The Center for Hospitality Research Hospitality Leadership Through Learning The Effect of Corporate Culture and Strategic Orientation on Financial Performance: An Analysis of South Korean Upscale and Luxury Hotels Cornell Hospitality Report th Vol. 12 No. 4, January 2012 201992 - 2012 by HyunJeong "Spring" Han, Ph.D., and Rohit Verma, Ph.D. ANNIVERSARY All CHR reports are available for free download, but may not be reposted, reproduced, or distributed without the express permission of the publisher. Advisory Board Niklas Andréen, Group Vice President Global Hospitality & Partner Marketing, Travelport GDS Ra’anan Ben-Zur, Chief Executive Officer, French Quarter Holdings, Inc. Scott Berman, Principal, Real Estate Business Advisory Services, Industry Leader, Hospitality & Leisure, PricewaterhouseCoopers Raymond Bickson, Managing Director and Chief Executive Officer, Taj Group of Hotels, Resorts, and Palaces Stephen C. Brandman, Co-Owner, Thompson Hotels, Inc. 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Power and Associates • The Lodging Conference • Lodging Hospitality • Lodging Magazine • LRA Worldwide, Inc. • Milestone Internet Marketing • MindFolio • Mindshare Technologies • PhoCusWright Inc. • PKF Hospitality Research • Questex Hospitality Group • Resort and Recreation Magazine • The Resort Trades • RestaurantEdge.com • Shibata Publishing Co. • Synovate • UniFocus • USA Today • Vantage Strategy • WageWatch, Inc. • The Wall Street Journal • WIWIH.COM The Effect of Corporate Culture and Strategic Orientation on Financial Performance: An Analysis of South Korean Upscale and Luxury Hotels by HyunJeong “Spring” Han and Rohit Verma AbouT The AuThors hyunJeong “spring” han, Ph.D., is a visiting scholar at the Cornell Center for Hospitality Research (hjh56@ cornell.edu). Prior to her current appointment, she was a lecturer at the School of Tourism at Kyonggi University in Seoul, Korea, where she taught courses on financial management and hotel accounting. Her current research interests include interrelated facets of financial and strategic management, corporate culture, and operations and marketing. Among other journals, she has published in Korean Journal of Hotel Administration and Korean Journal of Korean Convention Research. This report grew out of her research presentation at QUIS12 (the 12th International Research Symposium on Service Excellence in Management Conference). She has also presented at the 38th International Tourism Symposium; Korean Academic Society of Hospitality Administration, 12th International Academic Conference; Korea Convention Society, 31th Academic Conference; and the Korea Academic Society of Tourism Management. rohit Verma, Ph.D., is professor of operations management and executive director of the Center for Hospitality Research at the Cornell University School of Hotel Administration (rohit.verma@cornell.edu). Among his research interests are product-and-service design and innovation, customer choice modeling, and quality process improvement of supplier selection strategies. His work has appeared in such publications as MIT Sloan Management Review, Journal of Operations Management, and Cornell Hospitality Quarterly. 4 The Center for Hospitality Research • Cornell University exeCuTiVe suMMAry Researchers have been studying the importance of an appropriate and effective culture to business success for over thirty years. A successful culture combined with a congruent strategic orientation is now considered essential for a business to maintain its edge in a fiercely competitive environment. So far, however, little research has focused directly on how the hospitality industry can maximize performance through the combination of a corporate culture and a strategic action plan. In this study, we explore the relationship between strategic orientation, corporate culture, and financial performance for hotels, using data from 211 managers of 99 upscale and luxury (4- or 5-star) hotels in South Korea. The study shows that corporate culture directly affects financial performance, but for this group of hotels not all cultures performed equally. The transaction- oriented Market culture did not promote financial performance, as compared to the family-oriented Clan culture or the innovative “Adhocracy” culture. The tradition-bound Hierarchical culture actually cost hotels in terms of financial performance. Certain strategic orientations moderated and improved financial results for some of the cultures, but not all. The opportunity-seeking approach of a Leading strategic orientation drove financial results for the Clan and Adhocracy cultures, but did not help the Market or Hierarchy cultures. Other strategic orientations also drove financial results, including Future- analytic and Defensive. Cornell Hospitality Report • January 2012 • www.chr.cornell.edu 5 Cornell hospiTAliTy reporT The Effect