Corporate Culture Assessment

A Resource Guide from Ethical Systems

BY ETHICAL SYSTEMS

Corporate culture, a rather nebulous psychological construct, is nevertheless part of an organization’s personality. It informs employees—via expectations, standards, prohibitions, and norms, both written and unwritten—how to behave, ultimately driving individual and group-level behavior. This culture is also inherently and deeply linked to ethics, because individual employees tend to act in accordance with the culture which surrounds them, and use culture as a way to determine if their employer deserves their high levels of effort, or if undermining the organization is acceptable.

We know what company culture is, and why we care about it, but how do we measure a nebulous psychological construct that exists collectively in the minds of organization members? Some researchers have even questioned whether company culture exists. Following such questions, a large body of research demonstrated that indeed organizational culture exists and can be measured in various ways. More recently, research in this area has been aimed at improved validity in assessing culture, and establishing associations with performance, compliance, and ethical behavior. Currently there remain several challenges to assessing culture, in particular as it relates to ethical culture. Individuals may not “buy in” to company culture, even if they are aware of it and surrounded by it. There may be superficial appearances of positive cultural characteristics masking deeper weaknesses, such as conducting training and making public statements that signal desirable culture while internally ignoring abusive management or diversity challenges. Important areas of culture may be overlooked or measured ineffectively. Overlapping concepts such as engagement, job satisfaction, and organizational commitment, measured by a “pulse” survey, may be seen as adequate proxies for culture, resulting in an incomplete picture. 

Academic and commercial approaches for assessing and improving culture are abundant, growing in number, and evolving alongside theory and research. Leaders in organizations are presented with a plethora of competing methods for assessing their company culture. Additionally, they must consider the scope and purpose of the work, ranging from a standalone cultural assessment to complementing the work of a larger consulting or transformation program initiative.

CONTENTS

Ideas to Apply

Areas of Research

Ethical Culture

Ethical Systems Culture Survey

Future Research Recommendations

IDEAS TO APPLY (Based on research covered below)

Ensure that culture assessment is meaningful. Measure, with depth and accuracy, the perceptions and behaviors of the organization to get accurate conclusions and actionable insights. 

Avoid survey fatigue. Use shorter assessments and assess less frequently (e.g. bi-annual vs. monthly) where possible. 

Validate culture assessment. Confirm associations with other important business outcomes such as job satisfaction, business risks, and revenue. 

Determine if larger cultural transformation is needed. Or take advantage of a more-focused approach.

Strive for high participation rates in any assessment campaign.

AREAS OF RESEARCH

At one time, psychologists questioned if organizational culture was real or imagined (Key, 1999). The answer that quickly emerged was a resounding “yes,” yet the challenge of measuring a shared and multifaceted psychological perception that we call “culture” remained daunting. Countless approaches emerged, and there is little agreement today on what is most important to measure, or how to ensure you’ve measured something successfully.  

Our comprehensive review of currently available assessments revealed many varied academic and commercial options for assessing culture inside organizations. 

Comprehensive List of Culture Assessments

*Appears to be open access and may be free to use (please check applicable usage permissions).

These assessments have a lot in common (CultureX and Culture 500 are notable exceptions). They generally were designed to measure relatively universal dimensions of organizational culture that should be relevant to the various organizations where they are deployed. The culture assessments measure the levels of certain cultural components present in the organization, through employee self-reports. This approach of assessment from the outside looking in (external researchers have determined what questions should be asked), often labeled “etic” (vs. emic), is powerful and straightforward. This etic approach allows generalizations and comparisons across organizations. The assessments are refined through standard survey development procedures to improve their validity and reliability; they are analyzed for correlations with key business outcomes; and they provide a dependable way to determine the current state of the culture as well as changes over time. 

There are limitations to the quantitative survey approach that dominates culture assessment, namely that the dimensions of culture may vary internationally or across industries, and that a one-size-fits-all approach also does not capture unique features of an organization. For these reasons, successfully assessing culture requires considering various contexts (geographic, political, socio-cultural, organizational) as well as additional research methods to discover unique features of any given organization. Exploratory and qualitative methods (e.g. interviews, focus groups, meme analysis, network analysis) are likely to complement the assessment approach discussed here.  

A complete culture assessment plan may require additional research methodologies beyond standard quantitative measurements. Qualitative techniques, those that rely on themes and ideas instead of numbers, allow for the organization members to say what they choose, which may include topics that the organization didn’t even know needed evaluation. Common qualitative methods include open-ended survey questions, interviews, and ethnography (observation or interaction on the job). While the presence of the researcher (physically or via data collection instrument) may have an impact, the opportunity for speaking freely opens doors to powerful narrative analysis, unearthing of hidden organizational culture factors, and indicators of the underpinnings that explain the “why” of challenges and opportunities. 

