Does corporate culture really impact results?
The following article comes from Fast Company, which describes itself as the world’s leading business media brand, with an editorial focus on technological innovation, leadership, transformative ideas, creativity, and design. Written for and about the most progressive business leaders, Fast Company inspires readers to think big, lead with purpose, embrace change, and shape the future of business.
At least one analysis claims it doesn’t.
The article is by Bud Caddell, founder and CEO of NOBL, a boutique consulting firm that helps its clients create real change. His work has appeared in The New York Times, The Wall Street Journal, Forbes, and AdAge.
Corporate culture does not affect performance. This is not a controversial opinion; it’s the conclusion of a 2022 meta-analysis by the Chartered Institute of Personnel and Development, which compared more than 500 research articles on the topic. From the report:
The findings are very clear: there is little evidence that consistently links organizational culture to performance, but if such a link existed, it is very weak and too small to be meaningful in practice.
Therefore, organizations and professionals should be cautious about investing time and money in company-wide cultural change programs, as they are unlikely to improve performance.
And yet, when asked, 92% of executives believe that improving their company’s culture would increase its value.
So, are 92% of executives wrong?
Are millions, if not billions, of dollars wasted each year on cultural initiatives?
The short answer? Yes and yes. The full answer is a bit more complex.
Why does the myth persist?
Leaders cling to the idea that culture drives results because it feels controllable. New values can be written, an off-site meeting can be held, or a chief culture officer can be hired. It is far easier to reprint the employee handbook than to reconfigure incentives, decision-making, or priorities. The discourse on culture offers the illusion of progress—something visible, moral, and manageable—while the true drivers of performance remain untouched.
Corporate culture remains deeply misunderstood.
Many leaders talk about culture as something you have—a vibe, a set of values, a state of mind—rather than something you do. But culture is not a static asset; it is the emergent result of how decisions are made, what is rewarded or punished, and what behaviors the system facilitates or hinders. When executives say, “We need a culture of innovation,” but still require six levels of approval for new ideas, they are confusing aspiration with infrastructure.
Leaders are not honest about their culture or themselves.
A 2020 MIT Sloan Management Review study
found no correlation between a company’s stated values and the lived experience of its employees. In other words, what leaders say their culture is and what people actually feel on a daily basis are worlds apart. Companies with large cultural gaps experience lower productivity and poor alignment.
This misalignment fuels cynicism and distrust, undermining managerial credibility and eroding morale. Employees in these organizations report lower engagement and higher turnover. Instead of addressing this gap, many double down on image: slogans, motivational speeches for everyone, or off-site meetings to «rebuild trust.»
But culture isn’t changed with words or rituals, but through systems.
The right to make decisions, the flow of information, the cadence of meetings, and incentives form the true architecture of behavior. Until leaders are honest enough to align these structures with their rhetoric, cultural initiatives will continue to deliver the same result: symbolic satisfaction without measurable performance improvements.
Leaders aren’t being strategic with their culture.
Every era has its cultural model: the company everyone is told to emulate. In the 1990s it was Jack Welch’s GE. Then it was Apple, then Amazon. Now it’s Jensen Huang’s Nvidia. Each time, executives rush to borrow its rituals and slogans, hoping to import a little of its magic. But let’s be honest: your company isn’t that company, and it shouldn’t be.
Culture is simply how strategy is lived.
This means there is no such thing as an «ideal culture,» only a suitable culture—one that reinforces your strategy and addresses your specific constraints. Copying someone else’s culture while pursuing a different strategy is not only naive but counter-strategic.
Obsessing over culture is a distraction.
The corporate world is hooked on culture because it’s comforting and makes leadership feel human and moral. But talking about culture often becomes a way to avoid harder truths: poor strategy, misaligned incentives, failing systems, and unclear ownership. In our experience as a consulting partner to some of the world’s largest and most complex companies, a «cultural problem» is often a smokescreen for issues leaders have long known about and are shirking responsibility for—a «friendly» way to avoid assigning blame or deflecting responsibility. And when we analyzed 1,700 publicly traded companies and their Glassdoor ratings, we found that the main theme among negative reviews was complaints about leaders and management. So, poor leadership breeds poor cultures.
What to do instead?
Before rushing to rewrite values, produce giveaways, or drag people into public meetings, leaders must first take responsibility for themselves. Do they actually behave the way they expect others to? Do they collaborate with their colleagues as «one company,» or is that just a slogan? Does the way they allocate resources align with what they say they prioritize? Are the people who rise through the ranks truly the best «culture bearers,» or are they simply complainers or political players?
Therefore, leaders must consider culture as the shadow cast by the operating model they design and manage.
If they want to change that shadow, they must change the object casting it. This means redesigning how decisions are made, how information is communicated, and what is measured and rewarded. Culture isn’t a lever you pull; it’s a reflection of the decisions leaders make every day about how things actually get done.
So yes, culture matters, but not in the way most executives think. You don’t fix performance by fixing culture; you fix culture by fixing performance. Because, ultimately, culture resides in the rules you enforce, not in the words you pass.
Does Your Company’s Culture Improve Your Results?
The following contribution comes from the CultureWise portal, which defines itself as follows: CultureWise helps your team consistently deliver exceptional experiences by developing daily habits, a shared language, and true accountability.
More than 1,000 companies worldwide trust us.
Author: Candace Coleman
Does Your Company’s Culture Improve Your Results?
It may be surprising that the head of one of the world’s most successful companies considers culture his number one priority. But that’s exactly what Satya Nadella, CEO of Microsoft, stated when he increased his organization’s market capitalization from $300 billion to more than $2.7 trillion.
Nadella isn’t the only one who thinks this way. A Korn Ferry survey reveals that two-thirds of the leaders of the world’s largest companies attribute at least 30% of their companies’ value to culture, and a third say it accounts for 50% or more.
Furthermore, 72% of those surveyed by PwC stated that a strong culture is critical to the success of change initiatives.
Prioritizing culture seems like an obvious decision for business leaders, as change is inevitable and even necessary to maintain a market advantage and remain profitable. However, organizational culture is not as effective as a standalone attribute. CEOs like Nadella understand that it is fundamental to every aspect of their business and cite it as the primary reason for Microsoft’s rise. Nadella and other top leaders understand that they unleash the power of culture when they align it with their business strategy.
When Boosting Culture Fails to Increase Profits
It’s impossible to run a company without hearing about the importance of workplace culture. The topic dominates news across all sectors and is the focus of countless books, articles, podcasts, seminars, and workshops.
Most of these sources focus on improving the quality of corporate culture. However, many fail to address the relationship between culture and profit.
Researchers at Hendrick & Struggle (H&S), a global leadership consultancy, report that this disconnect could be the reason why many CEOs fail to maximize their culture’s potential to revitalize their bottom line.
