The Importance of Culture in Driving Growth, Performance & Value

March 9, 2022 – Culture is hardly a new concept. Well before the rise of various models and frameworks to evaluate organizational culture, companies recognized the risk of hiring a cultural mismatch — such as the lone wolf in a company that values collaboration. New employees, especially leaders, who clash with the culture are often ineffective, and are likely to quickly depart for a friendlier environment.

As the ramifications of COVID-19 continue well beyond the pandemic, broad and lasting changes to the workplace have advanced a more integrated approach to talent management built around culture, according to executive recruiters. Organizations that used to synchronize their talent to corporate vision, core values, and strategic objectives are now aligning people around purpose.And for good reason: Building sustainable cultures in the long run will attract, engage, and retain talent – and give organizations with strong cultures a key competitive edge, according to executive recruiters.

“Most companies make statements about what they stand for and how they want to operate – around company values and purpose,” said Steve McLay, brand and marketing leader at Walking the Talk, the culture division of ZRG Partners. “But having a great company culture means living that every day: aligning the way people behave, the way they make decisions, what they prioritize, the behaviors their processes and systems encourage. The greater this alignment, the more the company is walking its talk, and this is the characteristic of any great culture. It doesn’t mean all great cultures have to be the same, but rather than all great companies can be trusted to walk their talk.”

Priority Patterns of Behavior
Culture is shaped by the patterns of behavior that are encouraged and not tolerated over time, according to Mr. McLay. “For every organization, certain patterns of behavior are crucial to their ability to execute successfully on their strategy,” he said. “For example, fast decision making, customer centricity, acting as one-team, being innovative. If these become the norm across the organization, performance will improve. What ‘good culture’ means is different for every organization and defining the priority patterns of behavior is an important part of culture leadership.”

Good recruitment is one of the key levers which shapes culture, Mr. McLay said. “If a company wants to change its culture, it needs to recruit people who are role models of the future culture it is trying to build. Seeding such people across the organization helps to pull the organization towards its target culture. Recruiting for current culture fit may keep the organization stuck in the past, recruiting for future culture contribution moves it forward.”

At ZRG, the firm has been able to use all of Walking the Talk’s IP on the behaviors that are associated with different target cultures to build an assessment, the Taylor Assessment, which helps clients select candidates who will contribute to shaping their target culture.

“Build a sense of identity, of belonging to a community who share a purpose and standards of what they expect of each other,” said Mr. McLay. “The pandemic broke some of those close bonds, and had people detach somewhat from their association with their workspace and colleagues. Losing some of that loyalty helped people see that they had more choices than perhaps they realized, and some resigned as a result – the opportunity now is to rebuild that enthusiasm for being part of the organization and identifying with and being proud of what the organization stands for.”

Where everyone feels welcome, included, and valued for the contributions they can make are some key elements of having a great company culture, according to Louis Montgomery, a partner and human resources and diversity officers practice leader at JM Search. “This includes respect for individual differences and a positive, growth mindset,” he said. “It’s the kind of place where individuals feel like they can make a difference. It’s the kind of place where innovation and new ideas are valued and actively sought out. It’s the kind of organization that promotes learning and individual development. It’s the kind of organization where collaboration is not only welcomed but expected. A great company culture is one in where people are encouraged to speak their minds and where differences of opinion are welcome. A place where people can disagree and not be disagreeable. Lastly, it’s a place where people feel what they do on a daily basis matters, and they can see how their efforts lead to good business outcomes.”

Healthy cultures can also lead to more discretionary effort of behalf of employees, Mr. Montgomery said. “If you feel good about your organization, you’re willing to put in the extra time and effort to get things done. Another way it leads to better performance is that it encourages people to be innovative. A good culture promotes a sense of ownership and that feeling leads to people wanting to do their best on a consistent basis, and to not just do their job but to work on ways to make things better. A good company culture encourages people to collaborate with colleagues in other areas that can lead to more innovation and process improvement. Lastly, a good culture encourages people to promote their organization, which includes referring prospective colleagues, who they respect and would enjoy working with. In short, a good culture creates a virtuous cycle.”

The Great Resignation
The great resignation represents a great opportunity for organizations to differentiate themselves from their competitors and become more attractive for potential employees. “First, recognize that people are looking for meaning in their work,” Mr. Montgomery said. “The pandemic has forced change on all of us and have caused many to reevaluate their lives. Increasingly individuals recognize that time is precious and is our only non-renewable resource. We can always get more money but never more time. As a result, where, with whom, and what we do with our time is of greater importance. Work that has meaning,
that connects us to a greater purpose, that helps society in some way is very attractive to many folks,” he said. “Second, recognize that people want and need more flexibility around where, when, and how they work. The pandemic has shown that remote and/or hybrid working arrangements work and, in some cases, may be superior from a productivity standpoint. And while we may miss seeing our colleagues more regularly, few of us miss long commutes, traffic, and the hassles of going to the office every day. Organizations that promote flexibility going forward will win the talent war.

