The Business Case for Company Culture
Strong company culture has become a major selling point — right up there with salary and healthcare benefits — for companies looking to recruit the best and brightest talent. But what exactly is company culture? Contrary to popular belief, company culture is not simply defined by quarterly happy hours and office snacks. Rather, company culture relates to the ways in which employees think and act on a daily basis.
While Microsoft, Zoom, and HubSpot are infamous for their high-performing company cultures, many companies outside of the tech world are stepping up to the plate. Novelis, the world’s largest producer of flat-rolled aluminum, received significant praise for its commitment to operational excellence through culture management.
“You can never overestimate the impact a strong culture has on an organization,” said HR (Shashi) Shashikant, Senior Vice President & Chief Human Resources Officer. “If you are genuine and use every means at your disposal to reach and engage your workforce toward specific business goals, the results are astounding.”
The numbers prove it: companies that effectively manage their culture have 63% more successful product launches and their employees are 90% more likely to recommend their organization as a great place to work. These companies also deliver nearly 20% higher returns to shareholders relative to comparable companies over a five-year period.
But reaching results isn’t the only advantage of culture management. Here are five additional benefits leaders reap when they intentionally cultivate their culture:
1. Strategic Clarity
A company’s organizational goals, or Key Results, define what they hope to achieve. But to successfully achieve the “what,” employees need to understand the “how.” This is the culture component.
Culture and strategy work in tandem to provide employees with a clear roadmap of expectations. By pairing three to five meaningful, measurable, and memorable organizational goals with four to five supporting cultural beliefs, leaders ensure employees understand exactly how they are expected to think and act to reach results.
Without cultural beliefs, employees continue old patterns of thinking and behavior that don’t align with top priorities. On the flip side, without highly targeted, strategic goals, cultural beliefs are like a boat without an anchor — there’s nothing to tie them to. It takes both culture and strategy to succeed.
Case Study: Petronas
PETRONAS, a Malaysian oil and gas corporation, was founded in 1974 as a small, 15-person company with big dreams. Today, the company employs more than 53,000 people working in 80 countries and across multiple business pipelines, including accounting, engineering, retail, oil fieldwork, and beyond.
While differences in location and job description abound, there’s one thing every PETRONAS employee has in common: a shared commitment to the PETRONAS company culture.
Accomplishing this unified culture wasn’t always easy. When Tan Sri Wan Zulkiflee Wan Ariffin was appointed CEO of PETRONAS in April 2015, oil prices had been plunging steadily for nearly a year. Wan Zulkiflee knew that to survive in the market, his company would need both clear strategic direction and a cultural transformation to execute it.
Wan Zulkiflee worked diligently with his team to identify highly targeted key business results surrounding shareholder value, stakeholder knowledge, transparent procurement procedures, and the growth of professional relationships. Once strategic clarity was established, he introduced six cultural beliefs to anchor and rally the company towards achieving their organizational goals:
- Results Matter: I stretch my limits to deliver superior results.
- Own It: I own the results and don’t blame others.
- Focused Execution: I plan, commit, and deliver with discipline.
- Nurture Trust: I always keep my promise and build mutual trust.
- Tell Me: I seek, give, and act positively on feedback.
- Shared Success: I collaborate for the greater good of PETRONAS.
This strategic and cultural clarity charted a course forward for the company, helping them rise above the economic downturn.
“The upside of a crisis is that you are compelled to do whatever is necessary to ride out the tough times. This includes taking a hard look at your organizational culture. Is it one that helps you weather the storm, or does it need to be strengthened?” said Wan Zulkiflee in a recent interview. “Culture plays a critical part in bringing strategy to life. It’s the foundation that sustains all of our change initiatives.”
2. Top-to-Bottom Alignment
Working in silos can be extremely beneficial for a workforce, allowing employees to become experts in a specific task and take pride in their work and ownership over moving the needle in a specific area. But there’s also a downside to this type of structure. Rather than looking at the big picture — the overall success of the company — siloed teams end up with a very narrow frame of focus. They are unable to keep pace with desired organization-wide results.