In their survey of 500 leaders from the world’s largest companies,
82% of respondents stated that culture was important to them. However, 74% stated that other aspects of their business (such as strategy and leadership) drive profitability. In a recent article, the H&S team notes:
“Our findings suggest that most CEOs prioritize culture, as we believe they should. However, surprisingly, we also observed that most are not particularly intentional in their pursuit of culture as a driver of financial performance, even when they try.”
Without understanding culture’s potential to impact revenue, leaders’ initiatives to improve it can only achieve basic goals.
Correlation of Culture with the Bottom Line
Upon further analysis of their survey data, the H&S team discovered an interesting subset of companies: those that approached their cultural initiatives with strategic intent. By labeling them “culture accelerators,” they found that these organizations followed a people-centric approach across the board and outperformed the rest of the surveyed group financially. H&S reports that the compound annual growth rate (CAGR) for culture accelerator companies was 9.1%, up from 4.4% the previous year.
They also found that this phenomenon was observed in companies of all sizes and sectors globally. They concluded: “In our experience, companies often know they need to align strategy, operating models, and culture, but they don’t know where to start. This is not the case for CEOs of culture accelerators; only 19% stated that focusing on operating models was among the top three positive influences on financial performance, compared to 40% of other CEOs.”
Furthermore, 48% of cultural accelerators stated that they focus on culture
to drive a change in strategy or direction, compared to only 22% of other organizations.
Cultural accelerators are particularly focused on maximizing personal contact to improve the customer experience and strengthen relationships with stakeholders. They also work to generate a high level of collaboration and trust among their team members. Similarly, the Health & Safety survey revealed that 48% of cultural accelerator companies prioritized diversity, equity, and inclusion initiatives, compared to 30% of other organizations.
Not surprisingly, two-thirds of these companies reported having met or exceeded their cultural objectives. Their strong financial performance and strategic focus suggest that companies would be more successful if they integrated culture into their strategy from the outset, rather than treating it as a separate entity.
According to H&S, a select and smaller group within cultural accelerators embraces their culture at an even deeper level. These companies, referred to as «cultural connectors,» demonstrate intense engagement with their culture.
«Their employees are involved, to a large extent or completely, in applying the company culture in their daily work.» These organizations focus even more on clear and effective communication, both internally and externally, and strive to engage all their staff.» H&S reports that organizations that connect cultures had a higher three-year compound annual growth rate (CAGR) in revenue than all other companies surveyed.
Using Culture as a Catalyst
H&S researchers found that CEOs of companies that connect cultures believe a strong culture strengthens financial performance because it inspires people to exceed expectations. They identified two best practices that enabled companies to generate high levels of performance and enthusiasm:
Engaging people at all levels of the organization
Large-scale communication
ENGAGEMENT
Nearly two-thirds of the CEOs of companies that connect cultures in the H&S study said that appreciation and recognition were key aspects of their culture and that these elements directly impacted financial performance. This percentage is 26% higher than that of culture accelerators and significantly higher than that of the other companies surveyed.
It can be difficult for some leaders to connect the dots between showing appreciation for their team members and increasing profitability. However, many expert sources point to meaningful staff recognition as one of the most impactful ways companies can foster employee engagement.
According to Gallup
And according to Gallup, employee engagement is closely linked to the business results essential to an organization’s financial success.
Another way culture-connecting companies generate engagement is by encouraging employees to take ownership of living the organization’s culture. Initiating this positive accountability reinforces the entire team’s effort to encourage and support each other to achieve results.
COMMUNICATION
CEOs who connect cultures systematically implement multiple methods to strengthen their culture.
They stay in tune with their team through communication at both micro and macro levels, from one-on-one dialogues and coaching to large-scale discussions. They look for ways to build ongoing alignment with the culture and prevent toxic situations that could erode it.
This focused, continuous, and multifaceted communication approach helps a company manifest its culture and allows everyone to participate in its success.
The H&S survey also revealed that CEOs of culture-connecting companies practice a more subtle but powerful way of communicating culture: they lead by example. Their researchers report:
“When asked how they communicate at scale, 80% of these CEOs selected ‘personal commitment to focusing on culture,’ compared to 66% of culture accelerators and 45% of other companies.”
The Role of Culture in Strategy
Korn Ferry recently surveyed nearly 500 leaders from the World’s Most Admired Companies (WMAC) and other leading organizations. The consensus among respondents was that culture was the most underrated source of a company’s future success.
These executives are planning a continued emphasis on culture within their organizations and listed related priorities when planning for the future, including learning, customer focus, collaboration, accountability, and a long-term perspective. As Laura Manson-Smith, global leader of Korn Ferry’s Organizational Strategy Consulting practice, observed:
“Ultimately, we’re seeing a shift from the what to the how. Most executives at the World’s Most Admired Companies are preparing for a future where they won’t focus exclusively on the bottom line. Instead, they’re spending more time questioning how they will achieve results.”
These leaders are giving culture a central role in their business strategy, which will be crucial for their continued success.
The Economist Intelligence Unit Survey
This interrelationship is vital, as a survey by The Economist Intelligence Unit revealed that a lack of cultural alignment was the reason why 90% of large companies failed to achieve their strategic objectives. However, companies that align their strategy with their culture empower and inspire their teams to achieve and exceed goals.
Korn Ferry
For example, Korn Ferry reports that companies that adhere to this alignment achieve a 117% higher return on investment than those that do not. They also achieve a 145% higher return on assets and a 56% higher return on equity.
Legendary management consultant Peter Drucker warned business leaders that “culture eats strategy.” But it doesn’t have to be that way. Culture can and should be the most important component of strategy. As former IBM CEO Louis Gerstner noted:
«I came to understand that culture isn’t just an aspect of the game, it is the game itself. In the end, an organization is nothing more than the collective ability of its people to create value.»
8 Ways Your Company Culture Directly Impacts Your Results
The following contribution comes from the website of the prestigious Forbes magazine.
It is written by William Craig, a former contributor. I write about the secret of company culture for business success. I am the founder and president of WebFX. For the past three consecutive years, WebFX has been named the #1 Best Place to Work in Pennsylvania, setting a new record in the award’s history and a new standard for Pennsylvania companies to reward their employees. Here, I write about leadership.
It may be so obvious that you’ve never thought about it: the subtle but undeniable connection between your company’s culture and identity and its profitability.
A strong company culture and a commitment to employee happiness have a direct relationship with shareholder profitability. Culture-conscious companies stand out from industry standards and outperform the competition in revenue and performance.
With benefits like these, culture is definitely something you should consider. Why? And more importantly, how can this be achieved? Let’s take a look.
