Why Harnessing Corporate Culture is Vital

Yesterday’s Advisor covered defining corporate culture; today’s issue offers that, plus the importance of harnessing it.

A recent study by Professors Jillian Popadak, John Graham, and Campbell Harvey of Duke University’s Fuqua School of Business, plus Shiva Rajgopal of Columbia Business School, lists the importance of defining a corporate culture. Key findings include:

  • Survey respondents tended to characterize company culture as shared values that guide employee decisions.
  • Fifteen percent said that their own corporate culture was exactly where it needed to be.
  • Ninety-two percent said they believed improving their firm’s corporate culture would improve the value of the company.
  • Firms that participated identified the importance of trust among employees (83%) and coordination (73%) as key factors that help make their culture more effective.
  • Fifty-seven percent of executives believe that the compensation system reinforces the effectiveness of their company culture.
  • More than 50% of executives said corporate culture influences productivity, creativity, profitability, the value of a firm, and growth rates.
  • Almost one-half the executives said they would not acquire a company whose culture was not aligned with their own.

Additionally, the study finds corporate culture can also exert a positive effect on creativity and innovation, as respondents expressed “[it] reinforces desire to innovate,” and “creativity blossoms when workers feel supported to take risks and not fear punishment if they fail.” Meanwhile, respondents refer to the impact of corporate culture on productivity as they write that culture “encourages teamwork,” “together we will find a way,” and “creates a personal drive of individuals to get the job done without being pushed unwillingly into actions”.
The riddle, according to Harvey, is that “CEOs and CFOs are very clear that getting culture right enhances value, but it is a puzzle in that if culture is so important to value, why do we hear very few CEOs talking about it? … Most often, talk of culture arises after a disaster—such as the VW emissions scandal. We need to change the conversation.”
Even if CEOs don’t follow Jeff Bezos’ claim that failure is a key contributor to a company’s corporate culture, it’s clearly time for CEOs to talk about and nurture the idea before disaster strikes.