People are the key to your organization’s success. As a senior HR professional, you may not be directly in charge of your company’s finances, but you have a wide view of not only your HR department but also your organization as a whole. This gives you the perfect vantage point to gauge your organization’s performance on a much deeper level—its culture.
And, as it turns out, corporate culture and performance are intrinsically linked—and that includes both employee performance and financial performance.
Are your organization’s employees motivated to do their best? Do your most valuable people intend to stay in your company for the long haul, or are they looking for the next chance to jump ship? When change comes to your organization, can it effectively seize new opportunities from positive change or mitigate the damage from negative change?
All of these questions are answered by one question—how healthy is your corporate culture?
Why is culture important in business?
To answer that, let’s answer a more fundamental question first—what is corporate culture?
In simplest terms, your corporate culture consists of two things—what people in your organization do and how they do it.
From this simple definition, you can see how corporate culture and performance are intrinsically linked. The culture of your workplace plays a fundamental role in how every part of your organization performs, in every department—from you and your fellow senior teammates down to your direct reports and their direct reports, from the newest entry-level workers up to the C-suite.
Culture is something every workplace has, simply by dint of being a collection of humans working together. Whether that culture is healthy or unhealthy—that is what determines the impacts of culture on your company.
Why is company culture important? Because it determines:
- How well your organization performs financially. According to McKinsey & Company, the companies with the healthiest cultures have quantifiable improvements over shareholder returns.
- How well your organization adapts to changes. Shifts in industry regulations, market trends, supply chain dynamics, or economic conditions can all fundamentally change the landscape your business exists in. The healthier your corporate culture, the more adept your organization will be at safely navigating these changes and finding new opportunities in them.
- How well your workers do their jobs, how likely they are to go above and beyond, and how satisfied your customers or clients will be with your products or services. Healthy corporate cultures breed healthy workers—and more satisfied and loyal customers.
- How likely great employees are to stay with your company in the long term as opposed to taking their talents and knowledge elsewhere.
The health of your corporate culture and performance are intrinsically linked. Ultimately, having a healthy culture is a valuable competitive advantage in your marketplace, whatever industry you’re in.
Unpacking the Impacts of Culture on Your Corporate Environment
As a senior HR professional, understanding the impacts of culture on your corporate environment is essential for creating or maintaining a workplace culture that optimizes your organizational outcomes. The key to understanding this is understanding the outcomes a healthy or unhealthy culture leads to.
Exploring the link between corporate culture and performance shows the effect a strong and healthy culture has on worker performance and the financial health of your organization as a whole—as well as the detrimental effects of a weaker culture.
How Corporate Culture Affects Worker Performance
A strong and healthy culture is a guiding light for employees across your organization. Your culture influences:
- How much you employees feel as though they “belong” to your organization. A healthy culture engages employees and encourages motivation and dedication in their day-to-day jobs.
- How well employees understand and feel in alignment with your organization’s values and goals. In a culture that clearly defines your organization’s goals and values, employees can feel confident they are all pulling their weight in the right direction.
- How willing employees are to collaborate with each other, seize learning and development opportunities, and grow their skill sets to provide greater value to your organization.
- How well employees feel they can balance the responsibilities of work with the responsibilities of their life outside of work. As the Great Resignation has demonstrated so clearly, work-life balance has a profound effect on worker satisfaction and performance, and culture is a significant determinant of how your organization expects work and life to be balanced.
- How empowered and autonomous workers feel in their roles. Employees who feel safe and comfortable taking responsibility for their decisions, regardless of the outcome of those decisions, have a greater sense of ownership of their work and are more invested in the success of their efforts.
On the other hand, in these bullet points you can see the impacts of an unhealthy culture on employees. Failing to build and maintain a healthy corporate culture can easily lead to toxic work environments where employees have low morale, don’t feel connected to your organization’s values, and are unmotivated to do their best. They could be discouraged from mastering new skills, collaborating with their coworkers, taking responsibility for their work, or taking risks on new ideas if they don’t feel safe or supported in doing so. Ultimately, these factors quash productivity—and can have serious knock-down effects on your organization’s financial performance.
How Corporate Culture Affects Financial Performance
It should come as no surprise that many of the elements of company culture that affect the performance and productivity of your organization’s employees also have a profound impact on your organization’s financial performance. Culture is a strong determinant in employee retention, innovation, productivity, and community—as well as your customer’s experiences with your services or products. All of these factors and more can significantly affect your business’s financial situation.
Corporate Culture and Employee Retention
Finding, hiring, and onboarding new employees is time-consuming and expensive. Your rates of employee attrition have a profound effect on your financial performance—if you have departments that are “revolving doors” of new hires and people on their way out, that’s a lot of time and money being drained from your organization.
