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Organisational culture, leadership and performance measurement

integratedness

Article  in  International Journal of Management and Enterprise Development · November 2010

DOI: 10.1504/IJMED.2010.037066

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Int. J. Management and Enterprise Development, Vol. 9, No. 3, 2010 251

Organisational culture, leadership and performance

measurement integratedness

Luu Trong Tuan

Asian Institute of Technology (AIT),
Klong Luang, Pathumthani 12120, Thailand
and
National University,
Ho Chi Minh City, Vietnam
E-mail: luutrongtuan@vnn.vn

Abstract: This research analysed the linkages among organisational culture,

leadership and integratedness of performance measurement in plastic
manufacturing companies in Vietnam. The findings revealed that transactional
leadership is correlated with clan culture and hierarchy culture.
Transformational leadership, on the other hand, promotes adhocracy
culture and market culture, which in turn positively impact the integratedness
of performance measurement. A direct relationship between transformational
leadership and the integratedness of performance measurement was also
detected.

Keywords: organisational culture; transformational leadership; transactional

leadership; integratedness of performance measurement; enterprise
development.

Reference to this paper should be made as follows: Tuan, L.T. (2010)

‘Organisational culture, leadership and performance measurement
integratedness’, Int. J. Management and Enterprise Development, Vol. 9,
No. 3, pp.251–275.

Biographical notes: Luu Trong Tuan is currently a Business Administration

(BA) teacher at National University – Ho Chi Minh City. He received his
Master’s degree from Victoria University, Australia, in 2004. His research
interests include organisational behaviour and performance measurement.

1 Introduction

“I am telling you, no single company in Vietnam is aware that the

organizational culture and leadership they are shaping now impact the way they
measure their members’ performance. Many of them reckon the use of
performance measurement system is determined by the trend of brand building
in the market.”
This statement came up during my dialogue with a manager of a plastic manufacturer
located in Ho Chi Minh City of Vietnam. The statement struck my mind with a lot of
questions: Do organisational culture and leadership style influence the implementation of
performance measures? What organisational culture types and leadership styles will lead
performance measures beyond financial measures and to what extent?

Copyright © 2010 Inderscience Enterprises Ltd.

252 L.T. Tuan

A positive organisational culture embraces certain essential elements. Firstly, it is not

only nurtured purely by a mission, but also by a lucid organisational vision, which is a
‘mental image of a possible and desirable future state of the organisation’ (Bennis and
Nanus, 1997). Organisational visions are most effectual when conspicuously
communicated by top organisational leaders, who display strong values and own
dynamic, charismatic personalities (Greenberg and Baron, 1997). Secondly,
organisational culture is shored up by organisational values that are consistent with the
goal of the organisation and aligned with the personal values of organisational members
(Qubein, 1999). Organisational vision and values pervade all levels of the organisation
and are consistently modelled by top management. Thirdly, employees are highly valued
at all levels of the organisation, and there subsists widespread employee interaction both
within and across functional departments (Clemente and Greenspan, 1999). Fourthly, the
culture is adaptable, acclimatising briskly to peripheral conditions and is consistent,
behaving fairly towards all employees (Ahmed et al., 1999). Finally, organisational
culture is perpetuated in some way, perhaps through tangible symbols, slogans, legends
or ceremonies that underscore organisational values (Greenberg and Baron, 1997).
These characteristics of a positive culture cannot exist without extensive employee
support. Even within an organisation that has a strong overall culture (the ‘dominant
culture’), there will also be several subcultures (Greenberg and Baron, 1997). The values
of the dominant culture need to be aligned with the values of each of the subcultures as
well as the personal values of each individual.
Leadership, the personal values of leaders, is the principal shaper and builder of
organisational culture. Schein contended cogently, “we must recognize the centrality
of this culture management function in the leadership concept” (1985, p.2). According to
Trice and Beyer (1993) and Schein (1985), a strong visionary or charismatic leader
accounts for the unique character of an organisation’s values and assumptions.
Constructing on attribution theory (Calder, 1977), scholars propose that most
organisational members believe that leaders are accountable for organisational outcomes.
The perpetuating nature of organisational routines (March and Simon, 1958) and the
dominant impact of the larger social, technological and cultural environments lead certain
researchers (e.g. Safford, 1988) to demote leadership to the role of an endogenous factor
that interacts with a variety of other organisational variables including culture in
influencing organisational outcomes. In light of the clashing views, the question of how
organisational culture impacts leadership as well as how organisational culture and
leadership enhance the integratedness in performance measurement implementation, an
area where little empirical proof exists (Scott et al., 2003; Wang and Ahmed, 2003), will
be unpacked in this study.

2 Literature review

2.1 Organisational culture

2.1.1 Definitions of organisational culture
Culture has been portrayed by numerous authors as ‘the way we do things around here’
(Deal and Kennedy, 1982) or ‘something to do with the people and unique quality and
style of organisation’ (Kilmann et al., 1985). From the anthropological perspective,
 Organisational culture, leadership and performance measurement integratedness253

culture is conceptualised either as a system of shared symbols and meanings (Geertz,

