The Link Between Corporate Culture and Performance

Who Are We? What Do We Do? What Do We Stand For?

What is “corporate culture” and why it is important? Is it a predictor of corporate success?

In the simplest sense, “culture” refers to a system of values and norms that are shared by a group of people and gives its members a framework for thinking, planning and behaving. In this context, “values” represent the shared assumptions of what “ought” to be or, in other words, what the group believes to be right and desirable, while “norms” are the guidelines that define the expected behavior of group members in various circumstances.

Building on this definition, corporate culture is the shared set of attitudes, beliefs and norms that is passed along among members of an organization. In many cases, the corporate culture conveys a sense of identity for the organization, reflects the values of the founders and/or the direction from its current leadership, underpins its mission and vision, defines its main operating principles and serves as the basis for a shared identity among those who belong to it. When it is working well, corporate culture is not only the “glue” that holds an organization together, it also helps to coordinate employee efforts because members of the organization know what is expected of them and what to expect from the organization.

A corporate culture can be defined as “strong” when (1) corporate actions are conducted according to clear principles and (2) when management actively and often communicates these principles and shows how they relate to the organization’s operating environment. Having clearly-defined goals reduces employee uncertainty and helps organizations adapt more quickly to changing events. Another factor that contributes to the strength of a corporate culture is exhibiting a demonstrable concern for the well-being of employees, customers and shareholders.

On the other hand, weak corporate cultures are characterized by adherence to a wide range of different values and beliefs and little sense of a common purpose or goals, leading employees to feel alienated from both the organization and its leadership. These organizations often have difficulty implementing corporate-wide strategies or initiatives. A key problem with underperforming cultures is their inward focus and lack of regard for key stakeholders, including employees and customers.

In these organizations, separate “fiefdoms” or silos can grow at the expense of the organizational as a whole, issues get resolved on the basis of turf rather than principle, self-interest triumphs over the interests of the whole and the organization becomes hostile to change, often in the form of the “not invented here” syndrome. These organizations tend to promote those who can “play the game” rather than the employees with entrepreneurial skills and leadership capabilities.

What Does This Mean for My Organization?

Dr. Jerome Want believes that “corporate culture has been underappreciated, underutilized, and widely misunderstood as a lever for sustainable success.” In our work surveying employees for many different organizations, we often witness the vital role that a clearly-defined culture – or the lack of one – plays for an organization.

Although they may not recognize it, senior leadership has a direct impact on the culture of their organization and its influence on performance. More often than not, if top management does not view culture as an important issue, other members of the organization will not see it as crucial either. A high-performing culture can only come from a deliberate to build, maintain and continually develop it.

Here are some guidelines for action to building a strong corporate culture:

1. Start with the top – without the direct involvement of senior leadership, the organization will not recognize the legitimacy of the need for action nor the urgency for a change. Without senior managements unwavering support of the corporate culture and without demonstrating that they are walking the talk, efforts to mold a corporate culture will not succeed.
    
2. Conduct a systematic “culture audit,” including examining your organization’s history, operating principles, strength and weakness. A 4Cs survey from Insightlink can make an important contribution to this effort, but should not be the only source of action.
    
3. Work to align your organization’s culture with your coporate strategy, so that your workforce is motivated to work in ways that support effective implementation of that strategy. This means that you need to foster the aspects of your current culture that support your strategy and to eliminate or change those that detract from your ability to meet your strategic goals and objectives.
    
4. Recognize that an ongoing commitment to corporate culture begins when you are hiring people. It’s best to bring on new people whose personalities and work styles are in line with your culture, rather than hiring candidates who are not in sync.
    
5. Keep in mind the need for regular communications of your culture and values through both formal and informal channels. Senior management must be the main source communication of corporate culture and must repeat, repeat and repeat the organization’s fundamental beliefs and objectives. The strongest cultures thrive on reinforcement through tales of individual employees who live the organization’s values and are rewarded for those actions.
    
6. Finally, define, quantify and regularly measure your success at implementing the key aspects of corporate culture, such as your mission, vision and values. Since “Culture” is one of the 4Cs of the Insightlink model, our survey is an excellent tool for both benchmarking and tracking your efforts to build a strong and compelling corporate culture.