It’s probably the worst-kept secret in the business world: not all sick leave is due to an actual illness. Sometimes, employees stay home all day simply because they’re dissatisfied with what they’re doing or who they’re doing it with.
Putting yourself in someone else’s shoes
The first step to boosting your results by investing in company culture is simply putting yourself in someone else’s shoes. Would you like to work in this environment? Would you feel you had the necessary tools to do excellent work every day?
These questions aren’t difficult to answer, and you probably won’t find them difficult. The key is to start asking yourself these questions.
Less costly turnover
Closely following absenteeism is turnover. As you probably know, employee turnover can be incredibly expensive, especially if you perform specialized work or require specific skills.
If you’ve succeeded in making your employees feel happier and more secure going to work in the morning, chances are you’ve also encouraged them to invest their talent in your company for the long haul.
Less Management Needed
Company culture goes beyond celebrating employee birthdays; it also involves instilling positive qualities in every team member. A healthy culture fosters employee motivation and self-reliance whenever possible.
The result is a company that requires less management. By fostering not only trust but also a desire to do things right, you’ll be able to dedicate more time to growing your business than to micromanaging it.
Environment and Morale
At the risk of sounding vain, the degree to which we find our environment appealing has a considerable impact on our mood. Environments that promote excessive noise or stress, or that don’t take privacy seriously, are a quick way to compromise productivity and, therefore, your bottom line. Solve it with culture.
American companies are going through an identity crisis with the debate between open-plan offices and cubicles. Surveys seem to suggest that open-plan offices sacrifice privacy to reduce expenses on partitions, but every workplace is different. This makes it a cultural aspect worth investigating in your own environment. If there are many meetings and collaborations, a more open office design might be the solution. In other situations, a more intimate and private environment might be better.
Observe what you prioritize for your employees: it’s very likely to translate more or less directly into increased productivity and even profits.
Appearance is everything.
Let’s dismiss vanity once again and suggest that employee attire is an essential and integral part of your organization’s culture.
Why? Because while appearance isn’t everything, it’s still very important. Companies whose clients visit frequently would do well to adopt business casual attire, while many other professionals benefit equally from a slightly more relaxed dress code.
As with other things, results can vary.
Regarding results, it’s easy to see why maintaining a professional appearance will favor client retention, or why a relaxed dress code that improves morale and focus, or informal Fridays, are often a good team motivator.
Commitment to Improvement.
Previously, conventional wisdom told us to fear employee reviews. Now, younger professional generations are leading us in a new direction: Millennials thrive on constructive criticism of their performance and even look forward to it.
Make this a core pillar of your company culture. A company’s ability to honestly address employee weaknesses while nurturing their strengths appears to be directly linked to their job engagement and, therefore, their productivity.
Even as adults, we never stop learning.
That includes learning about ourselves and how we work. Every new employee you bring on board should know they are joining an organization that regularly assesses their strengths and what could benefit from an honest review.
Health
I hope it goes without saying. If it does, remember that healthy employees are far happier, more productive, and more engaged than those who aren’t.
It’s true that healthcare is a political issue right now, but as business leaders, one thing that hasn’t changed is our responsibility to keep our employees healthy. This means offering health plans that are superior to low-cost options and staying current with paid sick leave, paid maternity or paternity leave, and even, surprisingly, unlimited paid vacation.
The latter has been an unexpected hero for some of the world’s most recognized brands. It turns out that when employees know they have a safety net for their physical and mental well-being, they are more focused on their work and better prepared to help their company exceed expectations.
Culture within cultures
We think we’ll end with a small caveat. Just as one company’s culture might not mesh with another’s, the teams within your company might develop their own distinct cultures.
Your instinct might be to fight against this. You might think that everyone needs to be working in the same direction for the culture to function properly and influence your results. However, there’s no need to force things.
Many different types of work are done under one roof. What works for one team might not work for another. Insisting that every type of professional employee adhere to the same processes could harm your productivity rather than improve it.
What better way to conclude than by remembering individuality? Culture is, ultimately, a collection of individuals. At the very least, I hope you’re now more aware of culture than you were recently. In some ways, it takes care of itself, while in others it needs help.
How Corporate Culture Influences Results
The following contribution comes from the Reworked portal, which describes itself as follows: produced by Simpler Media Group, it is the world’s leading community of professionals in employee experience, digital work environments, and talent management.
Our mission is to advance the careers of top professionals in the workplace and future-oriented leadership through high-impact knowledge, networking, and recognition (through the Reworked IMPACT Awards).
The author is Melissa Henley, who is Director of Customer Engagement at KeyShot, a global leader in product design rendering software. Her professional interests include building a customer community, change management, leadership and culture, and digital transformation. In her free time, Melissa travels to conferences and client events, helping professionals drive their technology projects forward, both for internal and external clients.
Employee Experience
If the connection between company culture, customer experience (CX), and revenue improvement is so clear, why aren’t we rushing to change the way we work?
Customer experience (CX) initiatives often focus on changing corporate culture. And it makes sense. There’s a direct relationship between satisfied employees and satisfied customers. The Aberdeen Group found that companies that actively engage their employees have 233% higher customer retention rates than those that don’t.
Employees are the face of your brand. No matter how much effort you put into digitizing the customer experience, at some point, they will interact with an employee. And even if they don’t, their digital experience will be programmed (or, in the case of an AI-powered experience, coded) by a person. Regardless of whether your customers physically interact with your employees or not, your intentions, attentiveness, and understanding of the importance of customer experience will be evident.
If the connection between company culture, customer experience, and revenue improvement is so clear, why aren’t we rushing to change the way we work? Well, as the saying goes, Rome wasn’t built in a day, and neither is your company’s culture. It’s not a journey, it’s a destination, and it’s one reached through constant iteration and effort.
If you’re looking to create a company culture that supports your customer experience goals, be sure to focus on your employees’ experience, looking beyond the metrics and communicating your values.
Employee experience drives customer experience, so start from within.
It’s simple: EX drives CX. If you don’t have happy employees, you won’t have happy customers. The Capgemini Digital Transformation Institute found that eight out of ten customers are willing to pay more for a superior experience.
Investing in EX doesn’t mean giving employees more vacation time or free lunch and donuts on Fridays (although that’s certainly nice). It means investing in the right things, such as:
Recognition
Everyone values feeling seen and understood. For customers, it’s a personalized experience when they visit your website or speak with a customer success manager who knows them. For your employees, it’s recognition. When employees feel recognized, retention increases; when they don’t, they leave. One survey revealed that 50% of employees who don’t feel valued start looking for other jobs. Think about recognizing employees on their birthdays and anniversaries, highlighting their accomplishments, and building personal relationships to make them feel valued. Ultimately, both customers and employees want to feel valued as people, not just as part of the final product.