An unhealthy corporate culture depresses worker satisfaction, productivity, and innovation. Ultimately, it increases turnover by encouraging valuable employees to seek greener pastures. However, a healthy culture encourages great workers to stay with your organization, even when times are tough. They’ll be more satisfied with their work and, as we’ve discussed above, provide better results. You’ll get a better return on your investment in individual workers who are a great fit with your company culture.
Culture and Customer Experience
Customer satisfaction has a profound effect on your organization’s financial performance. Satisfied and productive employees who feel empowered by your corporate culture and connected to their coworkers have been shown to provide better service to customers, in turn leaving them feeling more satisfied and more likely to become loyal repeat customers.
As a result, building and maintaining a healthy company culture brings in more business and more revenue from sales and services.
Culture and Adaptability
A healthy culture promotes innovation by encouraging workers to safely take risks with new ideas—ideas that can lead to seizing on new market opportunities. A spirit of innovation and adaptability also helps workplaces stay motivated for success in uncertain economic conditions. In industries that deal with stringent regulations, a culture that promotes ethical behavior and transparency can reduce the risk of legal issues and financial penalties, and can also lead to streamlined processes and reduced operational expenses.
All of these factors of a strong, healthy corporate culture positively influence your organization’s financial outcomes. On the other hand, a weak corporate culture fails to seize on ways you can maintain or improve your organization’s financial health.
How to Build a Winning Corporate Culture
The link between corporate culture and performance has been studied time and time again. A healthy culture drives better outcomes for your business—in terms of worker performance and retention, your organization’s ability to adapt in the face of positive or negative change, your customers’ loyalty and satisfaction, and ultimately, your bottom line.
As a senior HR professional, you have a significant role to play in building a healthy corporate culture—and keeping it that way. From managers and supervisors to directors all the way up to the C-suite, leaders are the beacon your company’s employees look to for guidance. The initiatives you take and the behaviours you model are forms of leadership by example. In addition, you have the authority to implement new strategies to improve and maintain the health of your business.
- Agree on what culture means to you.
- Determine your current culture.
- Identify the results you want.
- Assign accountability for change.
- Close the gap.
Kevin has helped countless senior HR professionals execute these five simple steps to model workplace behaviour and build cultures that bring out the best in your people—and with our help, you can gain insights from Kevin and other leaders in HR to transform your leadership and your workplace.
HR Velocity™ – Helping You Lead With Impact
At Gameplan HR™, we help senior HR leaders stay on the cutting edge of leading HR techniques, strategies, and insights to build and maintain better corporate cultures and retain a competitive edge. As a vetted HR partner, we help organizations of all shapes and sizes execute their unique HR strategies with industry-leading expertise and automation tools.
Our HR Velocity™ program for senior HR leaders provides hands-on learning experiences, seminars from HR thought leaders and networking opportunities for professionals to stay on the cutting edge of workforce management and navigate today’s biggest HR challenges.
You can enroll anytime and kick off a full calendar year of exciting HR events, with a unique seminar topic for each bimonthly session. March 2024 will focus on “Cultivating Winning Cultures” with insights from Kevin Judge on the importance of a “Champion Mindset” and the link between corporate culture and performance.
To learn more about how our services and programs can help you master the strategies to keep your corporate culture healthy, contact us today.
What is the link between corporate culture and performance?
Corporate culture and performance are intrinsically linked. A healthy culture influences employee motivation, satisfaction, and productivity, which in turn affects financial performance. A strong culture fosters collaboration, adaptability, and employee retention, resulting in improved shareholder returns and customer satisfaction.
Why is culture important in business?
Culture is important in business because it impacts various aspects of an organization. A healthy culture enhances financial performance, enables effective adaptation to changes in the industry, improves employee job satisfaction and performance, and increases employee retention. It also influences customer satisfaction and loyalty.
How does corporate culture affect worker performance?
Corporate culture plays a significant role in worker performance. A healthy culture promotes employee motivation, engagement, and dedication. It aligns employees with the organization’s values and goals, encourages collaboration and skill development, and empowers employees to take ownership of their work. In contrast, an unhealthy culture can lead to low morale, lack of motivation, and decreased productivity.
Can corporate culture impact financial performance?
Yes, corporate culture can have a profound impact on financial performance. A healthy culture positively affects employee retention, innovation, productivity, and customer experiences, leading to better financial outcomes. On the other hand, a weak culture can result in higher turnover, decreased customer satisfaction, and missed opportunities for growth and profitability.