of Corporate Culture and Strategic Orientation on Financial Performance: An Analysis of South Korean Upscale and Luxury Hotels by HyunJeong “Spring” Han and Rohit Verma The relationship between corporate culture and performance has been extensively studied during the last thirty years as part of the larger topic of strategic management.1 Studies presented in three widely circulated books, for example, have verified a strong relationship between culture and performance.2 More recently, Kim, Lee, and Yu presented the results that demonstrate that a “strong culture” which is shared by majority of employees could be a predictor variable for measuring an organization’s financial performance.3 1 Avci, U., Madanoglu, M. and Okumus, F., (2010), “Strategic orientation and performance of tourism firms: Evidence from a developing country,” Tour- ism Management, 31(5), 1-11. 2 W.G. Ouchi. 1981. Theory Z: How American Business Can Meet the Japanese Challenge (Reading, MA: Addison Wesley): T.E. Deal and A.A. Kennedy, 1982. Corporate Cultures: The Rites and Rituals of Corporate Life. (Reading, MA: Addison Wesley Publishing); and T. Peters and R.W. Waterman. 1982. In Search of Excellence: Lessons from America's Best Run Companies. (New York: Harper and Row). 3 S. Kim, J. Lee, and K. Yu (2004) Corporate Culture and Organizational Performance. Journal of Managerial Psychology. 19 (4): 34-359. 6 The Center for Hospitality Research • Cornell University Exhibit 1 proposed relationships between corporate culture, strategic orientation, and performance strategic orientation leading Future-analytic Aggressive Defensive Adventurous Conservative Corporate Culture performance Clan Growth oriented Adhocracy hierarchy profit oriented Market While this topic has been studied extensively in the Corporate culture has come to be defined as the strategic management literature, to our knowledge, none of pattern of shared values and beliefs that help individuals the studies are based on the global hospitality and tourism understand organizational functioning and thus provide industry. Moreover, although those early studies confirm the norms for behavior in the organization.5 Another way to benefits of a strong culture, we need to ascertain exactly what look at corporate culture is to focus on the underlying type of culture works best for the hotel industry. Therefore, in values and attitudes which affect the way in which things this study, we explore the relationship between four types of are done.6 Most intriguingly, a corporate culture can work corporate culture, related strategic orientations, and resulting against a company’s success as much as it can excite and financial performance for hotels, as shown in the theoretical guide their actions for the company’s benefit.7 This insight framework in Exhibit 1. For this study we collected data from has led researchers to investigate the link between corpo- managers and executives at the upscale and luxury hotels rate culture and other variables that promote corporate (4- or 5-star) located in various parts of South Korea. Before success. So, for example, Pascale argues that assessing we present our findings, we first review cultural theory and an organizational culture allows one to predict an orga- research. We then describe our research design, present our results; and discuss the managerial implications of our work. Effectiveness. Organization Science. 6 (4): 204-223; Shein, E.H., (1985), Corporate Culture Organizational Culture and Leadership. San Francisco, Jossey-Bass Publishers; Siehl, C., and Martin, G. (1988). Measuring organizational A 1979 study by Pettigrew can be recognized as the beginning culture: Mixing qualitative and quantitative methods, in Inside organiza- of formal writing on the concept of organizational culture. tions: Understanding the human dimension ed. Jones, M.O., Moore, M.D. Drawing on anthropological concepts, he showed how related and Snyder, R.C. (London: Sage Publications); and Wallach, E.J., (1983). Individuals and organizations: the cultural match. Training and Develop- concepts like “symbolism,” “myth,” and “rituals” can be used ment Journal. 37 (2) : 28–36. in organizational analysis to reveal the “deep structure” of an 5 Desphande, R.J. and Webster, F.E.Jr., (1989), Organizational culture organization.4 and marketing: defining the research agenda, Journal of Marketing, 4 53(2), 3-15.A.M. Pettigrew. 