Consistent Employee Experience
As a general rule, customers care more about the overall experience than a single memorable moment, and employees value the daily experience of being treated as people more than a fancy holiday party.
In fact, 60% of employees would accept a pay cut to work for a more empathetic company. This doesn’t mean you have to spend a fortune moving to a fancy new building. It could be simple things like more flexible work hours, better office lighting, or a standing desk. The point is, you won’t know unless you ask, which makes investing in getting accurate and timely feedback even more important.
Open Feedback Channels
And speaking of feedback, let’s go back to «She divorced me because I left the dishes in the sink,» which I first mentioned in relation to proactive support. You know what? It’s not just your customers who give you clues about their dissatisfaction: your employees do too.
Many of us are guilty of asking for feedback and then ignoring it if it doesn’t fit our narrative or dismissing it as just complaints from dissatisfied people. Constructive feedback is one of the best gifts you can receive because it means you have employees who remain engaged. So, if you’re going to ask for feedback, put your ego aside and listen. You’ll be surprised by what you hear.
Whether you’re thinking about customers or employees, it all comes down to the golden rule: treat others as you would like to be treated. Policies and procedures have consequences, both good and bad, that extend far beyond what’s anticipated. And if your employees’ experience isn’t positive, you can be sure your customers’ won’t be either.
Don’t get obsessed with metrics. Employee turnover, NPS, CSAT, CES… the CX metrics you can measure are endless. However, focusing solely on metrics can disconnect you from your ultimate goal: keeping customers happy.
You’ll know you’re obsessed with metrics if you justify the results with the same tired excuses (internal systems, understaffing or unsuitable personnel, corrupted data), or if you use those same excuses as a reason not to try to improve. Perhaps you spend all your time debating how to calculate metrics instead of analyzing the information they provide. Or perhaps you simply tell anyone who will listen that the numbers don’t matter because «we’re different,» and you dismiss customer feedback because you simply don’t understand it.
Work smarter. Every day.
Metrics are important, but they aren’t everything. Instead, think about prioritizing the crucial battles that impact customer satisfaction and your bottom line. It’s much easier to motivate employees to «improve the login experience» than to «reduce the login page bounce rate from 65% to 33%.» Employees have ideas for improving a specific experience based on their knowledge and conversations with customers. Let them be part of the solution.
Think you communicate enough? Think again.
Do you know your company’s mission, vision, and values? Let’s be honest: how many of you have visited your company’s website to refresh your memory? Well, here’s the news: if you don’t know them, why do you think your employees do? Your mission, vision, and values can’t be something you write once, put on your website, and then quickly forget. You need to communicate them continuously throughout the organization so they become part of your company culture. But more than that, you need to make it easy for employees to live those values. Think about it. Most of us probably work for companies that have some variation of «customer success» as one of their core values. After all, who doesn’t want customers to succeed? And to be more direct, what company will succeed if it doesn’t put customer success at the heart of its strategy? But saying it is one thing, and living it—in your words and in your actions—is another.
Corporate Culture in a New Era: Perspectives from Senior Management
The following contribution comes from the Wiley portal, which defines itself as: Your go-to hub for the latest trends, expert advice, and industry innovations in research, publishing, and education. Stay informed, grow professionally, and explore the future of knowledge.
The authors are John R. Graham, Jillian Grennan, Campbell R. Harvey, and Shivaram Rajgopal.
INTRODUCTION
Corporate culture has been compared to the heartbeat of an organization: the less visible and somewhat intangible force that defines its movements, health, and longevity. Just as human beings need a strong heart to live, culture often makes the difference between business success and failure.
Google’s culture is frequently considered a fundamental pillar of its innovation and achievements. Zappos’ excellent customer service is based on a team-oriented culture, cultivated from the hiring phase. In contrast, the problems of VW, Toshiba, Uber, and Wells Fargo are commonly cited as examples of cultural failures.
However, designing a culture that can be credited with significant business success is difficult, especially considering the global catalysts that are shifting workers toward hybrid arrangements and placing new demands on management practices and governance structures. Employees are increasingly seeking work that aligns with their personal values, rather than just financial incentives.
Similarly, employees, particularly those not immersed full-time in toxic work cultures, feel empowered as whistleblowers and are increasingly reporting wrongdoing within their companies to the SEC.
Amid these transformations, we believe it is time to reflect on the meaning of corporate culture and how it contributes to a company’s productivity, efficiency, and value creation. To this end, we analyzed executives’ responses to questions about culture, including: «How do companies build and maintain a culture focused on improving efficiency and value?», «What role do other formal institutions, such as board oversight and compensation systems, play in strengthening (or weakening) culture?», and «How is the effectiveness of a corporate culture measured?».
Within this context of reflection and inquiry, we synthesized the perspectives from a comprehensive survey of chief executive officers and chief financial officers (CEOs and CFOs, referred to interchangeably as «executives» or «managers») from a wide range of North American companies, both public and private.
In addition to specific questions about corporate culture and its role in their organizations, we also conducted in-depth interviews with executives representing more than 20% of U.S. market capitalization. In reviewing these perspectives, we strived to incorporate the most relevant insights on culture in this era of unprecedented change for leaders and employees.
In the following pages, we begin by summarizing the survey findings to provide context for the interviews and open-ended responses. Among the most important findings is that the majority of executives surveyed considered corporate culture to be one of the top three drivers of value in their companies, and nearly all agreed that improving it would increase the company’s value. While the CEO was identified as the most influential person in shaping the company’s current culture, boards of directors were also seen as influential, primarily through their election and oversight.
The finance function was also considered to have potentially significant effects on corporate culture, particularly in its role of internal governance as steward of corporate assets and investor capital. Incentive compensation, along with hiring, firing, and promotion decisions, was also identified as a factor that reinforces cultural values in successful companies while weakening them in others. In fact, cultural fit was considered so important in a merger or acquisition that most executives stated they would walk away from a company whose culture did not align with that of the acquiring company.
There was also consensus that culture significantly influences corporate risk-taking and plays a critical role in instilling a long-term focus in employees and managers. Conversely, a poorly implemented and ineffective culture was seen as increasing the likelihood of illegal or unethical behavior by employees or managers. Surprisingly (at least to us) was the widespread practice of «real profit management,» with over 40% of the CFOs surveyed acknowledging their companies’ willingness to postpone investment in value-adding projects to meet quarterly profit targets.
The executives who responded to our survey also noted a widespread disconnect between companies’ stated values and their prevailing social norms. Very few executives said they believed their own culture was exactly where it should be. And when asked how their culture could be improved, the majority of respondents said leaders should invest more time in developing it by fostering: (1) coordination and trust among employees; (2) consensus on the company’s long-term goals, values, and interests; (3) constructive criticism, learning, and the development of new ideas; (4) a sense of urgency and predictability in how employees worked; and (5) a willingness to identify problems when something goes wrong.
