Corporate culture embodies the workplace atmosphere, attitudes, and values, but is a relatively new term in the industry.
Culture stems from the Latin word meaning “to grow, tend, or cultivate.” Culture could be described as the social environment of an organisation which impacts its growth. Researchers define corporate culture broadly as consisting of a set of shared values, beliefs, norms, and assumptions that influence behaviour within an organisation.
A thriving organisational culture is increasingly recognised by both scholars and business leaders alike as instrumental to a thriving business. In fact, in a study conducted by Deloitte, 94% of executives viewed a distinct workplace culture as important to business success.
Successful organisations instill values into the organization to engage collaborators and recruit and attract new talent. In the process, a culture of wellbeing and productivity is born.
In our article: How making well-being a priority drives productivity in an organisation? You can read more about the importance of a culture of wellbeing and productivity for your organisation.
Academic studies are beginning to compile evidence for the relationship between organisational culture and a myriad of business outcomes.
Culture, as an abstraction, usually operates outside of our awareness and yet, the forces of culture are very powerful in our decision-making, attitudes, and behaviour.
Coincidentally, in line with its Latin root meaning, culture is often cited as the most decisive factor in the success or failure of change initiatives, ultimately determining the success or stagnation of the business.
Culture’s Impact on Organisational Performance
Researchers have been understanding the connection between organisational culture and business performance, but it has not been until recently that organisational researchers are actually starting to compile evidence. Many academic studies have found a relationship between organisational culture and numerous business outcomes, including financial performance, net sales, employee engagement, customer satisfaction, and talent recruitment.
Financial Performance and Net Sales
There is an evidence-based connection between a positive culture change and a thriving financial performance outcome. In a longitudinal study of 95 automobile dealerships over the course of six years, Boyce and colleagues found organisational culture to predict short and long-term business outcomes, even after accounting for dealership size, location, and previous sales.
They found that within the first year, culture improvement initiatives increased customer satisfaction ratings, and within 2 to 4 years, culture improvement had a positive impact on net sales. Not only did this study show a strong relationship between culture and business outcomes, it demonstrated the causal relationship of culture predicting organisational performance, and not the other way around.
In a study involving 900 organisations across 8 different industries, Hewitt Associates found both cultural alignment and employee engagement to also have a strong relationship with a company’s financial performance.
Additionally, Hewitt associates found organisational culture to directly impact employee engagement scores. Cultures that reflected high levels of employee fulfilment and challenge had the highest levels of employee engagement. Conversely, organisations with the highest levels of Cultural Entropy®, measured using the Barrett Seven Levels Model, or dysfunction, had the lowest engagement scores.
Several important findings came out of this study:
1) Culture affects engagement.
2) Both culture and engagement affect financial performance.
3) Culture and engagement work synergistically to affect business outcomes; their impact is greater when combined than when either is emphasised independently of the other.
In addition to the Boyce study mentioned above that found positive culture transformation initiatives impact customer satisfaction within the first year, an expansive study conducted in the health care industry found organisational culture to be strongly associated with patient satisfaction. A study developed by Gregory and their colleagues gathered data from 99 hospitals across the U.S. and found both group cultures and balanced cultures to have the highest patient satisfaction scores.
Group cultures were described as emphasising collaboration, empowerment, employee development, and company morale, while balanced cultures were characterised by adaptability, mission, consistency, and employee involvement.
The influential reach of organisational culture seems to be growing. There are indications from research, millennial generation surveys, and social media that organisational culture is becoming an important factor in the fiercely competitive talent market. Recruits are starting to see culture and brand as two sides of the same coin – fundamentally connected by an organisation’s underlying values.
It is becoming apparent that when you create a culture that people want to be a part of, you are creating a sustainable competitive advantage.
According to a Harvard Business Review Book called “An Everyone Culture”, most people spend about 50 percent of their effort at work making sure that they look good and avoid looking bad.
This arises when people fear that their place in the company is not safe, that their managers would not hesitate to replace them with someone else at the first sign of trouble.
The cost of not caring about employees is clear, and so is the benefit of reversing this trend. Conscious organisations know that when people feel a strong sense of job security, they stop wasting valuable energy hiding, and contribute at nearly double their previous capacity.
Contrary to the notion that an employee falls somewhere on a single spectrum between disengaged and engaged, Two-Factor Theory observes that there are actually two spectrums relevant to collaborators’ engagement:
1) The first is composed of hygiene factors: compensation, benefits, and perks.
2) The second is composed of motivation factors: growth and meaning
Companies that invest in the growth of the individual and foster a sense of feeling valued while working towards a meaningful purpose get better engagement.
Collaborators’ engagement is evidenced by the healthy, rigorous, passionate debate resulting from people caring about their work. This engagement produces better thinking, supercharges individual growth, and generates superior performance.
But, actually, your culture doesn’t stop with your collaborators. All of the stakeholders in your organisation are affected by your corporate culture.
Having a thriving organisational culture is a necessity for a thriving business, not just a nice-to-have.
Culture is what drives the engagement of your workforce, the satisfaction of your customers, the level of attraction you have to talent, and your bottom-line numbers.
When you decide to invest in the culture of your organisation, you simultaneously invest in the people who care about it (your employees, customers, and partners) and move one step closer to being in alignment with the fulfillment of your organisation’s purpose.
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