March 24, 2016

3 Reasons Why Culture is Your Most Important Asset

Rajesh Anandan

UNICEF Kidpower

Until a few years ago, I felt that any time or money spent on mission statements and corporate values was a monumental waste, except for the consultants getting paid to “help” you figure that stuff out. I’m a recovering management consultant, so I’m saying this with love, but every time I heard Peter Drucker’s famous “culture eats strategy for breakfast” quote, I would have an irresistible urge to roll my eyes.

I thought “values” were for big organizations that needed to fill up their corporate retreat agenda or website “About” page to compensate for a lack of purpose or progress. I was convinced that spending time or money on values had no place in a social enterprise that was well run (which by definition would be built around purpose, with a winning strategy and relentless execution).

It turns out the consultants were right. Now, I’ve not only embraced Drucker’s mantra of culture-eats-strategy, but I’ve upgraded to Bill Aulet’s religion of “culture eats strategy for breakfast, technology for lunch, and products for dinner, and soon thereafter everything else too!”

Let’s first define culture, and let’s start by defining what it is not. Culture is not the articulation of an organization’s mission and values. It turns out that simply stating your values does nothing for your performance. A recent study of the Value of Corporate Culture among S&P 500 companies found that the existence and prominence of a defined set of corporate values made no difference to short or long-term financial performance. But, the study also found that the behavior of a company’s senior managers (and the values their behavior embodied) made a huge difference in determining performance.

In other words, spending time and/or money coming up with an amazing list of your values is not enough. You need to be deliberate and diligent about making sure those values are reflected in your team’s attitudes and interactions. For the purpose of this post, let’s define culture as the combination of shared values, observed behaviors and accepted norms that drive your team members’ daily actions. Here are the top three reasons why a strong culture is your most important asset.

1. Culture can quadruple revenues and octuple job creation

Yes, it’s true. I don’t mean “true” in the sense of “if a coconut falls on my head, my head will hurt,” but more in the sense of “I can’t see or touch gravity, but it helps me explain and predict why lots of things happen.” A landmark study and resulting book called Corporate Culture and Performance found that companies with strong, performance-enhancing cultures achieve revenue growth of 4x, employment growth of almost 8x, and profit growth of over 750x versus companies that don’t have strong cultures.

Companies with strong cultures achieve profit growth of over 750x versus companies with weak cultures. Tweet This Quote

2. Culture can give you a permanent competitive advantage

Culture can provide a competitive advantage that money can’t buy, so don’t worry if you can’t afford a barista on every floor serving espressos 24/7. An awesome idea can be easily replicated, especially in the social enterprise space where most things are open source. A brilliant product or service can be copied in a flash, and a couple year advantage building a customer base or distribution channel can be shrunk down to a few months by a well-funded competitor. But a strong culture—one that propels employees to discover the next big idea, allows teams to consistently achieve outstanding results, and turns employees, customers and suppliers into loyal fans—can’t be easily replicated. As Lou Gerstner said in his book about the turnaround of IBM, Who Says Elephants Can’t Dance, “I came to see, in my time at IBM, that culture isn’t just one aspect of the game; it is the game.”

3. Culture is free

Building a strong culture is relatively “free” in terms of money, although definitely not free in terms of time and attention. By no means is it easy, though. It’s hard to find the time to invest in culture when you’re starting up, and even harder to find ways to sustain culture when you’re scaling up. But culture is your most important asset. Taking the time to define your organization’s values and making the effort to consistently model, measure and encourage the behaviors that reinforce those values are going to be the most important things you can do.

Does your company have an awesome culture? If not, what’s keeping the organization from fixing it? And if so, what approaches have you taken to define, reinforce and sustain it?

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