Finally, the executives suggested various ways to assess a company’s culture, including conference call transcripts and analyst reports, employee seniority and turnover, analysis of the company’s external communications and the CEO’s image in the press, as well as external websites with employee reviews such as Glassdoor.com. A common belief was that no single data source can measure the nuances of culture, but rather that triangulation among multiple sources may be most effective. In that regard, we linked survey and interview data with employee reviews collected collectively on platforms like Glassdoor and the cultural values advertised on corporate websites, obtaining revealing correlations. However, there is a considerable need for further research to establish definitive causal relationships between culture and various measures of business performance.
Interview Procedure
Because of our interest in investigating the causes and effects of corporate culture in the context of finance and accounting, most of our 18 follow-up interviews were conducted with chief financial officers, although we also interviewed a CEO and several other senior managers (including a marketing director). Given the potentially sensitive nature of corporate culture, and to encourage open conversation, we promised the executives anonymity.
Each interview began with open-ended questions such as “What is corporate culture?” and “How would you describe the corporate culture at your company?” The interviews ranged in length from 40 to 90 minutes, and the executives were candid in their responses and generally enthusiastic about the topic.
The companies represented by our 18 interviewees were all large corporations (with average sales of $47 billion) that, collectively, account for about 20% of the market capitalization of the New York Stock Exchange and the NASDAQ. In addition to being much larger than the typical Compustat company, they were also more leveraged, more profitable, had lower sales growth, and a higher credit rating.
Interview Results
Among the responses to our initial question, “What is corporate culture?”, we found terms such as “a belief system,” “a coordinating mechanism,” “how employees interact,” “a standard of behavior,” “norms about how people treat each other,” “part work ethic, part work environment,” and “the tone that defines the type of company.” Furthermore, these perspectives closely aligned with academic definitions of culture, such as: “the widely shared and firmly held values and norms across the organization that help employees understand what behaviors are and are not appropriate.”
We then asked the interviewees to describe “their company’s culture.” “Customer-focused,” “collaborative,” and “employee-centered” were the three most common responses. Based on our review of the respondents’ answers, we organized their descriptions into seven distinct groups or categories centered on the following core cultural values: (1) adaptability; (2) collaboration; (3) community; (4) customer satisfaction; (5) product quality and accuracy; (6) integrity; and (7) performance. A brief description of each of these cultural values follows:
Adaptability: We classified cultures as «adaptable» when participants used terms such as «startup culture,» «aggressive,» «rebellious,» «dynamic,» «innovative,» «thinking beyond the obvious,» «with little to no bureaucracy and hierarchy,» «entrepreneurial,» «action-oriented,» and «always looking for the best way.» As one executive described his company: «[Company XX] didn’t want processes… [or] systems… [or] bureaucracy; it wanted people to take ownership and make decisions even if they turned out to be wrong—to fail fast and then move forward. It was, in essence, about becoming a learning machine, where you take each cycle of data, feed it back into the algorithm, and make changes based on what you observe, rather than trying to get it right the first time and spending a year preparing for that first time instead of a week iterating on the data.»
The antithesis of adaptable organizations were those characterized as «traditional, rigid, centrally authoritative, conventional, command and control.» Collaboration: We classified cultures as «collaborative» when participants described their companies using terms such as «teamwork, cooperative, friendly, supportive, family-like, participative, universally recognized, no superstars, sharing, little or no politics, collegial, helpful, altruistic, cooperative, non-confrontational, or united.» As one executive interviewed about his company said, «Without a doubt, most of our managers are promoted internally. All members of the management team consider themselves partners in the company, not employees. Our culture is based on humility, collaboration, and determination. It’s very much about working together to achieve great things.»
Community: We identified cultures as «community-oriented» when participants used terms such as «community participation and collaboration, respect for diversity, empowerment of our employees, sustainable results, a welcoming and fun environment, citizenship, servant leadership, supportive, progressive, open-minded, inclusive, and developing all types of talent.» As one executive said about their company: «We hire passionate people and expect the same from all our colleagues, along with a commitment to the environment and caring for the communities where we work. Our employees know they are valued, and we encourage them to contribute to the community. We also urge our managers to treat everyone with dignity and respect and to do what is best for all our stakeholders.»
Customer satisfaction: We categorized cultures as “customer-oriented” when participants used terms such as “market-oriented, service priority, customer satisfaction and attention to their needs, the customer is always right, pride in our service… and meeting and exceeding customer expectations.” As one of our interviewees put it, “We dedicate a lot of time to customer service because we believe that, in the long run, it will be our single differentiator. To drive this across the company, we focus on constantly engaging with customers, from senior management to the most junior level, reinforcing the culture of taking ownership of the customer’s problem and solving it. We accomplish this by dedicating a lot of time to training our employees on how we want them to interact with customers and pointing out simple opportunities for them to do so. We thank customers constantly. We send gifts to customers who take the time to thank us. This is all part of what we try to do to foster a customer service culture.” Quality and Precision: We classify cultures as quality- and detail-oriented when participants used terms such as: attention to detail, development of in-depth knowledge, precision, emphasis on quality, analysis-based decisions, technological focus, data-driven, reliable and high-quality products, consistency in work and products, strong focus on processes and engineering, continuous process improvement, functional problem-solving experts, scientific leaders, evidence-based decision-making, and adherence to design.
Integrity: We classify cultures as valuing integrity when participants used terms such as: credibility, financial accuracy, honesty, reliability, transparency, compliance with regulations and laws, sincerity, ethics, morality, and accountability. Performance: Cultures were identified as “performance- or results-oriented” when participants used terms such as “continuous improvement, accountability, demand for excellence, effort, achievement of results, high performance, focus on results, being number one, high expectations, investor-oriented, internal and external competitiveness, profit regardless of the circumstances, no-excuses results, the right results in the right way, leveraging top talent for the best results, and personal accountability for results.”
When responding to our survey question about their opinion on the effectiveness of their own corporate cultures, 14% of executives indicated that their cultures were “in transition” or explicitly identified aspects of their culture that needed improvement. One executive described their company’s cultural transformation during a period of explosive growth as follows: “To begin with, there was an excessive level of individual authority. Many projects that would later become sizable working groups were the responsibility of a single person.” There was so much at stake that communicating about a particular project or decision wouldn’t have been feasible… Later, the founder and I more explicitly engineered one of the company’s most significant cultural shifts: from decentralized decision-making to a much more review-oriented culture.
Several participants described their cultures with terms like «selfish, directionless, confused, misguided, fragmented, or unrealistic.» One executive illustrated how instability at the top leads to an ineffective culture, stating that «if you look at [XX], their constant changes at the top and their re-engineering of what they’re going to do and how they’re going to go to market create a culture where associates have a lot of uncertainty about what’s going to happen. Plus, there’s a lot of negative press, which greatly reinforces the individual and affects their performance.»