1973) or as a system of shared cognitions (Rossi and O'Higgins, 1980).
Organisational culture has been defined in several ways due to the different research
framework adopted by the various authors. One of the most common definitions of
organisational culture involves a set of values, beliefs and behaviour patterns forming the
core identity of organisations and shaping the employees’ behaviour (Deal and Kennedy,
1982; Deshpande and Farley, 1999; Jones, 1983; Schein, 1992). Expanding Schein’s
(1992) definition with the notion of understandings, Daft (2005) views organisational
culture as a set of key values, assumptions, norms and understandings that is shared by
members of an organisation and taught to new members as correct. Organisational culture
also acts as a cognitive map that impacts the fashion in which the context is defined, for it
provides the selection mechanisms or norms and values through which people enact
events (Jones, 1983).
Frost et al. (1985, p.17) have contributed with this definition of organisational
culture:
“Talking about organizational culture seems to mean talking about the
importance for people of symbolism – of rituals, myths, stories and legends –
and about the interpretation of events, ideas, and experiences that are
influenced and shaped by the groups within which they live.”
Meaning – and meaning-giving processes – is a momentous aspect of this theory of
organisational culture: “Meaning refers to how an object or an utterance is interpreted.
Meaning has a subjective referent in the sense that it appeals to an expectation, a way of
relating to things” (Alvesson, 2002, p.4).
The rendezvous of most of the definitions on organisational culture is the shared
nature of the values, beliefs, philosophies, norms, meanings, etc. Several authors alleged
that the function of organisational culture is to generate a feeling of esprit de corps within
the organisation (Van Maanen and Barley, 1985, p.39).
Contending through a General Behavioural Model that one’s current behaviour is
contingent on his/her past behaviours, his/her revealed and stated preferences, the
aggregates’ influences and external factors or resource constraints either shared or unique
to each behaviour/person, Wu (2007) regards organisational cultures as accumulated
individual choices and as interactions among critical masses of people with different
preferences and past choices, thereby highlighting accumulated nature rather than shared
nature.

2.1.2 Aspects of organisational culture

Quinn and Rohrbaugh’s (1983) competing values framework (CVF) was developed by
Quinn (1988) into a model of organisational culture predicated on two dimensions:
1 organisational process (organic vs. mechanistic)
2 organisational orientation (internal vs. external).
The CVF was further developed and adapted by Cameron and Freeman (1991) and
Deshpande et al. (1993), which permits the instrument to investigate organisational
culture at a deeper level and identify further implications. As illustrated in Figure 1, the
vertical axis depicts the continuum from organic to mechanistic processes, ranging from
an accent on flexibility and spontaneity to control, stability and order. The horizontal axis
254 L.T. Tuan

depicts the relative organisational emphasis on internal maintenance (smoothing activities

and integration) to external positioning (competition and environmental differentiation).
The four culture types adhocracy, clan, hierarchy and market are assigned to the CVF
quadrants.
This framework shown in Figure 1 is predicated on four sets of attributes:
1 the dominant characteristics or values
2 the dominant style of leadership
3 the bases for bonding
4 the strategic emphasis present in the organisation.
In Asian studies, the researchers describe these four cultural styles as rabbit, monkey,
elephant and tiger, respectively (Jacobs, 2002). This concept has been extensively used
by Deshpande et al. (1993, 1997) in their Asian and cross-cultural research.

Figure 1 CVF-based model of organisational culture types

Source: Adapted from Deshpande et al. (1993).

 Organisational culture, leadership and performance measurement integratedness255

In a nutshell, while validating the usefulness of the above culture types, Deshpande et al.
(1993) emphasised that these culture types are dominant ones rather than mutually
exclusive ones. Most companies can and do have components of various types of
cultures. Consequently, identifying a typology of cultures also makes it possible to
determine if organisations are dominated by one type or have attributes of different types.
The author of the present research, nonetheless, suggests that organisational culture
should be viewed in a more dynamic way because ‘we live in a world of endless and
relentless change’ (Hargreaves, 2002, p.189) and ‘in a complex and fast-changing
society’ (Hargreaves and Fink, 2003, p.693). As displayed in Figure 2, an organisation
must first define its dominant culture type, then reinforce the attributes of this culture
type which are aligned with organisational vision and strategy and minimise the effects of
its attributes which diverge from organisational vision and strategy on organisational
performance and effectiveness. While consolidating the current dominant culture type,
the organisation incessantly observes and discerns or even generates changes in the
organisational core competencies and core values, vision and strategy (as these
components can become sclerotic), as well as detects changes in the external environment
(through environmental scanning), and defines new organisational culture type which
best addresses and supports these changes as suggested by Pool (2000) that organisational
culture allows an organisation to address ever-changing problems of adaptation to the
external environment and the internal integration of organisational resources, personnel
and policies to support external adaptation. The organisation should actively discover or
create these changes even though the culture of the organisation may change over time
(Goffee and Jones, 1998). After building this new culture type in the organisation, the
organisation must then endeavour to manage both organisational culture types
simultaneously. As the old culture becomes a barrier to the new vision and strategy, the
organisation must gradually make a transition to the new, and at this point, it must
resume the cycle: while maximising the operation within this new culture, it must again
discern new changes and construct a more appropriate organisational culture type.

2.1.3 Vietnamese culture and its link with Vietnam plastic industry
Although an individual may self-select into a particular industry or occupation,
nationality is typically something that temporally precedes entry into an organisation, and
thus may be regarded as a determinant of schema formation linked to organisational
culture.
Vietnam has been deemed as one of the backward countries in terms of technology
(Le, 1995). This situation could be ascribable to various wars inflicting devastation to the
country. There are economic factors that provide equally powerful explications.
Nonetheless, it is more revealing to examine how Vietnamese culture accommodates
technology. Traditionally, the Vietnamese believe that there are three worlds: the
physical world that is concrete and soulless, the human world that involves people in its
immediate vicinity as well as in a much wider community and the spiritual world that
appears to be remote but also close to the human mind. The Vietnamese people have had
a strong traditional respect for human and spiritual values. They found it less appealing to
explore the physical world than the spiritual one, as they believed the inner strength of an
individual can bring peace, harmony and happiness to life (a belief that was strongly
influenced by the prevailing Buddhism), whereas the knowledge of the physical world
does not necessarily lead to the achievement of happiness, and sometimes it could even
256 L.T. Tuan