1979. On studying corporate cultures, Administrative Sci- 6 ence Quarterly, 24: 570–581. See also: Dandridge, T., Mitroff, I., and Joyce, J. Deal and Kennedy, op.cit. (1980). Organizational symbolism: A topic to expand organizational analy- 7 Doran, K.M., Haddad, K.M. and Chow, C.W., (2003), The relationship sis. Academy of Management Review, 5: 77-82. Subsequent researchers have between corporate culture and performance in Bahrain hotels: Findings proposed various definitions of culture. See, for example: D.R. Denison and Management Implications, International Journal of Hospitality & and A.K. Mishra. (1995) Toward a Theory of Organizational Culture and Tourism Administration, 4(3), 65-80. Cornell Hospitality Report • January 2012 • www.chr.cornell.edu 7 Exhibit 2 Definition of corporate culture types Culture Description Clan Culture It is like an extended family. The management style is characterized by teamwork, consensus, and (relationship-oriented Culture) participation. The organization emphasizes human development. Adhocracy Culture The organization is a very dynamic entrepreneurial place. There is an emphasis on being on the (innovation-oriented Culture) cutting edge. Trying new things and prospecting for opportunities are valued. Market Culture The organization is very results oriented. Major concern is with getting the job done. People are very (Task-oriented Culture) competitive and achievement oriented. hierarchy Culture The organization is a very controlled and structured place. The glue that holds the organization together is formal rules and policies. Efficiency, control and smooth operations are importance. Note: Definitions are from: K.S. Cameron and R.E. Quinn, Diagnosing and Changing Organizational Culture (New York: Addison Wesley, 1999); and K.S. Cameron and R. E. Quinn, Diagnosing and Changing Organizational Culture, Revised edition (San Francisco: Jossey-Bass, 2006). nization’s ability to survive.8 With that in mind, this study view that strategic orientation is a significant driver of supe- draws on the culture taxonomy developed by Cameron and rior performance in emerging economies (and elsewhere).11 Quinn, as based on their Organizational Culture Assessment For this study, we adopt the framework developed by Instrument.9 They propose four culture types, namely, Clan, Venkatraman,12 who conceptualized strategic orientation in “Adhocracy,” Market, and Hierarchy, which are explained in terms of six dimensions, for which he developed operational Exhibit 2. Briefly, a Clan culture is a family-style organiza- indicators along the following six dimensions: Aggressive- tion, an Adhocracy seeks to be as entrepreneurial as possible, ness, Analysis, Defensiveness, Futurity, Proactivity, and Risk- a Market culture focuses on results, and a Hierarchical iness. As shown in Exhibit 3 (on the next page), Venkatra- culture is structured and governed by formal rules. man’s research outlined six strategic orientation types, which Strategic Orientation we apply in this study. Briefly, they are Leading (always trying to innovate), Future-Analytic (focusing on research The stream of literature that has developed and defined for future activities), Aggressive (undercutting competitors), corporate strategic orientation has unfolded largely separate Defensive (maintaining careful control), Adventurous (risk from the culture research, even though strategy is also a taking), and Conservative (avoiding risk). considerable factor in corporate success and failure. Strategic orientation is a set of behaviors that operationalize a firm’s Performance: overarching strategy. Strategic orientation focuses on how The Intersection of Culture and Strategy firms should interact with external environmental aspects Many researchers have attempted to explain organizational such as customers, competitors, and technology to conduct performance in terms of culture or strategic orientation,13 business.10 Because strategic orientation is considered a controllable variable, companies may hold their managers 11 Zhou, K,Z. and Li C.B. (2007), How does strategic orientation matter accountable for the company’s strategy. This stems from the in Chinese firms?, Asia Pacific Journal of Management, 24(4), 47–66. 12 8 Venkatraman, V. (1989), Strategic orientation of business enterprises: Pascale, R. T., 1990. Managing on the edge. New York: Simon and The construct, dimensionality and measurement, Management Science, Schuster. 35(8), 942-962. 9 Cameron, K.S. and Quinn, R.E., (1999), Diagnosing and Changing Orga- 13 The list is lengthy: Adler, N.J. and Jelinek M. (1986), Is “Organizational nizational Culture. (New York: Addison Wesley). culture” culture bound?, Human Resource Management, 25 (1): 73-90; 10 Day, G.S., (1994), The capabilities of market-driven organizations, Andrews, K.R.,(1971). The Concept of Corporate Strategy. Des Plaines, IL: Journal of Marketing, 58(4), 37–52; Gatignon, H. and Xuereb, J.M., (1997), Dow Jones-Irwin; Ansoff, H.,(1965). Corporate Strategy. New York: Mc- Strategic orientation of the firm and new product performance, Journal of Graw Hill; Barney, J.,(1986), Organizational culture: Can it be a source of Marketing Research, 34(1), 77–90. sustained competitive advantage?, Academic Management Review, 11(3), 8 The Center for Hospitality Research • Cornell University Exhibit 