Why is it worth investing in corporate culture?

A company’s culture is its inheritance – it implicitly determines how an organisation thinks, acts and feels. Definitions of culture range from corporate reputation (Kreps, 1990) to shared assumptions of a group (Schein, 1992) to the weighting of cultural elements (Gorton & Zentefis, 2019). What all definitions have in common is that corporate culture is the starting point and cause of strategy and vision, processes and structures, people and competences in companies. Corporate culture can only be created and developed collectively.

• An investment in corporate culture is a strategic competitive advantage

An investment is the targeted conversion of capital into assets. Investing in culture creates both wealth and performance potential. This is because adaptable cultures can achieve a 6-fold increase in turnover, an 8-fold increase in share price, a 2.5-fold increase in the workforce and a 750-fold increase in net profit (Kotter & Heskett).

• Culture as a productivity booster

In a study by Cherian et al. (2021), 69% of the employees surveyed also stated that the corporate culture had a significant influence on their performance. Those who identify more strongly with the culture of the organisation feel more committed and therefore work more productively. Let’s take a seat opposite this culture. It promises us: ‘You belong here, you can dare to do something here and you are here for a good reason’. So it’s no wonder that an investment in corporate culture pays off: effective culture invites employees to stay and to recognise and use their scope for action for the overarching purpose of the company.

• Culture as a means of attracting and retaining employees

2 out of 5 respondents in Deloitte’s ‘Global Human Capital Trends’ study (March 2023) would have rejected a job offer because it did not match their values – also a matter of culture. An effective corporate culture not only helps to attract talent, but also to retain it. According to Gallup’s Engagement Index (2022), 87% of employees feel little to no emotional connection with their employing organisation. If they felt just 10 % more meaningful in their work, there would already be 8 % fewer resignations (Allmers et al., 2022). The price for ineffective corporate cultures that are not developed further is therefore high in many respects.

Airbnb invests in culture and sees returns

The company Airbnb, for example, aims to keep employees productive, motivated and committed. Part of their culture is a practice that is made up of three words: elephants, dead fish and vomit.

• Elephants are the big issues that no one (yet) addresses, but everyone is aware of.
• Dead fish are past events that continue to have an effect in the present.
• Vomit represents the issues that employees want to get out of their heads and discuss in the team.

In this way, cultural priorities are set according to the motto ‘This is the way we do things here’. Indirectly, this creates a culture of transparency in which everything can and should be discussed. That pays off. The proverbial elephant in the room does not remain undetected for long at Airbnb: grievances are quickly identified and can be resolved promptly.

How can culture be developed?

Successful further development of corporate cultures is very complex because it affects an organisation as an entire social system. This system is characterised by facets of corporate culture that are dynamically interlinked – some of them visible, others only perceptible. Establishing a changed corporate culture requires time, consistency, patience, visible changes in behaviour, signals and authentic role models in management.

So how does cultural development work?

The first step is to diagnose the culture: ‘What culture are we talking about?’. The diagnosis can be made methodically using interviews, workshops, questionnaires, observations, data analyses and projective methods. Once the existing culture has been analysed, the target culture can be considered: ‘What characteristics do we need for the future of our company?’. Only after this assessment can the necessary fields of action be identified, risks analysed and the change process designed before the measures are implemented and evaluated. The secret to success? The development of culture always succeeds when clarity, consistency, alignment in leadership, acceptance and ‘what is said and what is done’ are in harmony.

What does a corporate culture need to offer?

In short, there is no one right or wrong corporate culture. The decisive factor is whether the distinctive culture is beneficial or detrimental to the organisation’s goals. In his book ‘The Culture Code’ (2018), Daniel Coyle gets to the heart of the matter: people stay in companies where they feel safe, can be vulnerable and have a sense of purpose.