“Last, understand the new generation entering the workforce are more diverse than any other in history. Embracing diversity is no longer a nice to have it’s a business imperative,” said Mr. Montgomery. “And while workforce diversity is partly about representation, truly leveraging this increasingly diverse workforce requires thoughtful effort. Those organizations who embrace diversity and actively work to assure their employees feel connected and invested in the organization will win.”

Driving Results
According to Deloitte, culture drives strategy. When aligned with business strategy, organizational culture can drive results, too. It’s how things get done in your organization. Humantelligence looks at culture as your company’s “BMW”: the sustained patterns of (1) Behaviors over time supported by the shared experiences, (2) the Motivators and beliefs of the organization, and (3) the way work happens or Work energizers of its people. “Together, culture is what transforms individual employees into a collective, cohesive whole,” said Juan Betancourt, CEO of Humantelligence. “Culture is not the perks you provide, engagement surveys that only indicate how satisfied an employee is, or the values you post on your website. In fact, there is little data that demonstrates any correlation between official company values and the actual culture as perceived and lived by employees.” The key elements that drive a great company culture and ultimately what stakeholders, like job candidates, current employees, and even investors, look to when they evaluate culture include:
• The team’s work habits.
• What and how the team is motivated.
• How the team interacts/socializes.
• Diversity or lack thereof.
• A sense of belonging/community and inclusion.
• Mentorship opportunities to build knowledge, skills, and
abilities.
• How employees collaborates and communicates.
• Where/how new ideas are fostered.
• How feedback is solicited, acknowledged, and implemented.
• Company and team planning processes.
• Recognition for work well done.

A strong indicator of a good company culture is strong interpersonal relationships at work, according to Mr. Betancourt. “And a leading cause for resignation is poor interpersonal relationships. It’s important to give your employees the opportunity to thrive and do the job they were hired to do — instead of requiring them to spend valuable time figuring out how to work better with one another,” he said. “This work can be exhausting, when there are easier, faster tech-enabled ways to do it. This is where culture-as-a-service (CaaS) comes in, which enables better communication and collaboration among employees – translating into better employee and team performance. With CaaS, companies leverage emotional intelligence data and the often unknown and unnoticed insights about team members to establish more effective communication, working structures, and talent acquisition plans.”

The future of assessments has arrived, he said, and now search firms can use these tools to assess the culture of the executive leadership teams, to see if they are aligned to the strategy of the team/company, and to see if everyone thinks the same, and if so, to then use the results to hire with more intention towards a culture or for diversity of thought. “This type of tool is also great for better on-boarding for your clients of the eventual candidate executive hire, as they will now know how best to interact and collaborate with the team, know the culture before they start working of the team, and know where there might be conflict and friction with specific people. All of this leads to executive search firms doing a better job in hiring for fit to team culture or to target team culture, and improve the onboarding and performance day one of the executives they place,” said Mr. Betancourt.

“In our experience, cultivating this kind of company culture begins with a leadership team that models culture from the top and does not hesitate to make difficult, values-based, people-centric choices,” said Daniel Forrester, founder and chief growth officer of THRUUE. “We have never seen a culture outperform the norms, values, and behaviors of those with the greatest influence. Second, there must be a clear and focused strategy that is understood across the organization. Without this, confusion reigns, top talent is uninspired and unchallenged, and customer experience quickly slides. Finally, great cultures are maintained when leaders act on culture data as seriously as they act on business key performance indicators (KPIs). Senior leaders and middle management must be empowered with rich, focused culture data and incentivized to act.”

The link between culture and organizational performance is no longer a discussion—it is empirical and well documented, Mr. Forrester said. “Without exception, organizational culture either propels or drags down performance. It either creates or reduces risk. It is never neutral. Most leaders now understand this link exists. What they don’t understand is how to determine what culture will best support their strategy and enable their organization, and all the people in it, to grow and thrive—nor do they know how to shift their existing culture toward their desired culture. We see many leaders declare a focus on things like well-being, retention, or even diversity and then take shots in the dark at what will move the needle inside their current cultures.”

In the growth journey of every organization, there are a few culture moments that play an outsized role in shaping and revealing company culture. How an organization handles major strategic shifts, unplanned disruptions like a global pandemic, and public failures are all culture moments, according to Mr. Forrester. “But the most powerful cultural moment is a change in leadership,” he said. “Search firms have an incredible opportunity to help organizations and their new leaders recognize and use leadership change as a powerful tool for shaping culture.”

