The Importance of Culture on Today’s Businesses
March 16, 2023 – 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. “Toxic cultures have been shown to predict undesired turnover 10 times as powerfully as employee attitudes about compensation,” said Maryanne Wanca-Thibault, partner, DHR Global Leadership Consulting. She points to Donald Sull and his son Charlie Sull who analyzed a dataset of over a million Glassdoor.com employee reviews to understand the most powerful drivers of culture. They isolated five traits that predict most strongly whether a culture is toxic: disrespectful, non-inclusive, unethical, cutthroat, and abusive. “If any of these themes show up in your employee feedback, you know you need to take action,” said Dr. Wanca-Thibault.
“There is no question that remote work has transformed many corporate cultures, often in unexpected ways,” said Jonathan Hoyt, partner, DHR Global Leadership Consulting. “During the pandemic, managers needed to find new ways to connect with and build trust with employees. If they didn’t, turnover was often the result.”
While it’s possible for culture change to be organic and bottom-up, the fastest and most effective way to bring about a culture change is from the top, according to Mr. Hoyt. “The CEO has a central role to play in defining and shaping a company’s culture,” he said. “By embracing and excelling at that role, CEOs take possession of one of the most important levers for growth and value creation.”
Cultural transformation requires a clear vision, ownership from leaders, and discipline to bring new habits and behaviors to life to reinforce the culture changes, according to Lisa Chang, global chief people officer for The Coca-Cola Co. “Articulating a clear vision for what the organization wants to achieve is a strong starting point for cultural transformation,” she said. “Coca-Cola’s vision is anchored in our purpose, to refresh the world and make a difference. Pairing a clear north star with transparent communication is a great formula for transforming culture and getting buy-in and alignment from leaders and employees alike.”
Ms. Chang says that leaders must also be role models for the transformation and that HR is only part of the equation. HR’s primary role is to help shepherd the change—however, HR does not exclusively “own” it. “Culture must be owned by leaders and employees,” she said. “At The Coca-Cola Co., we expect leaders to live and role model specific behaviors, which we have identified and outlined as characteristics that we want to be part of our culture. Employees observe what their leaders say and do. If leaders are saying one thing and doing another, employees will follow their actions not words, and instead adopt the behaviors that are consistently rewarded.”
A strong culture not only helps drive growth, but also attracts great diverse talent – even in areas where talent is difficult to find. “At The Coca-Cola Co., a strong and successful culture means our people are inspired and enabled to pursue our purpose and strategy,” said Ms. Chang. “They feel enlivened by their work, supported to be their best, and encouraged to grow both inside and outside of work. It means the organization is inclusive, agile, and open to discovering new opportunities for growth.”
Effort, Practice, and Consistency
Ms. Chang also notes that maintaining a strong culture requires effort, practice, and consistency. “A strong culture also requires constant vigilance and transparent communication,” she said. “Communication is one of the most critical aspects of maintaining a strong company culture. Communication must be precise, frequent, and transparent and take place at all levels across the organization. A strong company culture must be embedded throughout the employee lifecycle. From how we on-board new hires, develop our talent, and help people grow, to how we evaluate and monitor progress, each employee touchpoint helps reinforce company culture. Finally, having a clear vision, ownership from leaders, and embedded leadership behaviors that are used to identify and promote leaders is critically important.”
How Slone Partners Built a Strong Healthy Culture
Culture has been front and center ever since the firm was founded. What’s more, it involves all layer of the organization. And the firm’s cross-functional employee culture clubs help drive initiatives as well as an ongoing exchange of ideas and perspectives.
“An organization’s culture needs constant care and thoughtful attention to sustain and shape it,” said Burt Rea leader of Deloitte Consulting’s U.S. culture transformation offering. “Unattended, culture can drift, or become compromised by the shifting demands of the market, undue internal pressures, or other impacts to the values, beliefs, and behaviors that personify culture. Pressure to reduce costs, for example, can lead to shortcuts that undermine culture if leadership does not properly set context and strike the right balance for cost controls within the broader context of the organization’s culture and values.”