According to the Culture Accountability Index, only 36% of employees believe that individuals within their organization are aligned around a common set of cultural beliefs. What’s more, only 31% of individuals deeply understand how their work connects to their company’s strategic goals. Without a sense of alignment and purpose, business results can quickly slip through the cracks.
Culture management gurus don’t just describe what the strategic goals are and how employees should think and act to accomplish them, they also explain why it all matters. This instills a sense of purpose in employees and leads to greater alignment among even the most siloed teams. In fact, employees at companies that intentionally cultivate their company culture are 76% better at working together across the organization to quickly and efficiently handle new projects.
Case Study: Richland Community College
A few years back at Richland Community College, cross-functional collaboration was hard to come by. Departments operated in silos, rarely communicating with one another, while faculty and staff remained strictly divided. The only thing uniting all parties was confusion over the institution’s overarching goals.
This lack of alignment led to an absence of good, productive conversation. It also didn’t bode well for the health of the institution as a whole — the student retention rate had dropped to 46.24% for the following term and 8.46% for the full fall-to-fall calendar year. It was time for a significant culture shift.
For Richland Community College, that meant rallying all employees behind a single, unifying set of goals:
- Trust: Develop a mutually respectful and empowering work environment based on trust, individual and shared accountability.
- Grow: Grow institutional enrollments by 7% in 3 years.
- Thrive: Establish and maintain fiscal viability and sustainability.
Leaders at the college explained that every department would have to step up to the plate and work together if they wanted to see these goals realized. One department could not survive if the others failed — the health of the entire college was on the line.
Culture champions were appointed within each department to nurture inter-office relationships and conduct routine check-ins and team-building activities. As connections and trust strengthened, the teams stopped viewing one another as unique entities, but rather as part of one, united body. They understood what they needed to accomplish, how they were expected to get there, and why it all mattered.
It wasn’t long before goals that once seemed impossible started falling into place. Retention for the next term increased by 41% while fall-to-fall retention increased by 370%.
3. Personal Accountability
Individuals often externalize the need for change, and it’s easy to see why — it can be uncomfortable to take accountability and closely examine the issues right in front of us. But it can also be empowering. According to The New York Times bestseller, The Oz Principle, accountability is a “personal choice to rise above one’s circumstances and demonstrate the ownership necessary for achieving desired results.”
In organizations with effective company culture, employees are astutely aware of their organization’s top priorities, why they matter, and how they play a part in accomplishing them. As such, they are empowered to take greater accountability when challenges arise. In fact, companies with strong workplace cultures see 53% more personal investment in achieving organizational Key Results among employees.
Accountability-driven employees embody the Steps To Accountability (See It, Own It, Solve It, Do It) that promote ownership and propel change. For example, an accountable employee in a warehouse setting is one who sees that a machine is broken, takes ownership over the problem, develops a solution, and then puts that solution into place. They don’t say, “not my problem,” and wait for someone else to intervene, but rather do what’s needed to fix the issue.
Case Study: McElroy Manufacturing
McElroy Manufacturing is a family-owned business dedicated to providing the highest quality fin tube and pipe fusion products. Founded in Tulsa, Oklahoma, the company has grown from a small-town enterprise to a globally recognized brand.
Due to the nature of the high-hazard industry in which employees at McElroy work, safety has always been a top priority. When one of McElroy’s initial OSHA inspections identified over 40 serious safety hazards, members of the leadership team knew something had to change. They developed Lean into Safety, which is less of a program and more of a comprehensive cultural mindset.
“The culture of safety at McElroy is integrated into everything that we do. […] Because we put such a big focus on it, employees hold each other accountable,” said Barry Calogero, Vice President of Operations at McElroy. “If an employee sees something that doesn’t seem safe, they have an obligation and a responsibility to say something and they try to get it fixed right away. They don’t say that it’s management’s responsibility — they take ownership of it.”
