There has been a lot of press lately on the cultures of large organizations like Google, Zappos, Apple, Facebook and Amazon. Does company culture matter? And how do we know it matters? In my 30+ years in Human Resources and as a culture consultant, I have had the advantage of working in a variety of companies. Some companies paid close attention to culture while for others it simply did not matter. It is clear from my experience that those leaders who care about creating strong cultures were better able to attract and retain better fit employees. And those companies that did not put any effort into understanding their culture ended up with a business that succeeded in the short term but eventually ended up losing their competitiveness. It pays to create a conscious and intentional culture.
There are numerous studies that have demonstrated the efficacy of a conscious culture™. I particularly like the quote from James Haskett of the Harvard Business School, “A strong culture can help or hurt performance. Culture can account for up to half of the difference in operating profit between two organizations in the same business. Shaping a culture is one of the leader’s most important jobs; it can be ignored but only for so long and at one’s peril”*.
Here are what some of the studies have found:
- Bain & Company research found that nearly 70% of business leaders agree that culture provides the greatest source of competitive advantage. In fact, more than 80% believe an organization that lacks a high-performance culture is doomed to mediocrity.
- Research was conducted by Harvard Business School over an eleven-year period found that organizations that focused on shaping their culture outperformed their competitors: revenues were 4.1 times higher, stock price was 12.2 times higher, net income was 756% vs. 1% and return on investment was 15 times higher.
- Gallup surveyed4 million employees. Companies in the top-quartile of employee engagement are 22% more profitable than those in the bottom-quartile. In addition, the study confirms that engagement can lead to improved customer interactions, meaning that your customers are also experiencing the benefits of your culture.
- Great Place to Work has shown that the 100 Best Companies to Work For in the US consistently outperform the stock market. The S&P 500 showed an annual growth rate of 6.04 percent between 1997 and 2013 while the 100 Best showed an annual stock market return of 11.08 percent, almost two times greater. And they had 65% less turnover.
Culture absolutely matters. Creating a conscious culture™ that is unique and true for a company is shown in both research and anecdotally that it leads to more motivated, engaged, fulfilled work for employees and leaders. And when that happens, profits follow. Leaders in the C suite and in Human Resources need to understand the current state of culture, gain clarity on what employees think the culture is and put in place conscious actions that move the culture forward.