Can corporate culture boost financial performance

Can corporate culture boost financial performance

corporate culture boost financial performance

Executives spend a lot of time worrying about their companies’ products and prices, but they don’t spend nearly enough time worrying about corporate character.

A lot of them don’t believe companies even have a character, and others don’t see what difference it could possibly make.

Correlation between employee investment and performance

But is there a direct correlation between employee investment and performance? As Prof. James L. Heskett wrote in his latest book The Culture Cycle, effective culture can account for 20-30 percent of the differential in corporate performance when compared with “culturally unremarkable” competitors.

Kotter and Heskett’s landmark study Corporate Culture and Performance documented results for 207 large U.S. companies in 22 different industries over an eleven-year period.

Kotter and Heskett reported that companies that managed their cultures well saw revenue increases of 682% versus 166% for the companies that did not manage their cultures well – stock price increases of 901% versus 74% – and net income increases of 756% versus 1%.

Corporate culture is an incredibly powerful factor

Corporate culture is an incredibly powerful factor in a company’s long-term success. No matter how good your strategy is, when it comes down to it, people always make the difference. As Peter Drucker so wisely stated, “Culture eats strategy for breakfast.”

Culture is eating what it kills – such as strategy, change management, innovation, operational efficiency, lean process and even including vision and mission.

How to cultivate organizational culture?

Corporate culture is a hard thing to get right. It’s a moving target that means something different to everyone.

It grows and evolves over time and is the result of action and reaction. It is the lingering effect of every interaction. How to cultivate organizational culture?

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About The Author

Torben Rick

Experienced senior executive, both at a strategic and operational level, with strong track record in developing, driving and managing business improvement, development and change management. International experience from management positions in Denmark, Germany and Switzerland.

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