The Impact of Company Culture on Business Performance
The term "workplace culture" is admittedly still a bit nebulous. In fact, that is one of the problems we set out to address at WorkXO: we must give "workplace culture" a common language, make it more accessible, and learn to quantify/qualify/understand it. That said, there is still a ton of room for interpretation and perspective on this subject. And we feel like we owe it to our audience - and to the community - to share the diversity of thought on this important topic. The following is just one perspective - from an outside, non-WorkXO entity. And we're ok with that. In fact, we're cool with it. But it doesn't necessarily mean we agree with it entirely. Enjoy!
Ever doubted the importance of a good company culture? Sometimes, it’s hard not to. It’s such a nebulous topic and incredibly difficult to track.
But, research shows that company culture affects everything from employee happiness to your company’s bottom line. In this article, we’re looking at the impact of culture on a company’s performance and innovation.
What is company culture?
Before we get going, here’s a helpful and simple definition of company culture:
“Culture is the character and personality of your organization. It's what makes your organization unique and is the sum of its values, traditions, beliefs, interactions, behaviors, and attitudes.” - ERC
For your company culture to be genuine (and effective) it needs to be yours. It needs to reflect the people who work at your company, complement your business goals, and be “lived out” by everyone in the company (especially leaders).
Once you’ve got a genuine and strong company culture, it will have an astoundingly positive impact.
3 ways healthy company culture impacts business performance
If people feel represented by your company culture, they’ll be able to establish a positive relationship with your workplace. If they identify with your values, are enabled to do their best work and are listened to and respected, then they’ll be able to establish trust in your organization (and not just from a strategy standpoint).
This trust and alignment are key building blocks for engaged and happy employees. And we all know that engaged and happy employees are more productive. Research from the University of Warwick shows that a happy employee is 12% more productive, while unhappy employees are 10% less productive.
In short: a good culture is imperative for high levels of productivity. However, don’t expect to see the results immediately. After researching the company culture of 95 auto dealerships over a period of six years, researcher Dr. Gillespie emphasized that the impact of company culture on bottom-line results takes time:
“The culture of a sales department right now is going to influence the customer satisfaction from that department two years from now, and that customer satisfaction is going to drive vehicle sales two years from that point.” - Wall Street Journal
Business goals are supported
Academics at Duke University and Columbia University interviewed 1,348 North American leaders for their research paper “Corporate Culture: Evidence from the Field”. Here are some of their findings:
“Executives highlight that culture can circumvent mistakes in a way that other executive actions, formal institutions, or corporate assets cannot. Many executives believe culture contributes more to firm value than strategy does. For example, a company performs better with a strong culture and weak strategy than the other way around.”
This is because even if your strategy isn’t perfect, your strong culture will help to keep everyone marching to the beat of the same drum. People will stay on track, striving towards overall company goals.
Business performance is improved
After years of research, John Kotter found that companies that empowered their people to live their culture significantly outperformed those that didn’t. In his book, co-written with James Heskett, he assessed the cultures of 200 companies and how their cultures affected their performance.
“Strong corporate cultures that facilitate adaptation to a changing world are associated with strong financial results.”
Affordable luxury hotel chain, YOTEL, is a great example of this in practice. YOTEL has a rich company culture, and believe it’s important to live the company values at work every day. They’ve been very deliberate in making this happen, and continue to successfully grow around the world.
What does this look like in practice? Internally, they’ve developed a service brand that was collaboratively created by 150 staff members. It includes 31 very simple practices—one for each day of the month—that employees are encouraged to put into practice.
By reinforcing these 31 practices, YOTEL staff members are remaining true to the values of the brand and delivering this to their hotel guests. The expanding hotel chain provides a consistent and excellent level of service to their customers internationally.
The impact of company culture extends far beyond the happiness of employees. A good company culture will improve productivity, performance and customer experience. If your culture is not serving you, it’s time to do something about it. Changing organizational culture may be easier than you think.
I’ll leave you with this powerful finding from Corporate Culture: Evidence from the Field:
“Over half of senior executives believe that corporate culture is a top-three driver of firm value and 92% believe that improving their culture would increase their firm’s value. Surprisingly, only 16% believe their culture is where it should be.”
Hannah Price is the content marketing specialist at Jostle. She writes on workplace topics; encouraging readers to make small changes that improve their working environment. When she’s not tapping away at the keyboard, Hannah’s exploring beautiful British Columbia and beyond. Reach her at @JostleMe.
Image courtesy of flickr/Siemens PLM Software