Some of this potential can be realized through something as simple as adding one question to the end of an otherwise quantitative survey that asks “Do you have any other thoughts to share on this topic?” An expertly conducted qualitative study may reveal subtle themes and complex issues emergent across multiple respondents. This approach is particularly useful for aspects of company culture like social connectedness, organizational justice, and technological advancement, as individuals experience them in a narrative and nuanced manner. In one classic example, Michael Piore embarked on a quantitative study on the effect of changing technology in manufacturing, only to discover that the stories (informal qualitative interviews) people told were more valuable than the quantitative data, re-shaping the entire study (Piore, 1979). 

Piore wrote: 

Finally, however, the interviews seemed to reveal what the actual process was and, at least in retrospect, what my thesis came to be about was the definition of that actual process, and a comparison between it and the process I had first envisaged.

Piore uncovered an informal (rather than the expected formal) system of on-the-job training in which class and race differences inhibited success for some employees (e.g. racial minorities). This emergent model of organizational learning was not as hypothesized but almost certainly more accurate. 

The outsider, or etic, approach is most frequently carried out with significant access to employees and permission to conduct the survey analysis. However there is also growing interest and advancement in assessing company cultures from a truly external position, from publicly observable or easily discovered data sources collectively referred to as “unobtrusive indicators” (Reader et al., 2020). This requires no employee contact and uses only artefacts of culture found in the available data. 

For example, employee reviews on sites like Glassdoor can be mined to describe organizational culture (e.g. Das Swain et al., 2020; Luo, Zhou & Shon, 2016). This crowd-contributed approach captures previous employees’ opinions which are unlikely to be suppressed by organizational pressures. However, voluntary online reviews have weaknesses as well; current employees may be inauthentically positive while disgruntled former employees could be unfairly punitive or retaliatory, and many will not publicize their experiences at all. Other external data sources include customer reviews, organizational structure, company websites, social media, annual reports, journalism, and public filings/statements. 

If websites contain a lot of references to corporate responsibility and related words, this could signal something about the actual culture, but of course has questionable validity since a company could have a very different public face that doesn’t match actual behavior. Strict hierarchies versus flatter structures in the organization are likely to correlate with culture in some ways, but again, this link depends on various factors. Policies and mission statements provide similar information about foundational aspects of the company, and can be similarly analyzed. 

One promising external data source is annual reports, which typically are substantive and subject to consequences if inaccurate or misleading. Information on diversity and social responsibility can be gleaned from these sources as well as the more obvious information on financial outlook and resource allocation. Annual reports may help predict outcomes such as financial performance and CEO turnover (Chatman et al., 2014; Fiordelisi & Ricci, 2014). 

Unobtrusive measures can also be used internally, when access is granted or research is conducted within the organization, but there remains a desire to evade employee awareness. There are methodological advantages, and ethical pitfalls, with any approach of this nature, depending on how much employees are aware. As an example, reviews of internal emails for their terminology, sentiment, and employee interactions could provide evidence of the culture taken without the intrusion of a visible research process. If done with no prior notification, the advantage of avoiding performative or subversive responding ensures that the information collected is authentic. 

Conversely, if employees are notified, the content of all emails going forward will be compromised. So, the cost of this advantage is a risk to trust and transparency among employees, but the benefits are enticing. Measures of culture and structural embeddedness drawn from employee emails are correlated with attainment (performance, involuntary exit) in organizations (Goldberg, 2016; Srivastava, 2017). Similarly, text analysis of a written introduction contributed to prediction of turnover (Baek & Ihm, 2020). 

These valuable insights and many others show tremendous promise in the area of internal unobtrusive research, though using surveillance of this kind is controversial. 

How can unobtrusive measures be validated? The answer to this is complicated and a problem at the forefront of cultural assessment research (e.g. Knight, 2018; Reader et al., 2020; Wagstaff et al., 2020). A straightforward demonstration for establishing validity is when organizations conducting more traditional obtrusive research simultaneously examine the alignment with unobtrusive measures. If employees report a strong customer orientation, is this reflected in customer ratings and complaints? Where employees report high levels of trust in their supervisors on internal surveys, do current and former employee reviews of the company show the same? Where agreement/alignment is not found, either or both of the approaches may be lacking in validity.  