Search firms can help boards and search committees honestly assess what kind of leader is needed at this moment in the company’s growth. Mr. Forrester says there are two reasons that who leads is the ultimate cultural decision: 1) different stages in a company’s growth call for different strategies, and 2) different strategies can call for different cultures. “Because culture is set from the top leadership of an organization, helping organizations select leaders whose values match the desired future values and culture of the organization is essential to success,” he said. “Search firms can help prospective CEO hires ask the right questions about the culture of the company before day one: what is working, what is broken, and where is there culture risk? The existing culture will vote early and often on every CEO’s tenure. Hiding culture issues or risk only reduces the chances of a successful leadership transition and impact. Lastly, search firms and their partners should work closely with new CEOs to de-risk the earliest months of their tenure as they build their leadership teams and rapidly align around a strategy. Even a perfect placement disrupts alignment and creates new cultural tensions. New CEOs never inherit an existing strategy at face value—they rightly ask tough questions and bring their points of view.”

The first critical step in creating a great company culture is understanding what culture is, according to Henry Nothhaft, president and COO of Alioth. “Organizational culture is not filling snack drawers or throwing happy hours,” he said. “Those are perks, and sure, those items might be fun and indicative of a certain type of workplace environment. But they aren’t a company’s culture. Rather, culture is the sum of the unspoken behaviors, mindsets, and social patterns that dictate how an organization operates. It includes the unwritten rules that establish what is encouraged, discouraged, accepted, or rejected within a company. It offers a toolkit that employees can use to interact and thrive in a company.”

No One-Size-Fits-All Approach

“There is no one-size-fits-all approach to culture,” Mr. Nothhaft said. “What works at one company may not work at another, so trying to emulate another corporate culture is a fool’s errand. Instead, companies need to look inwards and ask how they can help their employees do their best work. The past few years have been challenging for companies of all sizes. As we’ve worked with companies to understand and benchmark their cultures, we’ve noticed a few trends.”

The companies that are thriving excel in three areas. “First, the top companies have leadership teams that model and live the values of their organizations,” said Mr. Nothhaft. “Without leadership’s embrace, values are merely words in a handbook and do not permeate the organization. Employees are lost in the woods without a compass and have to guess as to which behaviors, mindsets, and social patterns are acceptable. You can imagine the result. On the contrary, when leaders model the organization’s values, they set an example and create guideposts for employees, enabling them to make decisions in line with the company’s values, even when senior leaders are not around.”

“Second, we are seeing companies embrace inclusivity in new ways,” said Mr. Nothhaft. “Traditionally, companies have taken a top-down approach to corporate culture, essentially assigning a culture that may or may not reflect the lived experience of the employees. Nowadays, the most successful companies are changing the paradigm by asking their employees to weigh in and discovering what they need to do their best work and feel fulfilled in their jobs. At a time when public trust in institutions, including corporations, is falling, inclusivity builds essential social capital and is crucial for making employees feel valued and connected to the company.”

“Finally, in an age of constant change and disruption, companies have to be adaptable in order to survive,” Mr. Nothhaft said. “Contrary to what many believe, adaptability doesn’t begin and end with a crisis-proof supply chain, a great risk management team, a good business continuity plan, or a hardened IT system. Instead, adaptability begins and ends with the right culture – a culture that can cope and pivot in a changing landscape. The best companies are embracing the idea of constant change, anticipating disruption, modeling adaptability for their employees, and addressing emerging issues before they escalate into larger problems.”

Connecting Leaders With Purpose

“Culture is all about behavior – an organization’s collective behavior,” said Kelli Vukelic, CEO of N2Growth. “Organizations need to look beyond their culture to seek alignment for employee performance.” Mark Twain said, “The two most important days in your life are the day you are born, and the day you find out why.” When your employees are engaged around the why of your organization they can drive it towards its goal, according to Ms. Vukelic. “Connecting leaders with purpose will make employees connect with it too and will lead to innovation, cooperation, and success of the organization,” she said. “Organizations with a strong sense of purpose talk about it all the time and everywhere. They post it on their websites and printed materials, on the office walls, and speak about it in advertisements and at all levels of the organization. Sometimes that is why it feels like the definition of culture. Purpose is about emotion and how employees connect to the work being done. This alignment creates superior performance.

There is a significantly missed opportunity to measure conviction and passion for an organization’s purpose in the hiring process. In Ms. Vukelic’s book, Leadership Recruiting, Consulting Skills for Recruiters, she challenges the industry to move past just finding the best resume. Today, the process must be focused on finding exceptional leaders, which are not only aligned by past performance, but also on purpose.

“For years, the concept of hiring for culture fit has been a misused term by search firms,” said Ms. Vukelic. “It some instances it has been used as a reason to reject candidates, but if used in a candidate presentation you can be assured that their thinking it is out of date and does not promote growth for the organization. A search firm that uses this phrase to support your search process is narrow in their thinking and will never be able to assist you in challenging candidates’ alignment to purpose. A search firm should instill organizational purpose in the candidate pipeline from the beginning of the process, ensuring that it is present and alive in the organization when a candidate is hired. During their candidate presentations, you’ll know they are different if they use ‘culture add’ to describe a candidate.”