At the same time, however, several executives were quick to point out that there is no single culture or set of cultural values that is likely to be effective across all companies, or even within the same firm, at all times. One comment conveyed this sentiment as follows: “Clearly, the kind of camaraderie that [XX] enjoys might not be appropriate in many other financial sectors where this deeply humble collaboration is not necessarily the best strategy. There is also… a downside to a very strong culture. It can become a kind of shackle, limiting freedom of thought and the ability of external talent to quickly get up to speed and become part of the team. So that’s the trade-off… a strong culture can be both a blessing and a curse.”
Importance of Corporate Culture
More than 90% of respondents considered corporate culture to be “very important” or “important” in their company. At the same time, more than half (54%) ranked it as one of the top three drivers of company value, and another 25% ranked it as one of the top five contributors. Therefore, overall, nearly 80% of participants consider culture to be among the top five factors affecting company value.
When asked why they believed corporate culture is so important to corporate performance, several CFOs ranked it as more important than attributes such as “brand, employee talent, financial health, market position, operating plan, product, strategy, unique competitive advantage, and company vision.” As one executive put it, “If you start two companies with the same manufacturing process, the same raw materials, the same distribution network—everything is the same—and one has a good culture and the other a bad one, the good culture will outperform the bad one… People in the effective culture will work toward mutual success; everyone will strive to achieve it, whereas in the ineffective culture, people might simply think of themselves, trying to climb the corporate ladder… Ultimately, the strong culture will prevail.”
Another executive stated that culture creates a competitive advantage by creating a barrier to imitation:
“Our competitors can’t copy our culture.”
When asked if respondents believed that improving culture would increase their company’s value, an overwhelming 92% answered affirmatively. But executives acknowledged that changing a company’s culture, at least in the short term, is difficult: “Culture is always long-term because it’s the company’s code/behavior. As long as there isn’t a deliberate effort to change it, it persists.”
One manager expressed a widely shared view, stating that companies with a strong culture and a weak strategy could «get by,» but not the other way around. He continued, «When I see companies that aren’t doing particularly well, even with an excellent strategic plan, it’s because they don’t communicate it well. So, it almost doesn’t matter if you have a plan. Because those on the front lines, those who actually sell to customers, if they don’t understand it, it’s not going to work. Culture really helps even if you don’t have a great plan and it’s not communicated well, because culture helps tremendously in ensuring that you continue to do the right thing for the company in the long run.»
The executives we interviewed also provided compelling examples of why corporate culture is likely important for companies at all stages of development. As one of them recounted his own story: “The previous CEO didn’t attribute success to culture; he didn’t think it was important. [One of his sayings was, ‘If you want friends, get a dog.’ He didn’t want to meet with employees because it would have made him uncomfortable. He was brilliant and a good person, but he didn’t bring any warmth or compassion to the workplace, so we didn’t have a culture. I [as the new CEO] basically filled a huge void. I said we were going to have a culture and values. People were dying to have them… there was such a void that people really embraced it, and it was adopted quickly.”
Finally, the executives emphasized that having an effective corporate culture helps their companies find common ground in the face of the challenges inherent in managing an organization with diverse geographies, ages, and attitudes. As one executive described his company: “We’re very diverse. Our San Francisco group is young and likes to work as a team in a shared space with very flexible hours.” They tend to have more entitlement than some of my older, Boston-based employees. The two groups don’t always work well together.
We also have over 1,000 creative people. Creative people don’t like structure. They like having free rein and operating with a degree of autonomy. However, all of our divisions, though they may seem different, work toward that common goal. We’ve done very well as a company, and a key part of that is due to our strong engagement with our associates, who strive to work toward that common goal.
Corporate culture in mergers and acquisitions. Several CFOs interviewed mentioned that the cultural fit of a potential M&A target is very important and is seriously considered when «evaluating a company, the value it could ultimately bring, the speed at which things could be done, or how talent will integrate.» Another executive stated that several failed acquisitions were due to a lack of cultural integration: “Many deals didn’t deliver the promised returns… because the companies overpaid, but others failed because they couldn’t integrate both sides and achieve the synergies. And, usually, the main reason is culture. If the cultures don’t mesh, if they aren’t close enough to allow for change and adaptation, I bet that the transactions will almost always underperform.”
When we asked our chief financial officers to quantify the magnitude of the “discount,” if any, they would apply to a target company that represented a poor cultural fit, a remarkable 54% responded that they wouldn’t even make an offer for the company. And roughly a third said they would lower their offer price, with discounts of up to 20%. As one chief financial officer summed up the risk of a poor cultural fit: “You are buying the right to endless problems due to cultural factors that I would describe as compatibility issues.”
Another executive stated that a poor cultural fit stems from an inability to trust the target company’s employees: “I had an attractive valuation for a company that was a perfect strategic fit, but the CEO was known for being difficult. I didn’t invest because I knew we would have to fire him within a year.”
When asked how a company might assess the cultural fit of a merger and acquisition target, one executive replied: “We had a checklist of questions about elements of the culture and compared them to the key elements of our own culture.” For example, we were looking for a strong customer focus, high levels of integrity, and open communication.”
Creating an Effective Corporate Culture
When asked to rank who or what drives the company’s current culture, 55% of respondents identified the current CEO as the main driver, 32% the owner, and 30% the founders, while 18% pointed to previous CEOs as responsible for the company’s culture. However, only 12% mentioned the board of directors or incentives as drivers of the current culture.
This somewhat surprising finding led us to hypothesize that boards of directors and other more formal institutional mechanisms often act primarily as modifiers or reinforcers of the existing culture. As one executive interviewed noted, “Corporate culture is created from the top down. Only when leadership fails to cultivate the culture does it become a bottom-up culture.”
The primary role of leaders appears to be instilling a shared belief system that permeates the company.
As one executive interviewed commented, “Our leader was truly focused on values. He lived them and led the culture. You need leaders who live them.” Or as another executive put it, “Once you become CEO, you need to define what you want the culture to be… Core values begin to build a culture. I can create an environment and communicate my expectations, but if employees don’t embrace them, I can’t impose a culture. Transmitting that cultural message and being consistent with it is critical.”
However, as another executive pointed out, “A good leadership team and a good CEO will implement the necessary processes to ensure that the message reaches the lowest levels of the organization.” And ensuring this happens can be a very difficult task. As one executive admitted, “I think the best thing you can do is set a tone from the top that is passed down to the company’s key leaders, and people will build around it. It’s about how they behave, how they act, and their reliability.”
