Does employee understanding of strategic objectives matter? Effects on culture and performance

The purpose of this paper is to investigate whether employees' understanding of their organization's strategic objectives could be used by business organizations to develop a desired type of organizational culture that will improve business performance.

Structural equation modeling (SEM) was conducted on the data collected in 2018 from professionals working in the healthcare industry in the USA.

SEM revealed the positive effect of employee understanding of their organization's strategic objectives on the development of a serving culture, and the mediating effect of serving culture on the relationship between employee understanding of strategic objectives and performance.

This study emphasizes that having a well-defined mission and strategic goals may not be sufficient. Business organizations must also ensure that all employees clearly understand the meaning of such objectives. Employee understanding can become instrumental, as it could allow business organizations to develop a desired type of organizational culture that will support the implementation of the firm's strategic objectives.

The study is a valuable addition to past research. First, it advances the literature on strategy by exploring the critical role of employee understanding of their organization's strategic objectives in the context of culture and performance. Thus, it allows scholars to better explain how business organizations could more effectively utilize their process of strategic planning. In the domain of organizational culture, the paper contributes by identifying a new antecedent of serving culture. Furthermore, the paper also contributes to the literature on service management by identifying a mechanism that service organizations could use to increase their performance.