lead to the destruction of civilisation. This spiritual world can interfere strongly with any
endeavours to explore the physical world in which technology owes its existence. Under
the influence of Confucianism, the Vietnamese mind was ‘more easily attracted to social
philosophy than to physics and chemistry’ (Le, 1995, p.6). Unlike the West, which
highlighted the significance of intellectual development, the Vietnamese traditional
Confucian-style education underscored the human world in terms of the moral obligation
of individuals to the community at large (Le, 1995). It is, thus, comprehensible why
technology was not promoted in the Vietnamese society in the olden days.
Since renovation (Doi moi) and the open-door policy, in the context of a highly
competitive world, the role of technology has been incrementally viewed as decisive for
the country to fulfil its industrialisation and modernisation goals. At the organisational
level, it is becoming more and more evident that technology is a crucial factor in
determining an organisation’s survival, development and competitiveness. While
realising the magnitude of technologies, most managers still do not fully understand their
capabilities.

Figure 2 Dynamic organisational culture

 Organisational culture, leadership and performance measurement integratedness257

Moreover, in the Westerners’ eyes, Vietnam has a rather ‘fraught’ approach to

technology acquisition (Engholm, 1995, p.173). Vietnam undervalues intellectual know-
how, and this is reflected in its technology transfer regulations, which restricts its overall
value in an investment contract. Engholm (1995, p.173) stated that the Vietnamese want
state-of-the-art technology but do not want to pay for it. This mentality might have
underpinnings in the country’s historical experience with innovations. Vietnam has an
agricultural culture in which technological innovations traditionally took place in the
open and were immediately made communal property. To imitate another’s innovation
was the highest compliment, while the selling of proprietaries was unknown (Engholm,
1995). In the actual implementation of technology, this attitude is often reflected in the
disinclination of managers to go to any great length as far as the recognition of financial
resources required for the project is concerned.
This attitude is also found in managers in plastic industry. Therefore, state-of-the-art
technology had barely been transferred to Vietnamese plastic manufacturers until 1995.
The pioneers in the application of state-of-the-art technology in plastic production were
Binhminh Plastics Company (BMPLASCO), a state-owned company, which invested in
two sets of extrusion machine – Kraussmaffei from Germany and Cincinnati from Austria
in 1998, and Bavico Plastics Company (BAVICO), a private company, which invested in
preform manufacturing machines supplied by HUSKY and a blowing machine by SIDEL
in 1998. The change in this attitude was probably catalysed by international consumers’
demand for high quality of plastic products. However, merely roughly 30 plastic
companies have their products accommodated to standards of ISO, JIS and ASTM
(Hanoi Industrial and Trade Portal, 2006). Furthermore, although Vietnam owns crude oil
wells and an oil refinery plant in Dung Quat, Quang Ngai province, it has purely two
joint ventures producing approximately 250,000 tons PVC resin and 150,000 tons DOP
covering less than 10% of the national plastic material demand. Thus the reluctance of
managers to go to a great length still lingers.

2.2 Leadership
Leadership is viewed as a psychological phenomenon (i.e. the leader is a person who
owns certain desirable personality and demographic traits), or a sociological phenomenon
(i.e. the leader is the result of convergence of a person, a group and the needs arising
from a situation faced by each). Bass’s (1990) review of various conceptualisations of
leadership culminates in the subsequent definition of leadership:
Leadership is an interaction between two or more members of a group that
often involves a structuring or restructuring of the situation and the perceptions
and expectations of the members. Leaders are agents of change – persons
whose acts affect other people more than other people’s acts affect them.
Leadership occurs when one group member modifies the motivation or
competencies of others in the group.
Bass (1990), to a certain degree, defines leadership as meaning-making, and highlights
how the attributes and actions that would be categorised as agentic impact on meaning
(Arrows 2 and 4 in Figure 3), as well as the linkage between meaning and performance
(Arrows 9 and 10). Executive attributes, acts and behaviours that influence performance
without generating meaning (Arrows 5–8) are wrapped in the term ‘management’.
258 L.T. Tuan

Figure 3 Leadership as meaning-making

2.3 Performance measurement

2.3.1 Definitions of performance measurement
Neely et al. (1995) defined performance measurement in its strictest semantics as the
process of quantifying the efficiency and effectiveness of action, and hence
x a performance measure can be defined as a metric used to quantify the efficiency
and/or effectiveness of an action
x a performance measurement system can be defined as the set of metrics used to
quantify both the efficiency and effectiveness of actions.
Although this definition accentuates effectiveness as well as efficiency, it is unlikely to
make managers stop and challenge their performance measurement systems and gives
little indication as to what they should quantify or why. Therefore, Moullin (2003)
defined performance measurement as ‘evaluating how well organisations are managed
and the value they deliver for customers and other stakeholders’. This definition gives
much more guidance to people involved in performance measurement. It encourages
them to contemplate the degree to which organisations measure the value they deliver to
their customers and whether it covers the main aspects of how performance is managed.
Bocci (2004) preferred Neely’s definition, and specifically preferred ‘quantifying’ to
‘evaluating’ because the latter referred not only to measuring but also to making a
judgement. Moullin responded that evaluating was a better term for it implied
interpretation and analysis: “… someone somewhere is going to ask ‘how well an
organization is doing’ or ‘what appears to be responsible for the drop in sales’. We can’t
hide behind the numbers forever” (Moullin, 2005a). Pratt (2005) agreed, pointing out that
evaluating was much better than quantifying as it embraces qualitative as well as
quantitative measures. Neely himself commented that “in essence I find myself agreeing
with Moullin and Pratt – delivering value to stakeholders is clearly essential to an
organization’s success” (Neely, 2005, p.14) although later in the paper he says that “the
 Organisational culture, leadership and performance measurement integratedness259