That said, other executives cited their companies’ founders as key players in establishing the culture. In one opinion, “Memorable leaders substantially define the culture. Even years after they have ceased to be an active force in the organization, their legacy lives on. They define the culture because they defined much of the company’s character. There may be some structural factors that influence the culture, but in my experience, the company’s leaders contribute almost more to shaping it than the structural environment.”
Other factors that executives identified as affecting leadership’s ability
to create an effective culture were context and diversity. As one executive put it, “The attributes of the individual leader must be conducive to the industry… to know if their approach will work effectively.” This executive cited Bill Perez, former CEO of S.C. Johnson, as an example. “Bill was excellent at determining what consumers wanted. Nike was looking for a new CEO with top-tier expertise in various areas of marketing. Bill Perez was selected and did exactly what he was asked to do. Nine and a half months after Bill started, Phil Knight fired him. Bill was devastated. The culture was: ‘We’re Nike, we know what we want better than the customers. We tell the customers what they want.’ The culture completely consumed him.
Typically, those who fail don’t get a second chance, but Wrigley wanted the same thing Bill was doing at Nike and had done at S.C. Johnson. Bill came to Wrigley and… he was a resounding success. Same person, same actions, totally different results. Context is essential.”
Diversity in senior management has also helped some companies establish more effective cultures. As one executive described it: “Culture is impacted by the company’s top leaders. We have six people on our executive committee: three men and three women. The CEO and his executive committee make all the decisions about the direction of the company.” The company has a very balanced approach. Our most important operations are led by a woman with a strong marketing background. She brings a lot of insight into shaping the culture that the CEO or CFO might not be able to. I think a balanced executive committee helps.
Aligning Culture with Results: How Companies Can Accelerate Progress
The following contribution comes from the Heidrick & Struggles website, which describes itself as: a leading provider of global leadership consulting and on-demand talent solutions. We have worked with more than 70% of the Fortune 1000 companies in virtually every sector and industry worldwide.
The authors
Rose Gailey is Head of Organizational Acceleration, Cultural Development, and Diversity and Inclusion at Heidrick Consulting; she works in the Heidrick & Struggles office in Costa Mesa and is a a partner at Heidrick & Struggles in the Los Angeles office.
Ian Johnston is a partner in the London office and a member of Heidrick Consulting.
Andrew LeSueur is a partner in the Stamford office and a global managing partner at Heidrick Consulting. He is also a member of the Industry Practice Department.
A survey of 500 CEOs worldwide shows that most understand the importance of culture. However, one group links culture to strategy, prioritizes people, and doubles revenue growth compared to others.
Aligning Culture with Results
Earlier this year, we surveyed 500 CEOs of large companies around the world about how they define culture and how it influences financial performance. We also asked them why and how they work to cultivate their own organizational cultures.
During the pandemic and amidst the various challenges that 2020 brought to countries, communities, and businesses worldwide, organizational culture was challenged and became, for many organizations, the essential element that held them together.
Now, as leaders work to maintain resilience in hybrid and constantly changing work environments, the greater sense of purpose, inclusion, and collaboration that culture fosters is more important than ever for people and organizations to thrive.
Our findings suggest that most CEOs prioritize culture, as we believe they should. However, surprisingly, we also observed that most are not particularly intentional in their pursuit of culture as a driver of financial performance, even when they try. The connection between financial performance and a thriving culture was complex to establish even before the pandemic.
Now, with the increasing focus on culture as employees return to the office and adapt to hybrid work environments, it is more important than ever that companies’ cultural initiatives generate the greatest possible benefit and impact. Our survey shows that 82% of CEOs said they prioritized culture over the past three years, often to improve financial performance. However, when asked about the most important drivers of financial performance, 74% chose something different, typically strategy and leadership.
Furthermore, we found a striking discrepancy between the cultural elements CEOs consider most important for improving financial performance and those that actually prevail in their companies today.
One group of respondents is more successful in their cultural initiatives than others.
We call them «cultural accelerators» because they state that culture is one of the top three drivers of their financial performance, that it is very important or crucial to link culture to strategy to ensure a positive effect on financial performance, and that they have focused on developing culture as a key priority over the past three years.
Companies led by cultural accelerator CEOs have a financial performance (assessed by the three-year compound annual growth rate (CAGR) of revenue) that is more than double that of other surveyed companies: 9.1% for this group, compared to 4.4% for the rest.
Along with other notable differences described in this report, the data suggest that these CEOs are much more culture-conscious than other leaders. They act decisively, based on their conviction that culture influences financial performance, and they start from a direct connection between culture and strategy. They then focus on fostering broad engagement by prioritizing people to ensure that culture has a positive impact on performance. Purposeful leadership and broad engagement are two of the four pillars that, according to our work, are fundamental to developing cultures. Since thriving cultures will be key to future success, other leaders can benefit from seeing how these leaders have accelerated their focus on culture.
Culture as a Driver
This report is the first step in our work to understand how culture drives better organizational performance. We will then interview CEOs from around the world to understand their different approaches to this crucial aspect of organizational performance, especially now that many organizations are beginning the return-to-office process and facing the challenges of a hybrid work environment.
How Most Companies Approach Culture—and How They Miss Some Crucial Aspects
Organizational culture has become an increasing priority for executives in recent years. Even before the COVID-19 pandemic, many executives working to lead in a constantly changing business environment with an ever-evolving talent pool realized that a thriving culture could provide a competitive advantage in innovation, employee attraction and retention, and agility, among other areas. Eighty-two percent of CEOs surveyed said they had prioritized culture over the past three years. They did so for a variety of reasons, with improving financial performance being the most frequent response, followed by increasing employee engagement.
Culture Alignment Chart
When asked whether they had achieved their cultural goals, there was marked variation. More than half of the respondents met goals such as increasing employee engagement, improving diversity and inclusion, and improving financial performance. However, other goals, such as reinforcing a change in strategy and addressing ethical or compliance issues, proved more difficult to achieve. Regardless of success in achieving a specific goal, the majority of CEOs (74%) stated that their employees are fully or partially committed to applying their cultural values in their daily work. Notably, this percentage does not vary much, regardless of whether the workforce primarily works in person (77%) or in a more fluid hybrid work model (73%).
What makes cultural accelerators different?
While our survey showed that many CEOs are not as familiar with cultural configuration as a direct support for financial performance as they could be, a small group of companies has explored culture with a strategic intent and prioritizes people. Whether their goal was to improve financial performance or something else, these companies have stronger financial performance (assessed by three-year compound annual growth rate (CAGR) of revenue) than other surveyed companies: 9.1% compared to 4.4%.
