To Increase Organizational Performance, Cultural Similarity May Beat Individual Quality

Consider how much of your HR focus is on the quality of the individuals in your organization, but research suggests it may be equally or even more enlightening to understand the collective similarity–not just individual quality.

The typical focus on improving individuals

Most HR systems work very hard to hire and retain individual employees qualified for high individual performance, such as job-related skills and abilities, personality like conscientiousness, and cognitive ability (or “intelligence”).  HR research shares this focus, with decades of research suggesting such individual characteristics correlate with higher job performance across many types of work.  

For example, research shows that individuals higher on the personality characteristic of conscientiousness show a modest but consistently greater chance of higher performance across a wide variety of work tasks. Cognitive ability, or intelligence, also predicts individual performance ratings (albeit with some controversy).  Most organizations focus attention on enhancing individual job performance, implicitly assuming that better individual performance adds up to better organizational performance, and increased competitive advantage.

Is improving individual quality enough to improve organizational performance?

Individual quality is certainly an element of organizational performance, but it’s also easy to see that simply having great individual performers is not enough for great overall performance. The performance of teams and social networks is not simply the sum of the individual team members. The press is replete with examples of sports teams with less stellar individual talent, yet they outperform competitors stacked with superstars.  

Research on teams, such as by Hollenbeck and DeRue, shows that team performance is often not the summed performance of individuals, but instead depends on the configuration of individual capabilities, the capability of the lowest-performing member, or whether the team knows how to combine their capabilities.  

“Research shows that individuals higher on the personality characteristic of conscientiousness show a modest but consistently greater chance of higher performance across a wide variety of work tasks. Cognitive ability, or intelligence, also predicts individual performance.”

Rob Cross and other researchers on social networks also find that network effectiveness often depends more on how the network operates, and the social relationships among network members, rather than on the qualifications or performance of each individual.

Is financial performance better predicted by organizations’ cultural “personalities?”

The concept of “organizational culture” can be defined in many ways. Indeed, organizational culture is among the least well-defined and most misunderstood ideas in the social sciences, despite its popularity.  So, it is notable when research defines culture in an interesting and specific way, and one that reveals how the characteristics of individuals interact with the collective characteristics of the organization.  

Ben Schneider and Dave Bartram defined culture based on personality traits, and then examined how those traits related to organizational financial performance (an index combining the return-on-assets and return-on-investment in 2011 and 2012), in a sample of almost 40,000 individuals from 167 different organizations, in 31 different countries, and 10 industry sectors. 

“…simply having great individual performers is not enough for great overall performance.”

The researchers defined culture as the “organizational personality,” which was the average of the personality traits among individuals. They calculated the “strength” of the culture by the variability around those averages, with greater strength indicated by a narrower distribution. The idea was that if organization members are on average high on the personality trait, and the collective group is more closely clustered around that average, then the personality-defined culture is stronger.

They looked at four personality traits

  1. Conscientiousness (self-disciplined and expectation-focused); 
  2. Emotional stability (positive emotions, tolerance for ambiguity); 
  3. Agreeableness (concern for social harmony, trusting, willing to compromise); and 
  4. Openness to experience (Intellectually curious, willing to try new things)

Each of these traits has been found to be positively related to one or another type of job performance, so you might expect that organizations with higher average levels would perform better. Yet, the researchers did not find that. Did higher levels of some traits affect financial performance? Only for conscientiousness, and none of the others. 

However, the distributions of each personality trait revealed something different: The more closely clustered (smaller variability) the personality trait, the greater the financial performance–and that held true for all four personality traits.  

Financial performance wasn’t greater when individuals had higher levels of personality traits, but rather when the collective group had more similar personality traits.  

“Can’t we all just get along?”

Why would similarity of personality traits predict financial success more than the individual levels of those useful personality traits? 

Research suggests that cultural agreement increases organizational performance by reducing ambiguity, increasing coordination and reducing the need for formal control systems. Similarity of personality traits may have such effects, even when the average level of the trait does not. It may be useful to consider organizational similarity in personality and “culture,” rather than focus exclusively on the traits of individuals, even when certain traits enhance individual performance.  

Most HR systems focus on individuals, though collective traits often have greater effect.  Similarity may sometimes be more vital than raising average quality, particularly when increasing the average means adding “outliers” that may be high on useful characteristics but very dissimilar to their colleagues.  

“Financial performance wasn’t greater when individuals had higher levels of personality traits, but rather when the collective group had more similar personality traits.”

Boris Groysberg’s research on the impact of hiring “stars” similarly suggests that such “stars” often fail or add little value, but that their success can be increased by also hiring the team that made them stars in the first place.Of course, too much similarity can also lead to poor outcomes such as groupthink and conscious or unconscious bias. 

However, when HR systems and leadership focus so much on enhancing individual traits, HR leaders may well consider that if a goal is to increase certain traits (such as personality, skills, abilities, cultural perspectives, values, etc.), the best way may be by hiring and retaining groups of individuals with similarly high levels of those traits, rather than just one or two high-scoring outliers.

Author Photo
John Boudreau |
John Boudreau is professor and research director at the University of Southern California’s Marshall School of Business and Center for Effective Organizations, and Boudreau is the author of two forthcoming books, “Human Resource Excellence” with Edward E. Lawler III and “Reinventing Jobs” with Ravin Jesuthasan.