3 Definition of strategic orientation types strategic orientation Description leading Usually the first ones to introduce new brands or products in the market. Constantly seeking new opportunities related to the present operations Future-analytic Emphasize basic research to provide them with future competitive edge and "What-if" analysis of critical issues. Emphasize effective coordination among different functional areas Aggressive Sacrificing profitability to gain market share and setting prices below competition. Cutting prices to increase market share Defensive Significant modifications to the manufacturing technology. Use of cost control systems for monitoring performance Adventurous Their operations can be generally characterized as high-risk. New projects are approved with "blanket" Conservative They seem to adopt a rather conservative view when making major decisions. Operations have generally followed the "tried and true" paths Note: Definitions are from: V. Venkatraman, "Strategic Orientation of Business Enterprises: The Construct, Dimensionality, and Measurement," Management Science, Vol. 35, No. 8 (1989), pp. 942-962. and others have focused on classification of corporate culture might directly affect performance,15 and Kim, Lee, strategies and performance.14 However, the results have been and Yu investigated the relationship between corporate cul- inconsistent. We have found only a few studies that related ture and organizational performance among three industries corporate culture to performance in the service industries. in Singapore: high-tech manufacturing, hospitals, and insur- Doran, Haddad, and Chow, argued that hotels’ corporate ance.16 They documented a significant relationship between ROA and corporate culture for manufacturing but could not 656–665; Cameron, K.S. and Freeman, S.I., (1991), Cultural congruence, find such a relationship for the two service industries that strength, and type: Relationships to effectiveness, Research in organiza- they studied. tional change and development, 5(2), 23-58; Child, J., (1972), Organiza- Avci, Madanoglu, and Okumus obtained a different out- tional Structure, Environment and Performance: The Role of Strategic Choice, Sociology, 10(6), 1-22; Czarniawska, B. A., (1998), Narrative come in their investigation of the financial and non-financial approach to organization studies. Thousand Oaks, CA: Sage Publications; outcomes for tourism firms in Turkey that adopted one of Deal and Kennedy, op.cit.; Denison, op.cit.; Fisher, C. J. and Alford, R. J., four strategic orientations.17 This study found differences (2000), “Consulting on Culture: A New Bottom-Line”, Consulting Psychol- in both financial and non-financial performance based on ogy Journal, 52(3), 206-217; Hatch, M. J., (1993), The Dynamics of Orga- nizational Culture, Academy of Management Review, 18(4), 657-693; and the strategic orientations. Garrigos-Simon, Marques, and Hofstede, G.B., Nuijen, B., Ohayv, D. and Sanders, G., (1990), Measuring Narangajavana likewise found significant differences in total Organizational Cultures: a Qualitative and Quantitative Study Across performance in an analysis of four types of strategic orienta- Twenty Cases, Administrative Science Quarterly, 35, 286-316. tion for Spanish hotels.18 14 See, for example: Avci, Madanoglu and Okumus, op.cit.; Conant, J.S., One consistent theme regarding corporate culture was Mokwa, M.P. and Varadarajan, P.R.,(1990), Strategic types, distinctive marketing competencies and organizational performance: A multiple put forth by Barney: that is the idea that a firm’s culture can measures-based study, Strategic Management Journal, 11(2), 365-383; 15 Dess, G. and Davis, P.S., (1984), Porter’s(1980) Generic Strategies as Doran, Haddad and Chow, op.cit. Determinants of Strategic Group Membership and Organizational 16 Kim, Lee and Yu, op.cit. Performance, Academy of Management Journal, 27(3), 467-488; Doyle, 17 P. and Hooley, G., (1992), Strategic orientation and corporate perfor- Avci, Madanoglu and Okumus, op.cit., based on: Miles, R.E., and Snow, mance, International Journal of Research of Marketing, 9(1), 59–73; McKee, C.C. (1978). Organizational strategy structure and process. (New York: D.O., Varadarajan, R. and Pride, W. M., (1989), Strategic Adaptability McGraw Hill). and Firm Performance: A Market-Contingent Perspective, Journal of 18 Garrigos-Simon, F. J., Marques, D. P., and Naragajavana, Y., (2005), Marketing, 53(3), 21-35; Morgan, E.R. and Strong A.C., (2003), Business Competitive strategies and performance in Spanish hospitality firms, performance and dimension of strategic orientation, Journal of Business International Journal of Contemporary Hospitality Management, 17(10), Research, 56, 163-176. 