A new study finds that executives overwhelmingly believe culture is vital to how their business performs, but few are fully satisfied with the current state of their company culture.
Your company culture differentiates your business from that of your competitors and influences the behavior and performance of your employees. But while you’re immersed in it every day, you may not be fully aware of just how important it is.A recent study of nearly a thousand CEOs and CFOs from U.S. companies casts new light on this subject. In the study, “Corporate Culture: Evidence from the Field,” 91 percent of the executives surveyed said they believe improving their company culture would increase their company’s value. John Graham and Campbell Harvey from Duke University and Shiva Rajgopal from Columbia Business School conducted the research.
More than 50 percent of the executives said corporate culture is one of the top-three drivers of company value, while an additional 27 percent said it is in the top five. Culture is so important, in fact, that 48 percent of survey respondents said they would walk away from a merger or acquisition if the company they were bidding on had an unappealing culture. Others said a unsatisfactory culture would cause them to lower an offer by up to 30 percent.Culture also sets the tone for how ethically your employees behave: 84 percent of executives surveyed said that a poorly implemented culture increases the risk of employees breaking the law and/or committing unethical acts.
The researchers say their survey shows that it’s essential for businesses to pay close attention to their culture if they want to cultivate a productive and innovative workforce.
“An effective culture improves firm value and profitability by fostering creativity and encouraging productivity; promoting more risk tolerance; mitigating myopic behavior; creating a climate for suggesting critiques and for allowing ideas to germinate organically; and by compensating for mistakes in ways that the firm’s assets cannot,” Graham, Harvey, and Rajgopal write.
With all that said, there also was one rather unfortunate revelation from the study: Only 15 percent of executives said their culture is exactly where it needs to be.
What does it really mean to build a strong culture? For some entrepreneurs the very word conjures up images of employees dancing on desks, playing pool in the break room, and napping away in comfy, soundproof enclosures. While fun may be one component of a thriving culture, there’s so much more to it.
If you want to stand out from your competition, keep your rock star talent from jumping onto another stage, and glean nothing but the best from employees at all levels, always remember Rule 11.
Build a culture based on your own values, but don’t forget these 7 musts.
1. If you want to be trusted, you must trust.
A culture of trust is imperative, especially if you’re employing millennials. If you behave like a helicopter parent, overseeing, or worse, taking over every project, it will directly conflict with the building of trust. What if they make a mistake? I think any successful entrepreneur will tell you that there is no mistake from which you cannot recover. Give your employees clear guidelines and let them spread their wings.
2. Give employees the opportunity to get to know one another.
How can people know, like, and trust one another if they don’t have the opportunity to play together? An occasional party or outing is not enough to build and maintain these relationships; weave these events into the fabric of your day-to-day company life. Create little rituals at employee meetings, have themes for certain days of the week and holidays, and engage in community projects together. Find quirky ways to celebrate success, no matter how small, and certainly create friendly competition; both work-related and personal. A chili cook-off and a game-filled afternoon at the park are a couple of things to consider. Too much work? Assign a monthly “culture captain” to plan out the month.
3. Create a cool space.
Tossing a few desks in a room doesn’t cut it anymore. Our external environment has a significant impact on our internal thought process. Design a creative corner with bean bag chairs, chalk boards, and a lighthearted theme throughout. Allow employees to bring fun decorations to add to their work area. If you can afford it, hire a designer to create your unique space. A creative environment sets the bar for innovation. Creating a “culture of cool” attracts the kind of people who value the kind of culture you’re trying to build.
4. Give ’em free stuff.
Everyone loves free stuff! If you can’t afford to supply personal computers or tablets, stock options, and grand parties–no worries, those things will come. In the meantime Friday morning breakfasts, afternoon smoothies, fun work tools, and inexpensive merchandise will go a long way. This will contribute to a work-hard, play-hard environment, making for happy, productive, and creative employees.
5. No jerks allowed.
I can’t say this often enough: Hiring for skill alone will doom you to misery. Hire nice people who fit in with the intention design of your culture. Hire people who have a proven work ethic and are team players. Hire for creativity and personality. Sure, experience and skill are important, but not nearly enough to take you to the top of your industry.
6. Encourage growth and ownership.
A strong company culture isn’t just about fun: it’s about encouraging your employees to see their job as more than just a job–to own their job and their ideas. Once you’ve build this collaborative, trusting environment, your employees will bring ideas to the table. If it’s their idea, put them in charge of it! If an employee wants to learn something new, provide the support for them to do it. Today, innovative companies don’t hire employees to remain in one job for an eternity; they hire innovators who will contribute to the future of the company in a powerful way.
7. Communicate, communicate, communicate.
Here’s where I see entrepreneurs, especially startups, fail most often. When one hand doesn’t know what the other is doing you have a recipe for disaster. But communication about processes and workflow aren’t enough. Drill your values into your employees with ideas like those above and by demonstrating them in your own behavior. Be authentic and, at times, vulnerable. If an employee isn’t performing up to par, don’t let your frustration and disappointment grow; engage in thoughtful conversations about it and create a plan for improvement. If an employee has a win, celebrate!
Building an outstanding culture is not an overnight event, and it’s not always easy. You’ll hit some bumps in the road; during those times remember rule number 6: Never forget that your team, not your product, not your bank account, is your number-one asset.