concept of stakeholder adds no clarity to the definition, because the question of which
stakeholder matters is so context dependent”. Moullin’s reaction was that an organisation
needs to know-how it is perceived by all key stakeholders and being explicit about this in
the definition will encourage organisations to measure stakeholder perceptions (Moullin,
2005b). Neely’s and Moullin’s definitions on performance measurement appear to
complement to each other, rather than conflicting. From the compounded essence of the
two definitions, a performance measurement system can be defined as the set of metrics
designed to evaluate how efficiently and effectively organisations are managed and the
value they deliver for customers and other stakeholders.

2.3.2 Non-financial measurement and agency theory

The application of non-financial measures for performance evaluation is in harmony with
theoretical work on compensation in agency settings. Financial measures of performance
are defective and noisy signals of manager’s endeavour. On the contrary, non-financial
performance measures better reflect the causal relationships and therefore impart value
by diminishing the noise in drawing inferences about agent’s attempts.
Feltham and Xie’s (1994) analysis inspires the use of non-financial measures by
identifying conditions under which the use of such measures over and above a short-term
financial measure (such as profit) gives rise to enhanced company profitability. The
authors suggest that when the agent’s attempt is multidimensional, augmenting
the number of performance measures may increase the set of implementable actions, and
bring about the implementation of a preferred action. Augmenting the number of
performance measures, moreover, may lower the risk imposed on the agent to induce a
particular implementable action. Especially, as the principal’s expected gross payoff is
a function of both short- and long-term oriented attempts and if the use of the profit
measure induces only the short-term oriented attempt, then the loss to the principal from
the failure to induce the long-term oriented attempt can be reduced by introducing a
second performance measure, say a non-financial indicator, that independently reports on
the long-term oriented attempt. Thus, if non-financial measures are indicators of long-
term attempt, they are precious.
The application of non-financial measures to alleviate the managerial myopia
problem is also suggested by Hemmer (1996). Hemmer concentrates on the design and
use of endogenous non-financial measures when financial measures fail to capture the
long-term implications of an agent’s actions. Predicated on a modified Holmstrom and
Milgrom framework, he demonstrates that although numerous non-financial measures
may be economically equivalent, measurement problems may render one measure more
valuable. In a relevant study, employing a two-period principal-agent model, Hauser et al.
(1994) analysed the profit impact due to the use of customer satisfaction measures in
incentive compensation and offer recommendations for measuring customer satisfaction.
In a word, although several reasons are suggested in the practitioner literature for the
use of non-financial measures, the primary reason is based on the argument that non-
financial measures are drivers and thus lead indicators of future financial performance.

2.3.3 Integratedness of performance measurement

Performance measurement integratedness involves diverse dimensions: drivers vs.
outcome measures, subjective vs. objective measures, internal vs. external measures and
260 L.T. Tuan

financial vs. non-financial measures (Ittner et al., 2003; Kaplan and Norton, 1996).
Hoque and James (2000) and Ittner et al. (2003) refer to measurement integratedness as
the multiplicity and variety of performance measures that can be clustered into financial
performance and non-financial performance. Despite their capability to present results of
decisions in a comparable measurement unit, to capture the cost of trade-offs between
resources and the cost of spare capacity, and their capabilities to support contractual
relationships and the capital markets (Atkinson et al., 1997), financial measures are
viewed as backward looking, lacking predictive ability to explain future performance,
rewarding short-term or incorrect behaviour, lacking actionability, lacking timely signals,
being too aggregated and summarised to guide managerial action, reflecting functions
instead of cross-functional processes and providing inadequate guidance to evaluate
intangible assets (Ittner and Larcker, 1998).
Numerous models have been constructed on a fusion of financial and non-financial
information. Dixon et al. (1990) introduce an integrated performance measurement
system whereby ‘costs and performance’ knowledge is acquired and used in the strategic
management cycle. Lynch and Cross (1991) present a performance pyramid that links
strategy and operations by translating strategic objectives from the top-down and
measures from the bottom-up, while Atkinson et al. (1997) build a stakeholder model that
includes measurement for the primary and secondary objectives of environmental and
process stakeholders. Kaplan and Norton (1992, 1996) propose a balanced scorecard – an
integrative framework – fusing financial, customer, internal process and learning and
growth perspectives steered by organisational vision and strategy.

2.3.4 Organisational culture, leadership and performance measurement

Notwithstanding the limited amount of research published on organisational culture,
leadership and performance, there is an astounding degree of consistency among these
proposed conclusions.
Ogbonna and Harris (2000) have conducted a study providing some empirical
evidence that the relationship between leadership style and performance is mediated by
the form of organisational culture that is present. Xenikou and Simosi’s (2006) findings
support the proposition that when leadership is viewed as a social process that involves
leaders, followers and social situations, organisational culture is found to be a filter
through which leadership influences performance.
Inspired by Fang and Wang’s (2006) study, Asree et al. (2010) have investigated the
impact of ‘soft issues’ such as leadership competency and organisational culture on
operations practices and organisational performance in service companies. Viewing
operations practices in terms of cumulative capability (responsiveness) as suggested by
Flynn and Flynn (2004), Asree et al. (2010) found the impact of leadership practices and
organisational culture on performance through responsiveness.
Overall, current models of organisational performance and change suggest that
organisational culture and leadership are central explanatory constructs (Schein, 1992). In
a global marketplace characterised by increasing technological complexity, geopolitical
instability and social diversity, organisations are finding their competitive edge in the
development of more flexible, higher involvement work cultures and in the creation of a
new type of leadership that can provide continuity in the midst of ongoing innovation and
adaptation (Schein, 1985; Vandenberg et al., 1999), such as an adaptation towards a new
balance sheet integrating financial and non-financial performance measures. In the little
 Organisational culture, leadership and performance measurement integratedness261

