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Bottom-line: Culture Matters

Want to improve your bottom line along with your sales growth and shareholder value? Pay attention to the culture within your organization.

Want to improve your bottom line along with your sales growth and shareholder value? Pay attention to the culture within your organization.

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A new study, conducted by Denison Consulting, shows that “firms with lower organizational culture scores versus those with higher scores underperformed a comparison group by 29 percent in return-on-assets (ROA) and by 20 percent in shareholder value.” Factors of organizational culture measured by Denison include adaptability, mission, consistency, and involvement. Included in those factors are things like creating change, customer focus, strategic direction, vision, empowerment, team work, and engagement.

By definition organization is comprised of the values, norms and behaviors that guide an organization. Adherence to culture produces the systems and processes by which the organization operates. So what does that mean to individuals and teams? Culture is what defines “what, how and why we do things.” Culture in high performing organizations ensures that employees know their jobs and can deliver on expectations secure in the knowledge that the systems and management supports them. The just opposite occurs in low performing organizations. Employees, management and systems work in opposition to one another.

Culture is akin to the environment; it is covers everything. But there are things individuals can do to reinforce it or improve it. For example:

Provide direction. Explain how an individual’s job contributes to the organization’s goals and objectives. Mission statements on cards are nice, but managers need to show how what an employee does contributes to the enterprise.

Communicate. Not only should managers articulate the message, they need to solicit feedback. Get in the habit of asking how the job is going. Listen to what people tell you, especially if they suggest alternatives or improvements. Implementing better ideas generated by folks on the front lines is a hallmark of successful companies.

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Engage the spirit. You want to create conditions for people to succeed. Provide tools and resources for the job as well as time to do it. Recognize them for a job well-done. And again link what they have accomplished to the company’s vision and mission.

Ignore culture at your peril. “It seems clear that not focusing on organizational culture can carry a big price tag, both in dollars and lost opportunities,” says Dan Denison, a professor at IMD and co-founder of Denison Consulting. Ryan Smerek, a researcher at Denison Consulting who co-authored the most recent research study, agrees that their findings “should serve as a wake-up call to any business leader who thinks organizational culture is not that meaningful or influential.” Culture matters to employees and what’s more it also matters to the bottom line.

John Baldoni • Leadership Author/Speaker • Baldoni Consulting, LLC • john@johnbaldoni.com www.johnbaldoni.com