Subcultural Differentiation and Fragmentation. A widespread and problematic assumption of organizational culture is that the views of individuals inside the organization are relatively consistent and monolithic. This assumption, resulting in viewing high-level aggregates as representative of the average employee, is the hallmark of the “integrated” approach that dominates research and interventions (Latta, 2019; Martin, 2002). While some level of homogeneity is expected based on awareness of the same policies, mission statements, and executive leadership, there is also variation due to individual perspectives and competing influence from subcultures (departments, teams, informal social groups). 

In most organizations there is a general culture and within that many smaller subcultures. The origin of subcultures may be structural/formal (departments, teams, job roles, locations), spontaneous (personalities, values, goals, work style), reflections of broader societal groups (lifestyles, affiliations, fandoms, identities), or a combination of all of these. The prototypical subculture is one that forms through shared experiences or mutual interest in ongoing issues at work, galvanizing individuals into cohesive subcultures.

Two perspectives—differentiation and fragmentation—give more weight to subcultural variation than does the integrated view. The differentiated approach assumes that subcultures within the company will view the culture differently. Perhaps perceptions of collaboration vary between work teams, or between genders, regarding trust in the organization. Consequently a more granular analysis with additional segmentations is implemented to discover and describe these discrepancies. 

For example, in universities, faculty and administrators are easily-understood horizontal groupings with different cultures. In a corporation, employees in customer service, tech, and marketing will have different subcultures that contribute to (or even eclipse) company culture’s impact on the employee. When variations in cultural perceptions are even more complex, varying between individuals or from one issue to the next within subgroups or subcultures, the culture seems both transient and ambiguous. 

This is known as fragmentation. When culture is fragmented, organization members typically agree on what important issues they face together, but there is little agreement on what to do about them. Fragmentation is best understood as ambiguity (rather than unity), with individual perspectives depending on multiple factors such as years of experience, field of study, geographic location, and personality. 

When it comes to assessing organizational culture, the integrated, differentiated, and fragmented perspectives are something to practice together toward a more nuanced understanding of cultural facets and intricacies. They are not competing, but rather a reflection of complexity, completeness, and forethought in the assessment process. 

Differentiation can be accomplished in large part through choices in data analysis, by attending to groupwise comparisons. Fragmentation data analysis is typified by complex multivariate statistical techniques, but to precisely capture minority cultural viewpoints qualitative methods are more illuminating.

ETHICAL CULTURE

Within the realm of culture assessment, a more narrowly defined “ethical culture” is of particular interest at Ethical Systems. Most culture assessments include some elements of ethics, while others are designed specifically to address only ethical culture. Many companies also measure related constructs such as engagement, satisfaction with supervision, citizenship behaviors, or organizational commitment as proxies for ethical culture. While correlated, these measures likely fail to capture the strength of an ethical culture as effectively as standalone ethical culture assessments or broader assessments with a distinct ethical component. 

Ethical culture is not just about shared understanding; rather it is both informal and formal, manifesting through both cultural messages and systems of reward and punishment (Treviño & Brown, 2004). If employees are told that building trust over the long term with external stakeholders is important, while rewards do not predominantly promote short-term financial gains, this combination of ethical culture forces is likely to result in ethical behavior. 

Consequences of Ethical Culture. Ethical culture ratings are well-evidenced as indicators of working conditions for employees. In a perfect world, a desire to conduct business ethically would be all the motivation needed to assess and improve ethical culture. For those requiring a business case, ethical culture is generally a worthwhile investment. An ethical culture that is consistently strong over time, rather than weak or declining, is associated with greater well-being among managers (Huhtala, Kaptein & Feldt, 2016). Managers who ultimately leave an organization, especially those citing loss of motivation and dissatisfaction with the company, rate their former employer lower on ethical organizational culture (Kangas at al., 2018), suggesting that culture might be related to retention. 

These contemporary findings are consistent with previous research finding that ethical culture is beneficially associated with job satisfaction, commitment, turnover intention, and willingness to recommend the organization. (Ruiz-Palomino, Martínez-Cañas & Fontrodona, 2013). A recent meta-analysis found that strong ethical culture is associated with higher levels of organizational citizenship behavior (voluntary employee behavior to support the organization), lower levels of counterproductive work behavior (loafing, absenteeism, fraud, etc.), and a smaller positive association with task performance (Peng & Kim, 2020). 

