Companies are making headlines for what is often misconceived as company culture: nap pods, ping-pong and foosball tables, comfortable couches in meeting rooms with exciting names, ice cream socials in the hallways, and even private chefs in the cafeteria. But those things are perks, not culture.
Organizational culture is the collection of beliefs and behaviors that are pervasive throughout your business. Unlike a mission or vision statement, it’s not something you can define in a series of meetings on a whiteboard behind those comfortable couches in the “Launchpad Liftoff Room.” Why? The reason is simple: organizational culture develops and changes right along with your business.
Your culture goes beyond the physical and virtual four walls of your company to how your employees work with customers and partners and even how stakeholders and potential hires perceive you. In other words, it has a major impact on the success of your business. This article looks at how culture affects success, as well as what you can do to ensure that the impact is a positive one.
Organizational Culture by the Numbers
The CEO of Pfizer, Ian Read, was quoted in a recent Training magazine article as observing, “Culture touches and influences every function in an organization, from research and development to manufacturing to sales. Get it right, and culture can transform your company’s performance and help sustain success for years to come. Get it wrong, and you’ll pay dearly for it…for years to come.”
Ian Read’s statement is backed up by facts and statistics:
- According to CFO, the 13 companies that have appeared in every Fortune’s annual 100 Best Companies to Work For list see higher average annual returns. Their cumulative returns are as high as 495 percent, and the majority of the 100 on the list outperformed the S&P 500 by 84 percent.
- Forbes notes that companies who have strong cultures experience an increase in revenue growth that is four times greater than those who don’t.
- In a recent Deloitte survey, 82 percent of respondents said they believe that culture is a potential competitive advantage.
- A study conducted by Glassdoor showed that being named a Best Place to Work is associated with a .75 percent stock price increase ten days after the notice. Those companies also outperform the overall market by 115.6 percent.
Interestingly, the Glassdoor study also showed that the 30 lowest-rated public companies on Glassdoor broadly under-performed the market.
What Enables an Organizational Culture That Drives Success?
If you ask experts, CEOs of top-performing companies, and employees this question, their answers are a variation of the same theme. They all say that the key component of a great organizational culture is one that empowers employees instead of limiting them. For example, the Ritz-Carlton gives employees permission to spend up to $2,000 to make a customer happy. And Starbucks employees are encouraged to offer a free drink or coupon if a customer has a service issue. These examples and many more help employees take care of customers above and beyond the normal call of duty.
Exceptional customer care and satisfaction is a key contributor to overall business success because if customers aren’t happy, they will seek products and services elsewhere. Uber’s widely broadcasted employee morale problems, for example, appear to have affected their revenues. A TechCrunch article noted that Lyft’s revenue was three times that of Uber in the fourth quarter of 2017, which represented a 168 percent increase in revenue over the prior year. Of note is the fact that LinkedIn’s 2018 list of 50 top startups to work for has Lyft in the top spot.
Empowering employees requires more than enabling them to exceed customer expectations. That’s just one aspect. A great culture gives employees the freedom and authority to be creative, to initiate innovative projects, and to adapt and respond in real-time with solutions that help their teams, the business, and the customer. Throughout the company, the decision-makers and experts in the company share information, resources, and power so that employees make decisions and solve problems on the spot.