Impact of Culture on Overall Business Performance

• “Our research indicates that focusing on purpose rather than profits builds business confidence and drives investment.
  This underscores the significant impact a ‘culture of purpose’ can play in fostering a thriving business community.”
  – Punit Renjen, Chairman of the Board, Deloitte LLP (1)
• “Culture as a conscious, deliberate, long-term strategy can be the key to sustainable differentiation and success for companies in the 21st century.” – Dov Seidman, CEO of LRN (2)
• In comparing the performance of eight companies with superior results against the performance of companies similar in size and industry sector, the most visible differentiating characteristics of the top performers were their values. Values were their top priority, even before stock price. (3)
• Self-governing [values-based] organizations outperform other types of organizations across every important performance outcome, including: higher levels of innovation, employee loyalty, and customer satisfaction; lower levels of misconduct; and superior overall financial performance. (2)
• Constructive culture raises levels of member cooperation within organizational units, levels of coordination between those units, and unit-level performance. (4)
• “Corporate cultures develop with or without conscious effort. A culture created consciously takes much less effort than fixing a culture of bad habits created by unconscious means.” (5)

Financial Indicators

• The [companies] with the most effective cultures early on experienced the highest customer satisfaction and…sales in later years, and this pattern was repeated over time. (6)
• Organizations that manage the right culture factors proactively can expect to achieve a return on investment (profitability) three to four times higher than companies who do not. (7)
• Comparing 200 companies that intentionally manage their cultures well vs. similar organizations that did not: (8)
  • Revenue increased 682% vs. 166%
  • Stock price increased 901% vs. 74%
  • Net income increased 756% vs. 1%
• 90% of financially “successful” corporate mergers and acquisitions addressed culture within the first 30 days after the announcement. In contrast, only one-third of financially “unsuccessful” mergers and acquisitions addressed culture within the first 30 days after the announcement. (9)
• In companies with effective cultures: “Engaged managers and employees are much more likely to remain in an organization, leading directly to fewer hires from outside the organization. This results in lower wage costs for talent; lower recruiting, hiring, and training costs; and higher productivity. Higher employee continuity leads to better customer relationships that contribute to greater customer loyalty, lower marketing costs, and enhanced sales.” (5)

Employee Loyalty

• Enablers of trust, values and mission high in an organization inevitably give rise to a highly inspired group of employees – employees with confidence and pride in the organization, its reputation, ability to satisfy its customers and contribute to its communities; employees willing to put forth extraordinary efforts on the organization’s behalf; and employees who intend to stay for the long haul and bring recruits into the fold. (2)
• Employees have a higher level of commitment to more “established” values-driven companies than employees of organizations that are just beginning to intentionally manage their cultures around core values. (10)
  • Am proud to work here: 80% vs. 62%
  • Would recommend as a good place to work: 73% vs. 50%
  • Am more satisfied here than anywhere else: 69% vs. 49%
• In a study of 800 managers working for companies at which the leaders had not created a positive culture, 48% reported that they intentionally decreased their work effort and 47% indicated that they intentionally decreased time spent at work. (11)
• 31% of employees reported that their colleagues are more likely to behave unethically in a work environment where there is a lack of transparent leadership communication. (12)
• Organizations with a strong sense of purpose are more likely to embrace diversity and different opinions, encourage innovation among employees, and provide the tools and resources for employees to realize their full potential. (1)

Reduced Turnover

• “By establishing a values-based culture, organizations can cultivate the trust necessary to reduce turnover and mitigate unethical behavior.” – Sharon Allen, Chairman of Deloitte (12)
• 9 out of 10 employees in organizations that are values-based strongly agree that they hope to be with their companies 12 months from now. (2)
• In companies with effective cultures, managers and employees are more engaged and much more likely to remain in an organization. (5)
• 46% of employees stated that “a lack of transparent leadership communication” is driving them to seek new employment. (12)
• [Robert W. Baird & Co]’s voluntary turnover is 4.7%, well below the industry average of 16%. Having and keeping the best people has also led to attracting new clients and translated to growth. (13)

Customer Satisfaction

• Culture can add organizational value, because customers become loyal to a company’s brand. (14)
• The [companies] with the most effective cultures early on experienced the highest customer satisfaction and…sales in later years, and this pattern was repeated over time. (6)
• 99% of employees of values-based organizations report that their company has very satisfied customers, compared with 42% of respondents in organizations characterized by top-down command and control. (2)
• Culture shapes the immediate experience of customers, and in doing so, lays the groundwork for positive (or negative) outcomes in the years to come. (6)

Quality

• Many of the traditional strategies used to increase quality (e.g. monetary incentives, training, and sharing of best practices) have little effect. Instead, companies that take a grassroots, peer-driven approach develop a culture of quality, resulting in employees who make fewer mistakes. (15)
• In a study of 226 manufacturing plants using quality practices associated with Six Sigma implementation, group culture had a significant and positive effect on the implementation level of different quality practices. (16)
• In a study of 800 managers working for companies at which the leaders had not created a positive culture, 38% reported that they intentionally decreased the quality of their work. (11)
• 89% of employees working for an organization with a strong sense of purpose say their clients trust that they deliver the highest quality products and services, vs. 66% of those working for companies that do not have a strong sense of purpose. (1)