Does Corporate Culture Affect Profit?

According to James L. Heskett, culture “can account for 20-30% of the differential in corporate performance when compared with ‘culturally unremarkable’ competitors.”  So what is corporate culture, anyway?  It’s one of those things that is so hard to define and articulate, yet you know it exists, and you can feel the difference in any organization you walk in to.  Whether written as a mission statement, spoken or merely understood, corporate culture describes and governs the ways a company’s leaders and employees think, feel and act.

Recently I had lunch with the young and retired CEO of a very successful oil and gas supply company, who had been a client for 20 years.  I asked him, “Now that you can look back more objectively, what would you do differently with your company, if you could do it over?”  His reply came quickly, and he said, “The number one thing would be I would work harder on the culture of the company.”

Interesting, I thought, as I reflected on all the changes this company had undertaken under his leadership.  So HOW do you focus on your company culture?  Five things come to mind:

  1. Understand and articulate the culture that you WANT.
  2. Understand the culture you currently have. And be objective about it.
  3. Ensure your leadership team is completely aligned on what you want, and how you will go about closing the gap to what you have today.
  4. Then communicate, communicate, communicate – to every single person at every opportunity.
  5. Walk your talk.

Watch a summary of this blog here.