22-38. Cornell Hospitality Report • January 2012 • www.chr.cornell.edu 9 ture.20E 4 Others, including Deshpande and Webster, argue that xhibit corporate culture directly affects business outcomes and Demographic profile of respondents (N = 211) also interacts with strategic orientation.21 For the purposes of this study, we take the view that corporate culture can be Demographic number percentage positioned as an antecedent, a moderator, or an interven- category ing variable in the relationship between market (strategic) Age orientation and business performance, as indicated in the model in Exhibit 1.22 29 or younger 5 2.4 30-39 years old 123 58.3 Research Methodology 40-49 years old 57 27.0 We created a questionnaire that was divided into the fol- lowing three sections. The first section drew from Cameron 50 or older 26 12.3 and Quinn’s Organizational Culture Assessment Instrument (OCAI), which rates organizations on the following dimen- Gender sions: internal focus and integration, stability and control, Male 151 71.6 flexibility and discretion, and external focus and differen- tiation. 23 The OCAI consists of six questions relating to an Female 60 28.7 organization’s dominant characteristics, leadership, manage- ment of employees, organizational “glue,” strategic emphasis, Career length and criteria for success. For each question, respondents are 5-9 year 100 47.4 asked to divide 100 points among four possible alternatives, depending on the extent to which a particular alternative de- 10-14 year 38 18.0 scribes their organization in each question. So, for example, 15 or more 73 34.6 on a particular question, if you think alternative A strongly describes your organization, while alternative B and C less Department so but are somewhat similar, and alternative D hardly fits at all, you might give fifty-five points to A, twenty points each Front office 116 55.0 to B and C, and five points to D. back office 76 36.0 The second section of our questionnaire was composed executives 19 9.0 of questions related to measurement of strategic orientation of business enterprises developed by Venkatraman.24 The third section of the questionnaire assessed finan- education level cial performance based on subjective measures scored by high school or less 3 1.4 the respondents. We would have liked to collect objective Associate’s degree 59 28.0 financial performance measures, but Korea has nothing like bachelor’s degree 115 54.5 the uniform system of accounts found in the U.S., and firms are reluctant to share their financial data, since this can Graduate degree or higher 34 16.1 reveal marketing strategies. We should note, however, that positions held 20 Assistant manager 88 41.7 Green, S., (1988). Organizational culture and symbolism, Long range Planning, 21 (4): 21-129.; Koza, M. P., and Lewin, A.Y., (1998). The co- Manager 84 38.4 evolution of strategic alliances, Organization Science, 9 (3) : 255-264; and Schwartz, H., and Davis, S. M., (1981). Matching corporate culture and senior manager 23 10.9 business strategy. Organizational Dynamics, Summer: 30-48. executives 19 9.0 21 Desphande, R.J. and Webster, F.E.Jr., (1989), Organizational culture and marketing: defining the research agenda. Journal of Marketing, 53(2), be a source of sustainable competitive advantage.19 That 3-15. 22 said, researchers cannot agree on the relationship between Hynes N., (2009). Corporate culture, strategic orientation, and busi- strategic orientation and corporate culture. Some authors ness performance: New approaches to modeling complex relationships, Technological Forecasting & Social Change, 76 : 644-651. think organizational strategy arises out of corporate cul- 23 Cameron, K.S. and Quinn, R.E., (1999), Diagnosing and Changing Organizational Culture. (New York: Addison Wesley). 19 Barney. op.cit. 24 Venkatraman, op.cit. 10 The Center for Hospitality Research • Cornell University Exhibit 5 relationship between corporate culture and performance Corporate Culture performance Clan 2.074** 1.832* Adhocracy Growth oriented -2.994*** hierarchy profit oriented Market Note: Significance levels: * p > .05; ** p > .01; *** p > .001. researchers have found that objective and subjective mea- Analysis and Results surement of financial performance are positively related.25 Exhibit 4 shows the demographic profile of the sample. The Prior to conducting the final survey, we conducted a bulk of the 211 respondents were 30 to 49 years old, and pilot study of 32 hotel managers. The results showed that women constituted just 28.7 percent of this sample. Nearly the survey instrument was appropriate for our research (e.g., half of the respondents (47.4%) had been in their career for Cronbach’s alpha for statements concerned with strategic five to nine years, and over one-third (34.6%) were extremely orientation was .92, and .91 for statements related to finan- experienced, with fifteen or more years in the business. Fifty- cial performance). five percent of respondents worked in the