by Neill and Borell
(1999). It was claimed that management
which was ``holistic'' and accommodated
climate dimensions had a ``profound impact
on overall organisational success . . .'' (Neill
and Borell, 1999, p. 30). In one of the cases
cited, it was claimed, ``one standard deviation
increase in such practices could be traced to
a 7.05 per cent decrease in turnover and, on a
per employee basis, $27,044 more in sales and
$18,641 and $3,814 more in market value and
profits respectively'' (Neill and Borell, 1999,
p. 30). In a second case ``. . . one standard
deviation in high performance work
practices resulted in an increase in
shareholder wealth of more than $40,000 per
employee'' (Neill and Borell, 1999, p. 31).
The link established between the variables
under the conditions of the present study is
statistically supportable but it is not yet
prudent to conclude either on causality or on
a single direction of influence, if any.
Simulations, controlled experiments, case
studies and longitudinal tracking would be
among alternative and complementary
methodologies to be considered in further
investigations. If there is some causal
connection between climate and
performance, then, intuitively, higher scores
on organisational climate might represent a
working environment which could nurture,
foster, or possibly lead to higher corporate
performance.
In conclusion, it is perhaps pertinent to
paraphrase Auden (1940): ``to its members an
organisation is not so much a place of work,
but a whole climate of perceptions and
opinions''. Such an interactionist approach
would be compatible with the findings of this
study.
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1 Which do you think comes first ±
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2 Are there optimal cultures for different
types of organization and different stages
of an organization's life cycle?