McElroy employees are given 30 minutes a day to clean their workstations and make short safety and improvement videos using their phones. Several of these videos are then shared at the company-wide meeting each morning, ensuring all employees are aware of a dangerous situation or a new safety best practice that has been identified.
4. Employee Engagement
Accountable employees take ownership for driving their own improvement. They proactively seek feedback, adjust performance, and deliver better results. As such, accountable employees are also engaged employees. They feel a sense of purpose in their work and understand how they play a part in the overall success of their company.
According to the Culture Advantage Index, organizations in the top quartile of accountability have 28% higher rates of employee engagement and 31% more growth potential. To bring this data to light, let’s look at Novelis, the company introduced at the beginning of this paper.
For several years, Novelis had been posting dismal financial performance, pursuing conflicting priorities, working in uncommunicative silos, and suffering from a lack of accountability for results. To make matters worse, despite several years of unprecedented investment totaling more than $2 billion, the company had still failed to produce a favorable return on invested capital.
CEO Steve Fisher knew something had to change — the survival of the business depended on it. At the company’s Global Leadership Summit, Fisher said “There is a blue ocean of opportunity in front of us. However, as a company, I’ve become convinced we will drown in that ocean if the people in this room don’t change. Accountability must be our vehicle for change.”
“Accelerating change by getting accountability right, C-suite to the front line,” became the company’s primary propeller for growth. Under Fisher’s leadership, the senior team at Novelis led and achieved an astonishing transformation by getting people to take greater accountability for their results. As employees gained a renewed sense of direction and purpose, employee engagement scores rose to historic levels, return on capital employed nearly tripled, and profitability increased by 26%.
5. Organizational Agility
Nearly 72% of executives believe their business model will be under threat within the next five years. As high as that is, that data predates the disruption of 2020. It’s no wonder “agility” has become a buzzword among leaders seeking to navigate the rapid pace of change in the marketplace and the slew demands spurred by emerging technologies, a global pandemic, and a total upheaval to way of life.
As business strategies adapt and align around disruption, so must company cultures. An organizational mindset that is flexible, forward-thinking, and resilient is crucial. Just look at the mindsets behind the CEOs of companies like McDonald’s, Netflix, and Microsoft — all three have led organizational culture shifts designed to facilitate innovation.
Microsoft in particular has earned a reputation for developing a growth mindset, in which challenges are viewed not as threats, but as opportunities to go above and beyond. For Microsoft CEO Satya Nadella, that means asking himself how successful new products are, how effective the company is at adapting to change, and what kind of culture is in place at any given moment to facilitate the company’s success. He encourages employees to ask themselves these questions regularly, refusing to settle for the “status quo” and constantly striving for new opportunities to learn and grow.
In a letter to his employees, Nadella wrote, “Our industry does not respect tradition — it only respects innovation. This is a critical time for the industry and for Microsoft. Make no mistake, we are headed for greater places — as technology evolves and we evolve with and ahead of it.”
Reaping the Benefits of Effective Company Culture
While each of the benefits listed in this paper — strategic clarity, top-to-bottom alignment, personal accountability, employee engagement, and organizational agility — is unique, they are also all related. Together, they form the basis of effective culture management and put companies on the path to sustainable success.
In companies that get their culture right, employees are 73% more enthusiastic about going to work and 69% more willing to navigate changing situations. They are proud of their companies and proud of themselves for the role they play in attaining organizational goals. But while studies prove that strong company culture is crucial for success, so do our clients.
After undergoing a significant culture shift that united more than 950 employees across 27 branches, leaders at Redstone Federal Credit Union were met with the fruits of their labor — 55% growth in annual non-interest income and 1,052% increase in loans. They also increased their monetary donations to local communities by 1,600% and increased members’ average annual cashback rebates by 7,251%. Their efforts had paid off.
“We’ve created a culture that’s going to ensure the success of this cooperative and its community for generations to come,” said Redstone CEO Joe Newberry. “It’s the culture that will propel us, and we can promise that no matter what happens in the future, Redstone will be here for its members.”