front office, 36 Sample and Data Collection percent worked for back office, and 9 percent were executives. In 2009, the Korean Hotel Association listed 139 five-star This was a well educated group. Roughly half of the respon- hotels and 172 four-star hotels in South Korea. From this dents had a bachelor’s degree, 28 percent had an associate’s list we chose 190 hotels having more than 100 guest rooms, degree, and 16.1 percent had a graduate degree or higher. on the theory that these are large enough to have both an The largest single position category for respondents was as- express strategic orientation and a corporate culture. We sistant manager (41.7%), while 38.4 percent were managers contacted hotel managers in various Korean cities, in- and 10.9 percent were senior managers, in addition to the 9 cluding Seoul, Busan, Daegu, and Inchon, and we also percent who were executives. included resort areas, such as Jeju Island and Korea’s east Corporate Culture and Financial Performance coast. We interviewed managers who agreed to the study Exhibit 5 shows the direct statistical relationship between and delivered a total of 260 questionnaires to the managers corporate culture and financial performance based on a of 120 hotels. Each participating manager was employed series of linear regression models. When analyzing the as a senior executive and had at least five years of working impact of corporate culture types on financial performance, experience with the same companies. Completed question- the family-like Clan culture and the entrepreneurial naires were returned directly to us during a four-month Adhocracy culture had a positive impact on growth-oriented period. This approach gave us 226 questionnaires from 101 financial performance. In contrast, the rule-bound Hierarchy hotels, but we had to exclude fifteen questionnaires due to culture had negative impact on growth-oriented financial irregularities, missing data, or unrealistic responses. Our performance. We found no significant relationship between final sample was 211 responses from 99 hotels. the task-oriented Market culture and financial performance. 25 See, for example: Madsen, T. K. (1987). “Empirical Export Per- None of the corporate culture dimensions showed a formance Studies: A Review of Conceptualizations and Findings”, in statistically significant relationship with profit-oriented Advances in International Marketing, 2, ed. S. Tamer Cavusgil (Greenwich, performance. CT: JAI Press); Shoham, A.(1998). Export performance: A conceptualiza- tion and empirical assessment. Journal of International Marketing, 6(3), 59–81; and Venkatraman, op.cit. Cornell Hospitality Report • January 2012 • www.chr.cornell.edu 11 Exhibit 6 Corporate Culture and Strategic Orientation relationship between corporate culture and strategic orientation Exhibit 6 shows the result of strategic the regression analysis between orientation corporate cultures and the hotels’ strategic orientations. leading 4.233*** This analysis found relationship- Future-analytic oriented (Clan) companies most strongly associated with a 2.259** Aggressive leading orientation, followed by Clan Culture 2.488** Defensive future-analytic, aggressive, and 2.489** defensive strategic orientations. Adventurous Innovation-oriented (Adhoc- racy) companies likewise were Conservative most strongly associated with a leading orientation, followed by strategic orientation future-analytic, aggressive, con- servative, and defensive strategic leading orientations—all significant. 4.533*** Task-oriented (Market Future-analytic culture) companies showed sig- 3.044*** Aggressive nificant but negative connections Adhocracy Culture 3.586*** with the strategic orientations, 2.289** Defensive with conservative most nega- 1.997** Adventurous tive, followed by future-analytic, leading, aggressive, conserva- 3.031*** Conservative tive, and defensive strategic orientations. Hierarchy-oriented strategic companies showed a significant orientation positive conservative orienta- tion, but a negative influence on leading -2.222** three other strategic orientations, Future-analytic with leading being most nega- tive, followed by aggressive and -2.254** Aggressive defensive strategic orientation. Market Culture -2.059** -1.856* Defensive Strategic Orientation and -4.046*** Adventurous Financial Performance Four strategic orientations Conservative had significant effects on both growth-oriented and profit- strategic orientation oriented financial performance, three of them positive and one leading negative, as shown in Exhibit -4.749*** 7, on the next page. Leading, Future-analytic future-analytic, and defensive -2.252** Aggressive strategic orientations had a hierarchy Culture positive impact on both growth- -1.747* Defensive and profit-oriented financial 1.811* Adventurous performance. The adventurous strategic orientation, however, Note: Significance levels: * p > .05; ** p > .01; *** p > .001. Conservative showed a negative impact on fi- 12 The Center for Hospitality Research • Cornell University Exhibit 7 relationship between strategic orientation and financial performance strategic orientation leading 8.808*** Financial performance Future-analytic 7.890*** Growth oriented Aggressive 7.707*** Defensive Adventurous -3.057** Conservative strategic orientation leading 8.247*** Financial performance Future-analytic 8.064*** profit oriented Aggressive 7.370*** Defensive Adventurous -3.770** Conservative Note: Significance levels: * p > .05; ** p > .01; *** p > .001. nancial performance. We found no significant effect of either Managers could draw from the Clan culture, for instance, to an aggressive and conservative strategic orientation on these take more interest in mentoring employees, as well as heed hotels’ financial performance. employees’ opinions. The resulting mutual trust should Discussion and Implications improve the hotels’ results. Second, certain strategic orientations enhanced finan- In general, our study showed that culture and strategic cial performance for the other three cultures, but they could orientation make a difference in hotels’ profit performance, go further. We found that Clan (relationship), Adhocracy but not all strategies or cultures are created equal. The task- (innovation), and Hierarchical culture companies could en- oriented Market culture, which focuses on hitting targets hance their financial performance through both leading and and performance had no significant effect on financial defensive strategic approaches. Given our findings regard- performance. To improve their financial performance, these ing the value of other strategic orientations, we suggest that companies should consider changing their corporate culture. companies seek new market opportunities, take leading ac- One point about the task-oriented culture is that it requires tions to respond to the changing environment, and put more employees to “win” in the market competition. We think effort in production technology improvement, cost control that development of individual employees or relationships systems, manufacturing management methods, quality man- among employees can be neglected in such an environment. agement circles, cost reduction, and operational efficiency. Cornell Hospitality Report • January 2012 • www.chr.cornell.edu 13 Third, some strategic orientations worked against cer- studies that used other methodologies and also concluded tain cultures. For example, innovation-oriented companies that discounting does not ultimately improve a hotel’s bot- that pursued an adventurous strategic orientation acted in tom line.26 a high-risk fashion rather than abide by business authoriza- In conclusion, we first must acknowledge that this tion processes to choose appropriate actions, and they fol- study’s findings could be limited by the fact that we studied lowed unproven procedures. The result for those companies only hotels in South Korea and only large, upscale hotel appears to be diminished financial performance. Companies properties. Certainly, this study should be replicated in other that focus on innovation and development should establish locations, but we see no reason that the core conclusions a project authorization process and a system to examine the should not apply fairly universally. It is clear from this study efficacy of action plans. that for Korean hotels, at least, a strong, appropriate culture Fourth, companies with a Hierarchical culture also has an effect on financial performance. That relationship could draw on practices from other cultures. We found is direct, but it is also moderated by the effects of a hotel’s that this culture, which pursues control and efficiency and strategic orientation. Just as not all cultures drive strong integrates employees through formalized standards and financial performance, neither do all strategic orientations policies, saw a negative impact on the financial performance. have a favorable effect on financial results. Moreover, some As we noted above, however, when these companies pursued strategic orientations are a poor fit for certain cultures. a leading strategic orientation, they enhanced their financial Certain strategic orientations, such as the leading strategy, performance. In addition, even when Hierarchical hotels seem to be effective for most cultures, while we found that pursued defensive, adventurous, or conservative strategic the aggressive approach was essentially ineffective for all the orientations, they saw partial enhancement of their financial hotels, regardless of culture. Based on these implications, we performance. In this regard, Hierarchical companies could suggest that managers should put more effort into creating seek market opportunities for expanding