Elements of Culture
“The need to transform culture can arise with the elements of culture – our beliefs, values, behaviors – get out of balance, become too far misaligned, drift, become outdated, or no longer serve to achieve the strategy of the organization,” said Kate Morican, national leader of organization transformation at Deloitte. “Leaders must take charge of this dynamic if the culture has become ineffective, ignored, inconsistent, or irrelevant. Transforming culture is a journey of both listening and leading, of sensing what the market and your customers value, and what your workforce needs in order to thrive. When operations, strategy, purpose, and culture become disconnected or misaligned, a reset is required – potentially including a transformation of your culture.”
A strong positive culture provides clarity and guidance to the organization for aligned purpose and focused energy and efforts, according to Mr. Rea. “Knowing the beliefs, values, and behaviors we all aspire to is a powerful and unifying alignment mechanism for an organization,” he said. “A strong positive culture helps guide decision making and the prioritization of work, as well as sets stage for high levels of workforce engagement and employee satisfaction. These in turn have been correlated to higher levels of customer satisfaction, greater revenue and earnings growth, higher employee retention and ability to attract talent, and reduced risk and compliance issues.”
Ms. Morican also notes that teams come together faster with a strong organizational culture as their foundation. “Organizational silos are less of a barrier to end-to-end process execution when the shared culture is strong,” she said. “Employees are more likely to take initiative, expend discretionary effort, and strive to delight customers/clients with a strong organizational culture guiding them and the high levels of engagement and satisfaction buoying their motivation to exceed expectations. Making the investment to build and sustain a strong positive culture returns value to the team many times over.”
According to Darcie Murray, SVP and head of the Americas of Mercuri Urval (MU), promoting a culture of acceptance and appreciation has a powerful impact when various groups are pulled together with different ideas and varying perspectives, the end result is a better outcome and a better company.”
In 2022, McKinsey did a study and found that ethnically diverse organizations are 36 percent more likely to outperform companies that are less diverse. “Consistently, studies have shown that companies who prioritize DEI and embed it into the fabric of their strategy and business, are more profitable and have healthier corporate cultures,” Ms. Murray said. “Adapting an effective DEI strategy, encouraging allyship, creating ERGs, today is imperative for companies to grow and stay competitive.”
Ms. Murray also says that its not easy to build a diverse culture. Many companies look at this and think where to begin, and it’s a good question,” she said. “Starting at any point is a step, but a clear path to building a diverse culture starts with hiring. From this perspective, the only basis for an employment decision is a factful match between an individual´s competencies – what they bring to work – and the requirements of the role, context and organization results needed.”
Creating Success in the Workplace
Mercuri Urval’s advice to clients, candidates and its own employees is therefore based on this founding principle. “Research and insight into what makes people successful in the workplace, has concluded that success at work can be increased through ensuring people decisions are made using a science-based, precisely tailored, quality assured and ethical way of working,” Ms. Murray said. “And success at work requires diverse and sustainably effective leaders and teams.”
Ms. Murray also notes that a poor cultural fit is equitable to a failed leadership appointment. Alarmingly, widely cited research confirms 50 percent of leaders fail soon after appointment. But at what cost? “There are always a multitude of reasons why an employee does not work out or does not fit, but often it is directly connected to not being a good cultural fit,” she said. “If this is a repetitive issue for a company, they might need to step back and look at their DEI strategy, evaluate their culture through the help of external partners or conducting internal health checks, and certainly to assess their hiring practices. It is increasingly a challenge to fix a poor cultural fit, as it requires a reflective diagnostic to understand effectively both sides of why there is not a fit.”
“The risks of a poor cultural fit are high and can penetrate deep and wide across an organization, they are both explicit and implicit, and can result in decreased morale, negative work atmosphere, and motivation; decreases in productivity; financial loss; culture disruption; time spent on recruitment and onboarding; impact to customers,” Ms. Murray said.
Recruiters must be able to independently judge the various cultures at play in the work world in general and within each client’s organization, says Seth Cohen, managing partner, at Eleven Canterbury. “Understanding the nuances of a client’s positive and negative employment culture is critical to determining its employment brand and how to match the best candidates for each job opportunity,” he said. “That effort involves more than perusing a client’s career site and marketing materials. Speaking to executives and direct reports about the organization’s purpose, mission, and values is essential.
