If you are part of a high performing organization, then you probably have a high performing culture. Businesses rarely succeed with a culture that is not conducive to success. Of course, what defines a high performing culture depends on who you talk to. Nevertheless, when employees lack shared values and understanding of what the organization is trying to do, they do not work together well and may be actively undermining the efforts of leadership.
As the evidence mounts that culture matters to business success, it is worth considering how businesses approach culture. Unlike consumers who often decide based on emotion and fad, we tend to think of businesses as being more driven by the bottom line. There are still fads or trends, like open-concept offices but even here there is a strong bottom-line impact. Businesses therefore need to be sure of the value of investing in culture before spending resources (time and money).
The amorphous nature of organizational culture is hard to grasp and the link between culture and performance for a specific organization is often unclear. But there is no question the link is there, and CEOs are increasingly concerned about it.
The Evidence that Culture Matters
The idea that corporate culture can drive financial performance is not new. There have been numerous research articles on the importance of culture (Gordon & DiTomaso, 1992). The financial benefits of a positive culture affect both organizational HR metrics as well as overall top line revenue and profitability.
Turnover is lower leading to lower costs— Organizations with high turnover are simply less productive not just because they spend money on hiring but also because when employees leave, they add to the burden of others. And, if the best employees are leaving, the problem is more acute. Several sources have explicitly made the link between culture and lower turnover.
- “Organizations that purposefully craft and develop their culture experience a 14% turnover rate, whereas organizations that ignore their culture experience a 48% turnover rate” (BDC Network)
- Grant Thornton determined that if employees said the company had a healthy culture the average company on the S&P 500 would save $156M in turnover costs each year.
Revenue is higher– The best indicator from a business perspective is revenue and profitability. Here a number of findings have shown that culture is a strong driver of revenue.
- Kotter and Heskett showed in 1992 that companies that had a culture that is capable of adaptation were more likely to have strong financial results.
- According to Grant Thornton, “Companies with extremely healthy cultures are 1.5 times more likely to report average revenue growth over 15% for the past 3 years.”
How Energy Mapping Drives Financial Performance
The idea that culture drives revenue provides a compelling narrative for working on and investing in your corporate culture. But what do you actually do? We know that leadership is critical for a healthy work culture and at the same time we know employees cannot just be told to change. We live in a work environment defined by the need for collaboration, purpose and autonomy.
The key is to start with Energy MappingTMbecause at its most basic level your culture is about the relationships among the people. People in roles act according to their personal and potentially the corporate values of the company. They also are the key actors in manifesting the expectations of the company when it comes to rules, procedures and norms.
Energy MappingTM is a modern tool that measures how connected people at work and the impact that people are having on each other. Organizations can finally see their workplace as a living breathing organism rather than an org chart. This is critical because changing your culture requires changing how people throughout the organization behave. Once you see how people are interacting you can leverage this knowledge to grow and adapt your culture for higher performance.
At ENRGY Inc. we know that the key to unlocking the power of the people in any organization is understanding where the energy is. And understanding your energy dynamics is the first step in improving the positive impact people have on each other. It all starts with a map…
Contact us to learn more about getting a map of your company’s energy.
Richard Jenkins Ph.D
Other Resources to Review
- Mikhail, Christine. (2016) “The ROI of company culture: Why companies should look at culture’s impact on profit.”
- Gordon, G. G., & DiTomaso, N. (1992). Predicting corporate performance from organizational culture*. Journal of management studies, 29(6), 783-798.
- Grant Thornton (2019)“Return on Culture: Proving the Connection between Culture and Profit”
- Kotter, John. (2011) “Does corporate culture drivefinancial performance?” Forbes.