body of empirical research on the relationship amongst organisational culture, leadership

and performance, performance measurement, especially performance measurement
integratedness has hardly been studied in the context of this relationship. In such meagre
research, Pors (2008) found that the organisational culture in which leadership plays an
important role has an influence on the introduction and diffusion of management tools,
whether performance measurement instruments or technological devices. Denison et al.
(2004) identified four cultural traits that are positively related to organisational
performance, namely, involvement and participation, consistency and normative
integration, adaptability and mission, so culture can influence the integration of
performance measures.

3 Conceptual framework and methodology

3.1 Conceptual framework and research hypotheses

The deeds of top-level managers are to dispatch robust messages to employees on a
regular basis about the indispensable character of an organisation’s culture. These
behaviours are alluded to as primary cultural embedding mechanisms (Schein, 1992). In
this study, it was postulated that specific types of leadership behaviours amongst top-
level managers would be inclined to evoke specific types of employee perceptions
towards organisational culture types. The subsequent hypotheses thus ensued:
H1a: A greater degree of adhocracy culture corresponds to a greater level of
transformational leadership.
H1b: A greater degree of market culture corresponds to a greater level of
transformational leadership.
H1c: A greater degree of clan culture corresponds to a greater level of transactional
leadership.
H1d: A greater degree of hierarchy culture corresponds to a greater level of
transactional leadership.
It is foreseen that a top-level manager who exhibits transactional leadership behaviours,
such as goal orientations through role clarification and task request (Robbins, 2003),
contingent reward and management-by-exception (Bass, 1985) would tend to employ
primary cultural embedding mechanisms that underpin the magnitude of sustaining an
organisation whose internal operations are well-integrated. On the contrary, a top-level
manager who exhibits transformational leadership behaviours such as individualised
consideration, intellectual stimulation, inspirational motivation and idealised influence
(Bass, 1985) would be more likely to employ primary cultural embedding mechanisms
that underpin the magnitude of acclimatising briskly to the demands of peripheral
environment. As non-financial performance measures can cultivate curiosity and
experimentation, inspire organisational reform and bolster the emergence of new
strategies and learning (Dent, 1990), transformational leadership behaviours would be
more likely to buttress the integration of financial measures and non-financial measures
in performance measurement system. Thus, the subsequent hypotheses emerged:
262 L.T. Tuan

H2a: A greater level of transformational leadership corresponds to greater

integratedness of performance measurement.
H2b: A greater level of transactional leadership corresponds to less integratedness of
performance measurement.
Pursuing Bhimani’s (2003) work, this research seeks to investigate the degree to which
organisational culture types becomes embedded in the use of control systems. These
linkages are investigated for culture influences, virtually all aspects of organisational
interactions as well as activities at the top management level (Chatterjee et al., 1992). As
part of control practices and organisational activities, thus, the use of performance
measurement system and the integratedness of performance measurement are impacted
by organisational culture types. Additionally, positing that performance assessment is an
exercise principally established on values (Quinn and Rohrbaugh, 1983), the attributes of
performance measurement system should reflect aspects of organisational values. Culture
and values, referring to elements of an organisation that are most stable and least
malleable (Schein, 1985), are deemed as informal controls which act as a starting point
for the design and use of formal control systems (Flamholtz, 1983). In Rousseau’s (1990)
view, control systems are material artefacts or pattern behaviour that are impacted by the
underlying value structure that generates meaning in the organisation.
Traditional performance measures predicated on financial metrics are linked with a
planning-and-control cycle (Nanni et al., 1992) and vertical functions (Ittner and Larcker,
1998). Financial data, which may be consistent with the focus placed on internal
maintenance, encourage conservatism and a ‘playing safe’ attitude (Otley, 1994). This
sentiment is echoed by Dent (1990) and Langfield-Smith (1997) who indicate that
accounting measures inhibit innovation and creativity. Conversely, portrayed as
actionable, traceable to strategic priorities and timely signals, non-financial measures
guide managerial deed rather than controlling it, and reflect cross-functional processes
(Ittner and Larcker, 1998; Nanni et al., 1992). Non-financial measures can also foster
curiosity and experimentation, stimulate organisational reform and advocate the
emergence of new strategies and learning (Dent, 1990). This is consistent with the accent
on external positioning. The following hypotheses were hence formulated:
H3a: A greater degree of adhocracy culture corresponds to greater integratedness of
performance measurement.
H3b: A greater degree of market culture corresponds to greater integratedness of
performance measurement.
H3c: A greater degree of clan culture corresponds to less integratedness of performance
measurement.
H3d: A greater degree of hierarchy culture corresponds to less integratedness of
performance measurement.
Figure 4 illustrates the hypothesised linkages among organisational culture types,
leadership styles and integratedness of performance measurement.
 Organisational culture, leadership and performance measurement integratedness263