An organization’s culture must be driven from the top of the house, according to Mr. Cohen. “The board, CEO, and executive team are the leaders responsible for establishing the values, purpose, and mission that will ignite an organization’s culture and ensure accountability to achieve the desired result,” he said. “The key to a successful organization is to have a culture based on a strongly held and widely shared set of beliefs supported by strategy and structure. Leadership heavily influences company culture. Leaders should reinforce organizational values by helping their people grow and develop through goal setting, opportunities, and recognition. The most common business objectives for implementing employee recognition programs include improving employee productivity, quality of work, customer satisfaction, employee safety, and sales.”
Conversely, Mr. Cohen notes that an ineffective culture will bring down the organization and its leadership. “Disengaged employees, high turnover, poor customer relations, and lower profits are just a few of the negative impacts a weak culture will have on a company’s bottom line,” he said. “To maintain a strong corporate culture, leaders must have the proper tools to monitor and assess its culture before developing programs and strategies to support and strengthen its core purpose and values.”
“Leaders should approach culture management by understanding the common traits found in all businesses, along with the various nuances and outliers that may exist within the divisions,” Mr. Cohen said. “Outliers provide observations that appear to deviate markedly from other observations in the sample. This helps guide leaders to see what the norm is and determine if the outliers indicate bad data or if something more relevant is happening within the organization.”
Related: Hiring Top Talent in Unprecedented Times
To begin, Mr. Cohen explains that a company must develop a culture assessment instrument that attempts to analyze both the implied and expressed attitudes and beliefs held by the organization. “With these assessment tools, leaders can define the organization’s expectations, philosophies, experiences, values, and mission that set the stage for individual behavior,” he said. “A culture assessment should be administered at least annually. Following the assessment, analyze and communicate the key findings company-wide. Conduct employee focus groups and discuss culture until a consensus forms around all key issues. Cultural assessments, and other activities, including cultural audits and 360-degree feedback, may also help uncover cultural inconsistencies that need to be eliminated.”
M&A’s Effect on Culture
“The success of a merger or acquisition is often a function of how well the two organizational cultures are integrated,” said Mr. Cohen. “Any time two organizations merge, there are bound to be cultural conflicts that need to be reconciled. Cultural integration must be managed and not left for people to work out on their own. Cultural due diligence in M&A must identify the cultural differences between the acquirer and seller. Mission-critical areas such as communication, decision-making, and performance management should be evaluated.”
It is important to recognize that company culture is not a goal you achieve, it’s a deliberate, proactive process that must be designed, measured, and adjusted, says Sasha Jensen, founder and CEO of Jensen Partners. “Recruiters that wish to gain deeper insights into their clients’ culture should first examine how the client approaches other key business objectives,” she said. “Do they take a data-driven approach? Do they prioritize transparency and accountability? Do they seek collaboration and inclusion? Understanding how the client approaches other business objectives can inform how to engineer a culture of success. Ms. Jenson notes that once that mind shift is achieved, recruiters can provide value by aligning qualitative factors with quantitative datasets to establish benchmarks and create actionable steps toward better company culture.”
Global research shows that prioritizing diversity and creating an inclusive culture improves business performance and overall revenue growth. When companies build a diverse leadership team, workforce, and inclusive culture, they better position themselves to innovate, attract talent, reach customers, and increase productivity.
So, who should drive an organization’s culture? When culture initiatives are led by executives who run other business units, they send the signal that culture is one of several objectives, and presumably a less important one, according to Ms. Jensen. “When organized within the human resources department, they send the signal that culture is a human capital objective, not a core business objective,” she said. “In fact, we’ve measured this with regard to the question of who should drive DEI initiatives, and found a consistent correlation between HR-led diversity committees and underperformance relative to peers on key DEI metrics, because HR-led DEI programs make DEI a nice to have, when success requires it be a core business objective.”
“Once the mind shift is achieved, the most effective practice is to assign accountability to an individual or group, preferably at the C-suite, so there is clear delineation of the objective and clear ownership over the firm’s progress,” she said.