Eleven percent of the CEOs surveyed led companies in this group. To be included, companies had to state that culture was one of the top three drivers of their financial performance, that linking culture to strategy was very important or crucial to ensuring a positive effect on financial performance, and that they had deliberately worked on developing and shaping their organizational culture over the past three years. It is worth noting that the combination of cultural accelerators in terms of region, sector, and size is slightly different from that of the overall sample, but not statistically significant. Therefore, this more successful approach to shaping culture is independent of geography, sector, and size.
Starting with Culture
In our experience, companies often know they need to align strategy, operating models, and culture, but they don’t know where to begin. This is not the case for CEOs using cultural accelerators; only 19% said focusing on operating models was among the top three positive influences on financial performance, compared to 40% of other CEOs. Furthermore, 48% of cultural accelerators said they focus on culture to drive a change in strategy or direction, compared to only 22% of the rest. Combined with the strong financial performance of companies led by cultural accelerators, these findings suggest that starting with culture could be the right first step.
Focusing on What Makes the Difference: People
Cultural accelerators, more frequently than others, say that the aspects of culture that affect financial performance are related to people, such as improving the customer experience and fostering good relationships with external stakeholders. And they most often focus on two elements of culture to create that positive effect: customer focus and quality, and collaboration and trust. It’s also noteworthy that, more often than other CEOs, culture accelerators go beyond simply stating the importance of collaboration and trust; they affirm that these qualities prevail in their own cultures and then reinforce them by communicating them, both internally and externally.
Furthermore, our survey showed that 48% of culture accelerator CEOs prioritize diversity, equity, and inclusion (DE&I) efforts, compared to 30% of other CEOs. This further indicates that, for culture accelerators, prioritizing people is more than a no-brainer; it’s at the heart of their cultural approach. Two-thirds of these CEOs also stated that they had fully met or exceeded their cultural goals, with 15% stating that they had surpassed them, compared to 5% of others.
Our survey showed that 48% of CEOs of culture accelerators prioritize diversity, equity, and inclusion (DE&I) efforts, compared to 30% of other CEOs.
Cultural Connectors
Within the group of culture accelerators, we delved a little deeper to identify a small group we call “cultural connectors.” In addition to having strategic intent, these companies demonstrate a broad commitment to their culture: all leaders stated that their employees are mostly or fully committed to applying the company culture in their daily work. Furthermore, these companies met or exceeded their cultural goals. While only 30 CEOs in our survey belong to this group, our findings suggest that their organizations are even more focused on clear and effective communication, both internally and externally, and that they go to great lengths to engage all their staff.
This approach appears to be working in their favor: Cultural Connectors had a higher three-year compound annual growth rate (CAGR) in revenue than other surveyed companies—8% compared to 4.8%. (While their revenue growth rate was slightly lower than the full accelerator group, there is a higher proportion of larger companies—those with more than $10 billion in annual revenue—in the Cultural Connectors group.) Looking at how Cultural Connectors have achieved broad workforce engagement, it appears that including employees at all levels is the first step. Thirty-seven percent of these CEOs stated that strengthening culture can improve financial performance because it encourages people to go beyond what is typically expected. Two best practices emerged for achieving this. First, these CEOs stated that engaging people at all levels of the company is crucial for building culture. Nearly two-thirds of the cultural connector CEOs who said recognition and appreciation are a cultural element that drives financial performance also said it is a dominant element in their culture—a much higher proportion than other CEOs who said this and 26 percent higher than those in cultural accelerators. Furthermore, 30 percent of the culture-connecting CEOs said that encouraging employees to take ownership of living the culture is one of the most important ways they personally ensure a thriving culture in their company—a much higher percentage than CEOs outside this group. (For more information, see the chart “How do they achieve broad engagement from their staff?” on page 10 of the full report.)
Second, cultural connectors indicated that large-scale communication is also critical to success. All of them affirmed that maintaining two-way dialogues with employees about the importance of culture helped to promote it: 20% more than culture accelerators and more than twice as many as other CEOs. Compared to others, culture connectors also hold more large-scale dialogues to develop culture (40% vs. 24%) and seek diverse ways to understand how employees feel, including using sentiment analysis. Perhaps most importantly, culture connector leaders embody culture; when asked how they communicate at scale, 80% of these CEOs responded «a personal commitment to focusing on culture,» compared to 66% of culture accelerators and 45% of the rest.
Building a Thriving Culture Today
As CEOs seek to help their companies thrive in today’s hybrid and ever-changing environment, a thriving culture will be their most powerful tool. The survey results reinforce the benefits companies can gain by linking their culture to their strategy and fostering broad commitment to it. Our four principles for shaping culture suggest how to get started.
Purposeful Leadership
Last year, we saw data from other surveys and abundant anecdotal evidence demonstrating that having a socially meaningful purpose has become a crucial characteristic of leadership and organizational culture worldwide. Key aspects of a purposeful leader include inclusivity, leading with influence rather than authority, and adapting leadership approaches to how people work. Inclusive leaders also foster collaboration by involving many people in implementing new ideas, rather than operating in isolation and imposing change. CEOs who drive culture act on their conviction that culture is a key driver of financial performance, linking it to strategy. Leaders who embody the culture, like most CEOs who connect with culture, further reinforce this approach. (For more information, see “What Inclusive Leaders Do and Don’t Do.”)
Personal Change
Leaders who can embody the culture and challenge others to do so will help build a leadership team of cultural accelerators and connectors. Leaders who currently don’t connect culture with financial performance will benefit from a mindset shift in that direction. Once they view culture as a strategic asset and connect the missing links between culture and financial performance, they can serve as role models and encourage other leaders to do the same. And, once employees see leaders changing their own mindsets, they’ll be more likely to follow suit—the beginning of widespread engagement so that soon everyone is living the culture.
Broad Engagement
As mentioned, many of the tactics used by culturally connected CEOs, such as ensuring that employees at all levels of the organization are valued and challenged, can help drive broad engagement. The more energetic and communicative leaders are in the cultural change process, the more likely the momentum will spread across teams. All leaders who follow this path will benefit from increased use of these tactics.
Systemic Alignment
In addition to recognizing that culture development must be reinforced across all areas of the organization, leaders must ensure that talent development and assessment processes, onboarding, and training include ways to develop and reinforce the aspects of culture most important for driving financial performance. We have seen that companies are most effective when they use balanced scorecards that include both financial and cultural performance metrics to periodically assess progress. Examples include market share, stock price, and Net Promoter Score, along with employee engagement and retention, and the internal promotion rate.
Take the First Step
Among all the other objectives that companies have in today’s uncertain world, internal initiatives like culture are sometimes considered secondary. However, our survey shows that companies that link culture to strategy and prioritize people also achieve better financial performance. Throughout the year, we will be interviewing CEOs from around the world to gain a deeper understanding of their different approaches to this crucial aspect of organizational performance.
Companies that link culture to strategy and prioritize people also achieve better financial performance.