Ethical culture acts, in part, as a mediator of ethical leadership, meaning that one way ethical leadership is effective is by supporting an ethical culture that permeates the organization. Employees perceiving high levels of ethical culture are also more motivated, particularly when they believe there is congruence of values within the organization and that the ethical culture is clear, with achievable aims (Colaco & Loi, 2019). Motivation as an outcome of ethical culture was confirmed by another study that also reiterated the elevated importance of management congruence (Pavić, Šerić, Šain & 2018). 

Ethical cultures are also linked to greater company financial performance. One recent study used glassdoor.com reviews in the context of Ethical Systems’ 2-factor model to predict financial performance, finding that unethical (disqualifying) cultural factors were correlated with lower performance (Di Miceli da Silveira, 2019). 

Realizing the benefits of ethical culture and anticipating complexities are probably best left to expert interventions. As an example of the intricacies that should be considered, the effects of ethical climate on employee attitudes/stress/performance and customer-oriented behavior depend on employee experience, the country (collectivism, corruption) in which the company is operating, and even the response rate of assessments (Friend, Jaramillo & Johnson, 2020). Along the same lines, Ruiz-Palomino and colleagues reported that a slew of positive outcomes from ethical culture are mediated by person-organization fit, hinting at the importance of employee selection and/or controlling for P-O fit in research (Ruiz-Palomino, Martínez-Cañas & Fontrodona, 2013). 

As these examples illustrate, adapting targeted methods to account for various individual- job- company- and country-level differences may maximize benefits gained from assessment and promotion of ethical culture. 

Integrity vs compliance. A major distinction between culture assessment efforts in organizations is what they aim to achieve. Compliance is a near necessity for existence and ongoing profitability, while integrity is a longer-term goal of doing business with ethics in mind. Peter Verhezen (2010) explained that organizational values:

. . . can be either (1) embodied in law and regulations, which will lead to compliance that functions as ‘‘legal borderlines’’ or (2) in narratives of ethical ideals, which can be reflected in integrity-based management that compel as inspiring living examples of moral excellence.

The latter concept of narratives, ideals, and inspiration describes what integrity looks like compared to mere compliance. With important issues like gender and racial equality, compliance means avoiding discrimination lawsuits and labor law violations, while integrity is creating a culture where all people have their voices heard, participate in some decisions, trust the organization, and are supported toward their full potential. The Society for Human Resources Management (Olson, 2013) further separates ethical culture into three models: compliance, positive, and virtuous, each successively more desirable. Reyes-Calderon and colleagues (2018) proposed that while integrity and compliance are often viewed as competing approaches with their own unique merits and drawbacks, they can be melded into a combined “harmonized” approach. 

Ultimately, integrity addresses root causes to prevent unethical behavior, while compliance remedies unethical behavior more directly.

​ETHICAL SYSTEMS CULTURE SURVEY

Ethical systems has developed its own unique assessment of ethical culture with a focus on academic rigor and brevity. The 20-item survey assesses 5 ethical culture domains: 

Trust & Fairness. While trust and fairness are not identical, we found them to be mostly inseparable as similar aspects of integrity. Statistical analysis suggested that they belong to the same latent construct. It is difficult to imagine trusting an unfair organization or expecting an organization you distrust to act with fairness. 

Empathy. In ethical culture, empathy refers to identifying with, understanding, and feeling sympathy for others. Lower scores indicate a cold uncaring workplace, while higher scores indicate consideration and feeling for the needs of others. 

Ethical Leadership. Focusing on ethics-related elements of leadership, this dimension assesses the extent to which managers and/or leadership have the best interests of their employees in mind, lead by example, and conduct themselves with fair and trustworthy practices. The trust and fairness concept is similar to the dimension with a similar label, however organization- and manager-level trust and fairness are often incongruent. 

Ethical Orientation. The overall orientation of the organization toward benevolence or selfishness, or the company “ethos,” is the awareness of ethical issues, tendency to do the right thing, and putting larger societal/humanitarian goals above one’s selfish interests.  

Speak-Up Culture. When an employee sees an ethical issue, do they feel empowered to speak up about it, or do they fear retaliation for doing so? A healthy speak-up culture is one in which each employee feels that they, and their colleagues, can and would choose to speak up when appropriate. 

Distilled from 36 items and 9 factors (Fairness, Leadership, Awareness, Ethical Climate, Decision Making, Efficacy, Empathy, Trust, Speak-up Culture), our assessment taps the core elements of a healthy ethical culture in organizations. 