and acquiring a corporate culture which can contribute to enhanced per- business fields and drastically eliminate and modify projects formance through taking interest in cultures that employees through periodic analysis to enhance their financial prefer, and at the same time, should seek new market oppor- performance. tunities, and select and pursue action plans to respond to the Fifth, the aggressive strategic orientation, which focuses changing environment. n on setting lower prices than competitors or giving up profits to acquire market share, did not have a significant impact on 26 For example, see: L. Canina, C.A. Enz, and M. Lomanno, Why Dis- any culture’s financial performance. This implies that rather counting Doesn’t Work, Cornell Hospitality Report, Vol. 4, No. 7 (2004); than focus on acquiring market share by price reductions, CA. Enz and L. Canina, Why Discounting Still Doesn’t Work, Cornell Hospitality Report, Vol. 6, No. 2 (2006); and S.E. Kimes, Successful Tactics these companies should select and focus on other, more for Surviving an Economic Downturn: Results from an International worthwhile strategies. This finding echoes numerous other Study, Cornell Hospitality Report, Vol. 10, No. 7 (2010). 14 The Center for Hospitality Research • Cornell University Cornell Center for Hospitality Research Publication Index www.chr.cornell.edu Cornell Hospitality Quarterly Vol. 11 No. 17 The Current State of Vol. 11 No. 9 2011 Travel Industry Online Food Ordering in the U.S. Benchmarking: Status of Senior http://cqx.sagepub.com/ Restaurant Industry, by Sheryl E. Kimes, Destination and Lodging Marketing Ph.D. Executives, by Rohit Verma, Ph.D., and 2012 Reports Ken McGill Vol. 12 No. 3 The Role of Multi- Vol. 11 No. 16 Unscrambling the Puzzling Restaurant Reservation Sites in Restaurant Matter of Online Consumer Ratings: Vol 11 No 8 Search, OTAs, and Online Distribution Management, by Sheryl E. An Exploratory Analysis, by Pradeep Booking: An Expanded Analysis of the Kimes and Katherine Kies Racherla, Ph.D., Daniel Connolly, Ph.D., Billboard Effect, by Chris Anderson Ph.D. and Natasa Christodoulidou, Ph.D. Vol. 12 No. 2 Compendium 2012 Vol. 11 No. 7 Online, Mobile, and Text Vol. 11 No. 15 Designing a Self-healing Food Ordering in the U.S. Restaurant Vol. 12 No. 1 2011 CHR Annual Report Service System: An Integrative Model, by Industry, by Sheryl E. Kimes, Ph.D., and Robert Ford, Ph.D., and Michael Sturman, Philipp F. Laqué 2011 Reports Ph.D. Vol. 11 No. 6 Hotel Guests’ Reactions to Vol. 11 No. 22 Environmental Vol. 11 No. 14 Reversing the Green Guest Room Sustainability Initiatives, by Management Certification and Backlash: Why Large Hospitality Alex Susskind, Ph.D. and Rohit Verma, Performance in the Hospitality Industry: Companies Should Welcome Credibly Ph.D. A Comparative Analysis of ISO 14001 Green Competitors, by Michael Hotels in Spain, by María-del-Val Segarra- Giebelhausen, Ph.D., and HaeEun Helen Vol. 11 No. 5 The Impact of Terrorism Oña, Ph.D., Ángel Peiró-Signes, Ph.D., and Chun, Ph.D. and Economic Shocks on U.S. Hotels, by Rohit Verma, Ph.D. Cathy A. Enz, Renáta Kosová, and Mark Vol. 11 No. 13 Developing a Sustainability Lomanno Vol. 11 No. 21 A Comparison of Measurement Framework for Hotels: the Performance of Independent and Toward an Industry-wide Reporting Vol. 11 No. 4 Implementing Human Franchise Hotels: The First Two Years of Structure, by Eric Ricaurte Resource Innovations: Three Success Operation, by Cathy A. Enz, Ph.D., and Stories from the Service Industry, by Justin Linda Canina, Ph.D. Vol. 11 No. 12 Creating Value for Women Sun and Kate Walsh, Ph.D. Business Travelers: Focusing on Emotional Vol. 11 No. 20 Restaurant Daily Outcomes, by Judi Brownell, Ph.D. Vol. 11 No. 3 Compendium 2011 Deals: Customers’ Responses to Social Couponing, by Sheryl E. Kimes, Ph.D., Vol. 11 No. 11 Customer Loyalty: Vol. 11 No. 2 Positioning a Place: and Utpal Dholakia, Ph.D. A New Look at the Benefits of Improving Developing a Compelling Destination Segmentation Efforts with Rewards Brand, by Robert J. Kwortnik, Ph.D., and Vol. 11 No. 19 To Groupon or Not to Programs, by Clay Voorhees, Ph.D., Ethan Hawkes, M.B.A. Groupon: A Tour Operator's Dilemma, by Michael McCall, Ph.D., and Roger Chekitan Dev, Ph.D., Laura Winter Falk, Calantone, Ph.D. Vol. 11 No. 1 The Impact of Health Ph.D., and Laure Mougeot Stroock Insurance on Employee Job Anxiety, Vol. 11 No. 10 Customer Perceptions of Withdrawal Behaviors, and Task Vol. 11 No. 18 Network Exploitation Electronic Food Ordering, Performance, by Sean Way, Ph.D., Bill Capability: Mapping the Electronic by Sheryl E. Kimes, Ph.D. Carroll, Ph.D., Alex Susskind, Ph.D., and Maturity of Hospitality Enterprises, by Joe C.Y. Leng Gabriele Piccoli, Ph.D., Bill Carroll, Ph.D., and Larry Hall Cornell Hospitality Report • January 2012 • www.chr.cornell.edu 15 www.chr.cornell.edu