Figure 4 Hypothesised model

3.2 Methodology
3.2.1 Sample and procedure
The sample for this study was drawn from a population of 1,127 manufacturing
companies in plastics industry listed in the 2008 Vietnam Trade Directory. As companies
should be sufficiently large to ensure that organisational and strategy variables apply
(Miller, 1987), and to ensure that a formal performance measurement system is primed
(Bouwens and Abernethy, 2000), merely 126 companies reached the two criteria:
Sales are at least Vietnam Dong 25 billion yearly (equivalent to $1,300 thousand US)
at least 100 employees are hired. Data on such constructs as organisational culture,
leadership and the degree of integratedness of performance measurement were collected
through self-administered structured questionnaires sent to 630 middle-level managers in
these 126 companies, an average of 5 middle managers in each company. Using middle-
management employees to depict top-management behaviour is apposite as they would
have more opportunities to observe top-management deeds than would lower-level
employees. Table 1 displays the demographic profile of the sample, which represented a
comparatively wide range of company ownership types.
The fact that time is scanty among middle and top managers accounted for the 15–
25% response rate range reported in recent studies (e.g. Baines and Langfield-Smith,
2003; Lee et al., 2001; Spanos and Lioukas, 2001). In this research, nonetheless, of 630
questionnaires delivered to middle-level managers, 416 were returned in completed form
for a response rate of 66.03%. This high response rate resulted from the voluntary
cooperation from these 416 managers with most of whom the connections were forged
through the researcher’s close business partners in the snowball sampling process
(Robson, 1993).
264 L.T. Tuan

Table 1 The demographic profile of the sample

Private 100% foreign-

State-owned domestic invested Joint-venture
companies companies companies companies
Characteristics Mean SD Mean SD Mean SD Mean SD F test Sig.
Company size
(number of
employees) 631 1,599.2 147 431.2 469 1,182.4 508 1,205.1 43.20 0.00
Company age
(years) 26.4 19.8 16.7 15.5 12.4 17.6 14.9 15.2 10.80 0.00
Respondent
average age
(years) 36 5.1 32 4.9 29 4.7 31 4.9 1.08 0.29
Respondent
average tenure
(years) 11 7.6 9 5.4 5 6.6 6 3.7 27.99 0.00
Respondent
education
(years after high
school) 6 4.9 4 1.9 6 2.1 5 2.4 1.87 0.12
Number % Number % Number % Number % F2 Sig.
Respondent position
Chief 21 14.09 16 12.60 8 11.76 7 9.72
accountant
HR manager 38 25.50 31 24.41 16 23.53 17 23.61
Production 24 16.11 21 16.54 11 16.18 12 16.67
manager
Marketing 34 22.82 32 25.20 18 26.47 17 23.61 18.30 0.00
manager
Sales manager 28 18.79 25 19.69 15 22.06 18 25.00
Others 4 2.68 2 1.57 0 0.00 1 1.39
Respondent gender
Male 105 70.47 78 61.42 48 70.59 49 68.06 1.70 0.28
Female 44 29.53 49 38.58 20 29.41 23 31.94

3.2.2 Quantitative measures

Although the quantitative approach utilised in this study does not allow for an analysis of
the deepest level of the constructs, it permits the researcher to investigate respondents’
perceptual realities (Ashkanasy et al., 2000).
3.2.2.1 Organisational culture Cameron and Freeman’s (1991) operationalisation of
the culture construct was further adapted by Deshpande et al. (1993), who built brief
scenarios to portray the dominant characteristics of each of the four culture types,
predicated on the framework displayed in Figure 1. The validity of this instrument has
been substantiated (e.g. Zammuto and Krakower, 1991), and it has been recently
 Organisational culture, leadership and performance measurement integratedness265

employed in an accounting setting (Bhimani, 2003). In the research instrument, all four
culture types are presented as alternatives in each question. To give respondents the
opportunity to designate both culture type and culture strength, respondents were invited
to dispense 100 points among the four scenarios in the questions, depending on how
analogous respondents thought each scenario was to their own organisation. The
scenarios, where organisation A refers to clan culture, organisation B refers to adhocracy
culture, organisation C refers to hierarchy culture and organisation D refers to market
culture, are consistently arranged in the questions, assessing the organisational
characteristics, organisational leadership, organisational bonding and organisational
strategic emphases.
3.2.2.2 Leadership style This construct was measured using Bass and Avolio’s
(1995) multifactor leadership questionnaire MLQ 5X (MLQ – leader form – form 5X),
which comprises 45 behavioural statements and employs a five-point Likert rating system
(1 = not at all; 2 = once in a while; 3 = sometimes; 4 = fairly often; 5 = frequently, if not
always). Middle-management employees were asked to indicate how frequently each
statement describes the leadership style of their top-level managers. Scores were then
generated for nine separate scales, five of which represent aspects of transformational
leadership and three of which represent aspects of transactional leadership (see Table 2).
Scores for each leadership scale on the MLQ 5X were computed using the completed
surveys of direct reports, which are consistent with the work of Bass (1985) who
indicates these scales reflect distinct, but related components of transformational and
transactional leadership.
The original MLQ has been examined in myriad research studies and on a broad
range of sample populations (Lowe et al., 1996). Form 5X was launched in 1991 and has
assimilated a variety of refinements (Avolio et al., 1999). Reliability coefficients for the
MLQ 5X leadership scales range from 0.74 to 0.91 (Bass and Avolio, 1995). Although
the depth of research conducted on the MLQ 5X is not as extensive as that conducted on
the original questionnaire, there is sufficient validation data to suggest that it is likely to
replicate or improve upon the research record of its predecessor (Lowe et al., 1996).
3.2.2.3 Integratedness of performance measurement The instrument to measure
the integratedness of performance measurement was adapted from that utilised by Hoque
and James (2000) and Hoque et al. (2001), and predicated on the frameworks of Keegan
et al. (1989), Fitzgerald et al. (1991), Azzone et al. (1991), Lynch and Cross (1991),
Kaplan and Norton (1996), Brown (1996) and Neely et al. (2002). This instrument
explores the frequency of use of 20 performance measures, encompassing both financial
and non-financial measures, procedural and structural measures and objective and
subjective measures (see Table 3), ranging on a seven-point Likert-type scale. A higher
mean score denotes that the company employs all of the measures to a greater extent, or
reach a greater integratedness of performance measurement.
Descriptive statistics of the constructs are presented in Table 4.
The reliability of each construct and its specific dimensions were appraised with
Cronbach Alpha coefficients. All constructs exceeded the recommended cut-off point of
0.70 (Nunnally, 1967) with the exception of clan culture (0.68), which was however on
the verge of acceptability as displayed in fifth column of Table 4.
266 L.T. Tuan

