Culture’s contribution to the bottom line

Recently, I was at the Culture Amp ‘Culture First’ Forum here in Europe and participated in a Q&A on Culture’s contribution to the bottom line: Selling the value of culture to Senior Leaders. It got me thinking.

Culture impacts business performance, obviously. It is common knowledge now, even amongst hardened business people. In his book The Culture Cycle, James Heskett demonstrates how an effective culture can account for 20-30% of the differential in performance compared with "culturally unremarkable" competitors. Damaged cultures ruin companies – think Enron and Lehman.

Our own research, carried out largely in 2018, showed 55% of companies didn’t believe their culture would support their growth agenda. And on the positive side, the right culture engages, retains and inspires. As one HRD of a digital platform business put it “strong cultural alignment is the key to pace”.

I don’t think the problem is selling the value of culture; I think the bigger issue is figuring out how to make a difference in this arena. Many attempts at ‘culture change’ have failed. Why is that?

One factor is that culture isn’t somehow separate, it’s part of a system and built for a purpose – it’s the way you solve problems, dynamically. If you see that truth, you realise that culture change ‘projects’ are often na?ve in their conception as well as their execution.

It’s also important to recognise that leadership is the single most important factor in shaping it – as Ed Schein has shown. ‘Senior Leaders’ are not a homogenous group, some need stories, others need data-driven arguments to engage in this. All of them need to recognise that their decisions and day-to-day behaviour are actively shaping the culture. They cast a long shadow. So delegating culture as a ‘project’ to others is unlikely to achieve much meaningful change.

There is also a strong ‘pull’ towards cutting edge thinking on culture and this may be wholly inappropriate for your business. Remember, we cannot all be like Netflix, their culture is very much designed around their business model, not yours. How do you know what kind of culture will best serve your business? 

Consider:

Which people/teams are critical to success in delivering the target customer experience for your products/services?

What are the priority mind-sets and behaviours we need to foster to deliver that customer experience?

Perhaps the true prize is that culture leads to sustainable performance, one that is very hard to copy. For that reason, if investors and managers are not driven by sustainable performance, but financial returns over much shorter time frames, they may not truly care about culture, frankly. You can try selling culture to these folks until you are blue in the face for all the difference it will make!

As a business grows and evolves the challenges you face change. So should your culture. As I said earlier, it is a dynamic process of problem-solving. Culture requires investment and intentional action over time; doing nothing has serious consequences and costs. We are in the business of helping our clients to navigate their growth journey and our clients see the force of an aligned and healthy culture to empower people and drive growth.

Is your culture holding your business back or a source of competitive advantage?

Simon Court, CEO and Founder, Value Partnership

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