“All else equal, firms that fail to foster a positive company culture will struggle to gain or maintain a competitive advantage,” said Ms. Jensen. “Simply put, unhappy, alienated employees are generally less likely to go above and beyond their basic job duties. Hence, improving performance is more about making sure each employee feels valued, and less about establishing a sense of shared values or beliefs.”
Fixing A Bad Culture
Ms. Jensen notes that no firm is ever beyond fixing, and there are several tangible steps firms can take to create a culture of equity and inclusion, including: 1) defining what diversity means to the firm and feeling comfortable with using that as justification for any DEI or culture initiatives, 2) creating mentorship programs for diverse talent that helps entry-level or mid-level professionals feel safe in their work environment and empowered to take risks and develop new skills and 3) ensuring pay equity for diverse employees and fully tracking and disclosing anonymized data on how people are paid at different levels of the organization.
What is the common element that attracts people to the firm and keeps current people engaged and enjoying their work with the firm? According to Bernard Layton, managing director and CEO of Comhar Partners: “The structure of the organization has some impact on the culture. If it’s family run its seems to be a bit of a paternal or maternalistic sort of looking after people culture,” he said. “If it’s a big corporate…Amazon famously has a two year and out, Microsoft has the same thing. There is a high turnover rate in the first two years, and then if people survive the first two years, sort of trial by fire approach culturally, then they tend to stay for five to seven years. So, it’s really a function of the intent of the leadership to set a certain pacing, or a certain style, or a certain community, so to speak.”
“The way to solve this is to ask questions around what holds the team together, what causes people to leave when they interview people, even if they fit all the criteria for the role but they don’t appear to fit in,” Mr. Layton said. “What are the common elements or links or things that you can speak to that influence those decisions and all of that ultimately speaks to culture. So, it’s just heavily influenced by the moment, the industry, the firm structure, the leadership’s approach to people, and then ultimately it’s more reactive than proactive. Most companies do not think in terms of how to firmly protect the culture. They talk about it, but they don’t necessarily act in the same fashion.”
“Culture is purpose driven and if people start to behave in a certain way, if the leadership or the ownership behaves in a certain way, that reenforces through their actions, how they recruit, how they attract people, and reenforce it in terms of people that remain with the company. But it has to be spoken, it has to articulated. But then actions have to support what goes on with that,” said Mr. Layton. “It even rises to the level of how the company is structured, can the financial moment that they’re in support the culture that they’re trying to promote? Ultimately, how do they deal with adversity and how is the culture impacted when adverse things affect the company? If it’s a strong culture, it will survive adverse moments. If it’s a lip service oriented culture, then it tends to fall apart.”
“The pandemic impacted company culture in a significant way, with leadership approach playing a key role in shaping the company culture,” said Steve Dwyer, SVP of consulting at Teamalytics. “Companies with a people-first culture made decisions to support their employees, while those with a declarative approach focused on survival measures. In the long term, companies that have moved out of survival mode and prioritized a people-centered culture are thriving in the talent war. Employees stay in these companies due to their strong relationships with the team and feeling valued, not just for perks. A people-center culture was successful pre-pandemic and is expected to continue being successful in the future.”
Remote Work
Remote work has impacted company culture, leading to a shift towards a desire for flexible work from home options, according to Mr. Dwyer. To maintain a thriving culture, he says organizations must address three main questions: (1) how do we measure productivity, (2) how do we keep people connected to their teams, and (3) how do we care for and connect with people we don’t see every day.? “This can be done through clear job descriptions and expectations, intentional team meetings, a hybrid schedule, and intentional check-ins, one-to-ones, and communication,” Mr. Dwyer said. “The concept of intentionality is key in ensuring a successful transition to a work from home culture.”
“A strong company culture is created by the behavior encouraged, modeled, tolerated, and rewarded by leaders,” said Mr. Dwyer. “The real culture of a company can be different from what is written in core values or advertised in recruitment materials. For example, Enron had a core value of integrity but senior executives’ behavior showed otherwise. On the other hand, Southwest Airlines has maintained a positive company culture and regularly receives many job applications for a limited number of positions. A strong company culture can affect employee performance, retention, and perception. Therefore, it is crucial for leaders to be intentional in creating the right type of company culture.”
Related: Designing a Winning Corporate Culture
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media