This 5-factor assessment measures the dimensions on which the Ethical Systems 2-Factor Model of Ethical Culture identifies qualifiers and disqualifiers. For example, organizational unfairness and distrust are disqualifying, while fairness and trust are qualifying. In the ethical-orientation dimension, a selfish orientation is disqualifying while a benevolent orientation is qualifying. For speak-up culture, the positive qualifying condition is accepting or rewarding speaking up, while a fear of retaliation would be disqualifying. This allows for understanding differences along the spectrum of ethical behavior, from high-risk disqualifiers to aspirational qualifiers. 

The Ethical Systems Culture Assessment is intended to serve as a measure of core ethical-culture components. Additional optional modules are currently in development toward a more adaptive and customized approach based on needs of diverse organizations. 

FUTURE RESEARCH RECOMMENDATIONS

  • Comparison of two or more culture assessments in the same population, to establish convergence/divergence, and relative predictive validity for key outcomes.
  • Development of assessments that are able to identify not only systemic, group-level culture problems, but also the influence of individuals on those around them. 
  • New measures of individual identification and buy-in with company culture to clarify the person-culture relationship. 
  • Validation of cross-cultural (national and regional) consistency of assessments, or development of assessment variants that include culture-specific language/items. 
  • Improved methods for identifying subcultures, and assessing sub- and company- level cultures simultaneously.
  • Analysis of how culture is related to successful mergers and acquisitions, as well as how the cultures will change or meld when merged.
  • Investigation of how culture assessment differs in remote/virtual working environments, including validation or modification of existing items/subscales.

RECOMMENDED READING

Cameron, K. S., & Quinn, R. E. (1999). An introduction to changing organizational culture. Diagnosing and changing organizational culture: Based on the competing values framework, 1-17.

Cunliffe, A. L. (2010). Retelling tales of the field: In search of organizational ethnography 20 years on.

Denison, D., Nieminen, L., & Kotrba, L. (2014). Diagnosing organizational cultures: A conceptual and empirical review of culture effectiveness surveys. European Journal of Work and Organizational Psychology, 23(1), 145-161.

Di Miceli da Silveira, A. (2019). The Costs of the Rotten Barrel: Financial Performance and Unethical Culture Based on Employee Reviews. Available at SSRN 3408790.

Friend, S. B., Jaramillo, F., & Johnson, J. S. (2020). Ethical Climate at the Frontline: A Meta-Analytic Evaluation. Journal of Service Research, 23(2), 116-138.

Kangas, M., Kaptein, M., Huhtala, M., Lämsä, A. M., Pihlajasaari, P., & Feldt, T. (2018). Why do managers leave their organization? Investigating the role of ethical organizational culture in managerial turnover. Journal of Business Ethics, 153(3), 707-723.

Kaptein, M. (2011). Understanding unethical behavior by unraveling ethical culture. Human relations, 64(6), 843-869.

Latta, G. F. (2019). A complexity analysis of organizational culture, leadership and engagement: Integration, differentiation and fragmentation. International Journal of Leadership in Education.

Peng, A. C., & Kim, D. (2020). A meta‐analytic test of the differential pathways linking ethical leadership to normative conduct. Journal of Organizational Behavior, 41(4), 348-368. 

Reader, T. W., Gillespie, A., Hald, J., & Patterson, M. (2020). Unobtrusive indicators of culture for organizations: a systematic review. European Journal of Work and Organizational Psychology, 1-17.

Ruiz-Palomino, P., Martínez-Cañas, R., & Fontrodona, J. (2013). Ethical culture and employee outcomes: The mediating role of person-organization fit. Journal of Business Ethics, 116(1), 173-188.

Treviño, L.K., Butterfield, K.D. and McCabe, D.L. (1998). “The ethical context in organizations: influences on employee attitudes and behaviors,” Business Ethics Quarterly, Vol. 8, pp. 447-76.

This collection of references and resources was created by Ethical Systems at the NYU Stern School of Business. This content is used by permission of Ethical Systems.

EMPOWERING ETHICS

Try BERC's free ethical decision-making tool.

TRY NOW(opens in new tab)

ETHICS AND COMPLIANCE TOOLKITS

Practical guidance that you can implement today.
Identifying and mentoring future principled leaders
Learn More

MOST RECENT BLOG POSTS

July 27, 2021

Robinhood: Debriefing a Scandal

\John Greniuk, Compliance & Ethics Contributor, BERC For the first in this series, and a backgrounder on the Robinhood/Gamestop situation, please click here. On February 18, 2021, the House of Representatives questioned ...
Read More
July 27, 2021

Toro pays tribute to former CEO Melrose with gift to St. Thomas business school

Endowment to rename ethics center at business school after Kendrick Melrose.  As the new offices of the Melrose and The Toro Company Center for Principled Leadership are about to open on ...
Read More