The purpose of this paper is to address an important gap in the literature by investigating the relationship between organizational climate and performance in small businesses.
Data were collected from 100 retail pharmacies in Sydney, Australia where a manager and up to three staff members and three buying customers were interviewed in each pharmacy.
Supportive climates tend to be associated with higher organizational performance (i.e. financial performance, staff satisfaction, customer satisfaction) in small retail pharmacies, and may reduce staff turnover.
The results suggest that managers should consider creating warm and supportive organizational climates to enhance business performance, employee job satisfaction and organizational commitment, and increase employee tenure.
This paper is among the first to empirically establish a direct link between organizational climate and the performance of small businesses, in particular in retail pharmacies. Both financial and non‐financial measures of performance confirm reports based on larger firms that performance is enhanced in the presence of more supportive organizational climates. A further benefit of supportive climates, namely lower staff turnover in small businesses, was also evident.