With the Great Resignation upon us, organizations can keep their teams together by connecting to purpose, staying true to their core mission and values, lead with empathy, and see their employees as humans first, Ms. Vukelic said. “Going forward shift your thinking this way: culture is how an organization operates, purpose is what an organization stands for, and engagement is how employees feel about their culture and purpose.”

“There are two key elements that immediately come to mind when building a great company culture: clear core values and building with inclusivity,” said Laura Kinder, president of Daversa Partners. “At Daversa the core values we embody every single day are the four H’s – humility, honesty, hustle, and hunger. Additionally, when you look at the fundamental basics of building a company, you need to ensure that intentionality and inclusivity is embedded in the foundation. This will guide your firm’s character for its entire lifetime. Simply put, progressive cultures should reflect the change both leaders and employees want to see – this is exactly what we have done for nearly 30 years.”

Daversa Partners is 64 percent women and 56 percent are spread across the firm’s senior leadership suite. The notion of a glass ceiling simply doesn’t exist at Daversa, as gender pay inequity is a term unknown inside the firm’s walls, and the belief that years in the seat outweighs hustle, grit, and sheer potential is untrue, according to Ms. Kinder. “A great company culture is one that reflects your entire employee base, giving everyone a voice and an opportunity to make a tangible impact,” she said. “We have spent the last three decades helping companies build and define what a great culture looks like, thus modeling the ‘greatness’ we have seen internally. Most importantly we model ourselves after the advice that we give.”

When Ms. Kinder thinks about the intersection of a great company culture and better employee performance there is one fundamental factor that ultimately makes the difference,” she said. “That is learning and development. Daversa’s heritage has revolved around this concept from its inception. Our continuous, never-ending promise to L&D was the subject of ridicule for several years in industry because we made the conscious decision to take the more difficult, ‘road less traveled’. We made a commitment early on to employees to build and develop their careers from the inside vs hiring people of seniority from the outside.”

She said it is now the firm’s superpower and a driving force behind its culture and increased employee performance. “This allows every single employee to have a voice (across all levels), it fosters a safe environment where development is encouraged, and it ultimately emboldens employees to generate ideas that can be turned into business models. Pairing knowledge sharing with trust signals to employees that we are here for them, and we are serious about embracing them as the next generation of leaders.”

No Secret Recipe

There is no secret recipe for great company culture, but there are several traits that companies with great culture tend to share, according to Sasha Jensen, founder and CEO of Jensen Partners. “For one, they value diversity – not just in principle, but based on the belief that a workforce comprised of different backgrounds and experiences yields a rich diversity of perspectives that can be leveraged to gain a competitive advantage,” she said. “A growing body of research supports that belief.” In fact, the World Economic Forum has proclaimed that the business case for diversity in the workplace is now overwhelming. “Another trait companies with great culture share is inclusiveness,” Ms. Jensen said. “We often encounter companies that fall short in this area because they assume that top-down mandates centered on diverse hiring will automatically translate into a groundswell of belonging and community among rank-and-file staff. However, inclusivity is a function of thousands of day-to-day interactions between employees, so building an inclusive workplace requires more than just mandates from the C-suite,” she said. “The final commonality among companies with great culture is that they take a systematic, data-driven approach to managing their workforce. They set empirical goals, they measure qualitative and quantitative metrics, they regularly analyze and refine their approach based on data, and they continually stive to be better. The most sophisticated companies are utilizing technology and analytics to better understand the effectiveness of their own initiatives, benchmark KPIs vs. their competitors and report progress to stakeholders,” she said.

“We believe great culture is an outcome, not an objective. Companies with great culture usually don’t dwell on culture,” said Ms. Jensen. “They dwell on improving DEI, employee well-being and satisfaction, and employee retention. These attributes sometimes get labeled as ‘culture,’ but the distinction is important because focusing on culture frames the issue as systemic and intrinsic, when in reality, performance is contingent on the satisfaction and well-being of each employee. Quite simply, unhappy, alienated employees are generally less likely to regularly go above and beyond. Hence, improving performance is more about making sure each employee feels valued and less about establishing a sense of shared values or beliefs,” she said.

“We are increasingly hearing candidates demand better DEI, culture and work-life balance from potential employers,” Ms. Jensen said. “These demands are often harder for our clients to meet because they take time to develop. Given our ability to help clients take a data-driven approach, our most sophisticated clients are beginning to offer data and analytics to current and prospective employees to empirically demonstrate their commitment to DEI and company culture. We see this practice becoming the norm as firms continue to seek new and innovative ways to increase retention and secure top talent.”