Table 2 MLQ 5X leadership scales

Transformational leadership Transactional leadership

Idealised influence (attributed) Contingent reward
Idealised influence (behaviour) Management by exception – active
Inspirational motivation Management by exception – passive
Intellectual stimulation
Individualised consideration

Table 3 Types of measures/dimensions of performance

Types of measures/dimensions of performance

Product/
Learning
process
and
related
Competitor Resource/inf Agility- growth/- Employee Strategy/
Frameworks Financial Customer Time Quality aspect rastructure /flexibility innovation /people vision

Keegan et al. 9 9 9 9 9
(1989)
Fitzgerald 9 9 9 9 9
et al. (1991)
Azzone et al. 9 9 9 9 9 9
(1991)
Lynch and 9 9 9 9 9
Cross (1991)
Kaplan and 9 9 9 9 9 9 9 9
Norton (1996)
Brown (1996) 9 9 9 9 9
Neely et al. 9 9 9 9 9 9 9 9 9 9
(2002)

Table 4 Descriptive statistics of the constructs

No. of Cronbach First-order

Constructs/dimensions items Mean SD alpha loadings range* Ȥ2 DF NNFI CFI RMSEA
Adhocracy culture 4 24.54 13.04 0.76 [0.41–0.74] 3.7 2 0.987 0.995 0.04
Clan culture 4 20.75 12.04 0.68 [0.27–0.55] 4.3 2 0.969 0.989 0.04
Market culture 4 24.52 12.58 0.70 [0.47–0.70] 7.8 2 0.945 0.981 0.08
Hierarchy culture 4 27.81 14.52 0.75 [0.51–0.80] 2.1 2 0.998 0.998 0.00
Transactional 45 5.52 0.87 0.78 [0.79–0.98]
leadership
Transformational 45 4.68 0.88 0.85 [0.77–1.00]
leadership
Integratedness of 20 4.54 0.72 0.83 [0.13–1.15] 562.7 161 0.902 0.906 0.07
measurement
*All factor loadings are statistically significant (p < 0.05).
 Organisational culture, leadership and performance measurement integratedness267

Construct validity was established via confirmatory factor analyses conducted with a
first-order model. Two main elements were investigated, i.e. the significance of the factor
loadings for each item and the overall acceptability of the measurement model employing
chi-square statistics and three fit indices. The indices employed to appraise the model
were among the most frequently reported, i.e. non-normed fit index (NNFI),
comparative-fit index (CFI) and root mean square error of approximation (RMSEA).
Every construct displays acceptable model fit, and all factor loadings are statistically
significant (see Table 4).

4 Findings and discussion

4.1 Findings from ANOVAs

As the findings from ANOVAs (see Table 5) show, transformational leadership is more
inclined to shape adhocracy culture (p < 0.01) and market culture (p < 0.05) than
transactional leadership, and transactional leadership is more inclined to mould clan
culture and hierarchy culture than transformational leadership (p < 0.05). The data,
moreover, demonstrate a greater integratedness of performance measurement for
transformational leadership than for transactional leadership (p < 0.01).
Table 5 Findings from ANOVAs

Dominant culture
types/integratedness of Transformational Transactional
performance measurement leadership leadership F Significance
Adhocracy culture 4.91 (0.94) 4.55 (1.02) 10.17 0.00
Clan culture 4.64 (0.92) 4.83 (0.97) 4.149 0.04
Market culture 5.14 (0.97) 4.89 (1.06) 5.04 0.04
Hierarchy culture 5.58 (0.96) 5.96 (1.05) 0.142 0.01
Integratedness of performance 4.84 (0.85) 4.44 (0.82) 17.489 0.00
measurement
Note: The mean scores are displayed for organisational culture types and integratedness
of performance measurement. Standard deviations are indicated in brackets.

5 Findings from the structural equation model

The findings displayed in Table 6 demonstrate positive and significant path coefficients
between
1 transformational leadership and two culture types (adhocracy culture and market
culture; p < 0.01)
2 transactional leadership and two culture types (clan culture and hierarchy culture;
p < 0.05)
3 transformational leadership and integratedness of performance measurement
(p < 0.01)
4 integratedness of performance measurement and two culture types (adhocracy
culture and market culture; p < 0.05).
268 L.T. Tuan

Table 6 Findings from the structural equation model

Path
Hypothesis Description of path coefficient Z-statistics Conclusion
H1a Transactional/transformational ĺ Adhocracy 0.177 3.60*** Supported
culture
H1b Transactional/transformational ĺ Market culture 0.129 2.57*** Supported
H1c Transactional/transformational ĺ Clan culture 0.196 2.49** Supported
H1d Transactional/transformational ĺ Hierarchy 0.133 2.37** Supported
culture
H2 Transactional/transformational ĺ Integratedness 0.132 3.78*** Supported
of performance measurement
H3a Adhocracy culture ĺ Integratedness of 0.182 2.01** Supported
performance measurement
H3b Market culture ĺ Integratedness of performance 0.246 2.52** Supported
measurement
H3c Clan culture ĺ Integratedness of performance í0.036 í0.29 Not
measurement supported
H3d Hierarchy culture ĺ Integratedness of 0.162 1.47 Not
performance measurement supported
*p < 0.10.
**p < 0.05.
***p < 0.01.

