This study examined relationships between institutional culture, decision making approaches, and organizational effectiveness of two-year colleges. The sample included 639 full-time faculty members or full-time administrators at 30 public two-year colleges stratified for size. The causal model estimated for this study used K. S. Cameron's (1978; 1986) nine dimensions of organizational effectiveness to produce a global measure of institutional performance. Four sets of variables were included: (1) institutional variables (such as financial health and enrollment health), (2) institutional culture, (3) resource allocation decision making, and (4) the global organizational effectiveness of the institution. Results confirmed and extended previous research on the influence of the external environment and institutional cultures on organizational effectiveness. The key mediating variable for both enrollment and financial health as well as overall effectiveness was an adhocracy culture. Adhocracy cultures assume that change is inevitable; individuals are motivated by the importance and ideological appeal of the tasks to be addressed. A prospector-type stratetic orientation is used to acquire resources to ensure institutional vitality and viability. Adaptive and interpretative qualities are called on to make decisions. Findings also suggested that the influences of these factors may have been underestimated in the past by not taking into account indirect influences on effectiveness and how the negative influences of declining enrollments and financial health may be partially muted through attention to institutional cultures and decision approaches. (Contains 53 references.) (DB)