6 Discussion

The positive and significant relationship between adhocracy culture and integratedness of
performance measurement (0.182; p < 0.05) corroborates H3a. A significant relationship
encountered in Table 6 between transformational leadership and adhocracy culture
(0.177; p < 0.01) confirms H1a. In McShane and Von Glinow’s (2008) words,
“transformational leaders are change agents who energize and direct employees to a new
set of corporate values and behaviors;” thus, transformational leadership involves the
orientation towards such dominant components of adhocracy culture as entrepreneurship,
creativity and adaptability (Deshpande et al., 1993). These components may act as
catalysts for creating the balance in the organisation’s performance measurement system
between non-financial measures and financial measures which are perceived as lacking
predictive ability to explicate future performance and lacking actionability (Ittner and
Larcker, 1998). Besides the bridge of adhocracy culture through which transformational
leadership is associated with greater integratedness of performance measurement,
transformational leadership was found to directly and significantly go hand in hand with
greater integratedness of performance measurement from the results of the structural
equation model (0.132; p < 0.01).
The findings shown in Tables 5 and 6 contribute to the substantiation of hypothesis
H1b by indicating that transformational leadership is significantly correlated to market
culture type. H3b which presumed that market culture would be associated with greater
integratedness of performance measurement is attested as denoted by the positive and
 Organisational culture, leadership and performance measurement integratedness269

significant coefficient between market culture and integratedness of measurement (0.246;

p < 0.05). Transformational leaders are cognitive of the requirements for organisational
improvement, and further generate the changed vision (Tichy and Devanna, 1986), on the
path towards market superiority associated with market culture (Deshpande et al., 1993).
Non-financial measures that appraise employees’ learning and absorptive capacity
complement financial measures in inspiring employee contributions towards the
organisation’s competitive edge and market superiority.
H3c was verified due to no lucid relationship encountered between clan culture and
integratedness of performance measurement. The data from the ANOVA and the
structural equation model indicate that transactional leadership is more associated with
clan culture than transformational leadership is, which corroborates H1c. Transactional
leadership enhances employee performance and satisfaction by linking job performance
to valued rewards (McShane and Von Glinow, 2008), contributing to the development of
human resources and employee commitment as strategically highlighted in clan culture
type.
H1d that posits the correspondence between transactional leadership and hierarchy
culture type is supported by the findings (see Table 6). The divergence between
transactional leadership and transformational leadership in relation to hierarchy culture is
significant. Hierarchy culture with the bonding among organisational members built on
rules, policies and procedures strategically underscores smooth operations (Deshpande
et al., 1993), which can be attained via role elaboration and task request transactional
leadership generates (Robbins, 2003).
Likewise, a positive but insignificant disparity between hierarchy culture and
integratedness of performance measurement as displayed in Table 6 corroborates
hypothesis H3d which assumed that hierarchy culture would be linked with less
integratedness of performance measurement. However, in light of the magnitude
dedicated to non-financial measures in recent years and the new development in
budgeting (e.g. Hansen et al., 2003), financial measures used to assess policies and
procedures in hierarchy culture appear to have been blended with non-financial measures
so as to implement stability strategy.

7 Concluding remarks

The hypothesised model displayed in Figure 4 was passably supported by the findings.
Transactional leadership, within expectation, is correlated with clan culture and hierarchy
culture. On the other hand, transformational leadership cultivates adhocracy culture and
market culture, which in turn positively impact the integratedness of performance
measurement. A direct linkage between transformational leadership and the
integratedness of performance measurement is discerned as well. Transformational
leadership is also found to integrate performance indicators of diverse dimensions. These
findings suggest that leaders should be change agents who change values, beliefs and
behaviour patterns to adapt to organisational culture as well as to generate new needs of
the performance measurement system towards enhanced stakeholder satisfaction and
commitment, rather than merely meeting the needs of the performance measurement
system as contended by Claver et al. (2001).
270 L.T. Tuan

Nonetheless, the findings from empirical questionnaire survey must be further tested
due to such limitations of the current study as its cross-sectional nature and the use of
perceptual measures. Another limitation is that the causal direction of the linkages
amongst the variables has been partially established. By controlling the effect of past
performance on the perceptions of organisational culture and leadership style, the study
can argue that culture and leadership have an impact on performance measurement
integratedness. One though has to acknowledge that the question of causality can be more
thoroughly addressed by longitudinal research designs in which all the variables are
measured at different points in time (Wilderom et al., 2000). Finally, this study ignored
followers’ characteristics, which may interact with leadership’s impact on organisational
culture in the integrated performance measurement adoption. The research conducted by
Leonard-Barton and Deschamps (1988) found that followers whose characteristics incline
them to adopt an innovation will do so without leadership influence.
An avenue for further research is the exploration of the mediating role of such
constructs as organisational learning as suggested in Vera and Crossan’s (2004) study on
the relationship between organisational learning and leadership. Customer orientation
also can play such mediating role. Dursun and Kilic (2010) found that market culture has
a positive and significant impact on customer orientation, and higher levels of customer
orientation lead to higher levels of relationship development and individual performance.
Ethics is observed to have certain influence on performance measurement (von
Drongelen and Fisscher, 2003; Winstanley and Stuart-Smith, 1996), so its mediating role
should be researched as well.

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