Guest Column: Why Culture Matters

In The Culture Code: The Secrets of Highly Successful Groups, author Daniel Coyle asks “Why do certain groups add up to be greater than the sum of their parts, while others add up to be less?” In the book, Coyle explores some of the world’s most successful organizations and reveals what makes them tick. He submits that although a successful culture can look and feel like magic, the truth is that it is not. I’d like to further explore and demystify this concept of culture and its relationship to leadership.

What Is Culture?

An organization’s culture encompasses shared beliefs, values, attitudes, and behaviors that define how the organization

operates and how its employees interact. It’s the “personality” of the organization, shaping employee experiences and influencing everything from workplace relationships to decision-making processes. It sets expectations, establishes standards, and serves to guide employee actions. Culture is the unique way that the organization lives out its purpose and delivers on its promise to its stakeholders. It could be thought of as part of the DNA of the organization. And an organization’s culture can grow and shift as circumstances change.

Great leaders understand the importance of culture. They recognize that shaping an effective culture rests squarely on their shoulders—it’s one of their most important responsibilities. In Execution: The Discipline of Getting Things Done, authors Larry Bossidy and Ram Charan write, “The behavior of a leader is, ultimately, the behavior of the organization. As such, it’s the foundation of the culture.”

Culture is a naturally occurring phenomenon—every organization develops one, whether intentionally or not. Good culture doesn’t happen by accident. It must be designed and nurtured. Leaders can shape and influence culture in various ways, such as by ensuring alignment on mission, purpose, and vision; inspiring confidence in the face of challenges; and learning from past missteps.

There is a clear link between culture and business results. I believe workplace culture is an indicator of future success. For this reason, a strong culture can be a differentiator and yield a competitive advantage. According to research from FTSE Russell, companies on the Fortune “100 Best Companies to Work For” list outperformed the market by a factor of three compared to their competitors between 1998 and 2016. Over time, that’s a staggering difference.

Strong culture drives business profitability through higher employee retention, lower levels of burnout, faster innovation cycles, greater resilience to setbacks, and a higher stock return. Case in point: a group of 69 companies that researchers identified as having thriving cultures didn’t follow the 35.5% stock decline of the S&P 500 from 2007–2009. Instead, they saw an increase of 14.4%, acccording to “The Business of Corporate Culture: Part II,” a blog entry from APCO Worldwide.

Culture as a Strategic Imperative

Executives talk about culture change as a top strategic imperative, yet we see that it often isn’t prioritized. Organizations can miss the mark on transforming culture when it comes to strategic improvement and major transformation initiatives. I think one reason organizations often prioritize business process change over culture change is due to the perception that processes are more tangible and more measurable, and they directly impact efficiency and outcomes, whereas culture is seen as more intangible and difficult to manage. When leaders mistakenly discount the importance of culture, there is little doubt that it will impair overall business performance.

A culture can become toxic when it is ignored or marginalized. In the article “Toxic Culture Is Driving the Great Resignation,” published in 2022 in MIT Sloan Management Review, a toxic workplace is defined as one that lacks diversity, equity, and inclusion; where workers feel disrespected; or when there is unethical behavior within the organization.

Signs of a toxic work culture include unfair treatment and discrimination, a lack of trust and support among teams, excessive workload and unrealistic expectations, poor communications, a high level of burnout and turnover, and an absence of purpose and pride in work. There have been some high-profile examples of these types of cultures mentioned in the press. The failure of the Enron Corp. in 2001 was one of the most publicized case studies.

Steps for a Healthy Culture

A healthy culture is fundamental to a successful organization. That’s why it’s essential to proactively build the culture you want to see, rather than leaving it to chance. From a high-level perspective, I’ve found these five steps to be essential when defining and building organizational culture:

1. Building widespread acceptance that culture is more than a buzzword—it matters
2. Clearly defining and consistenly communicating the mission, values, and goals of the organization
3. Establishing robust, two-way communication channels
4. Prioritizing and investing in employee well-being
5. Continuously monitoring and improving cultural alignment

In addition, two other key focus areas are essential: authentic leadership and the use of quantitative data. It’s important for leaders to be authentic. A leader’s words and actions are always closely scrutinized. Leaders need to create an environment of psychological safety. Equally important is the discipline of

collecting and analyzing data, similar to the military’s practice of after-action reports, which helps build a learning organization that sees mistakes as opportunities for growth. Formalizing a mechanism to routinely gather anecdotal and quantitative data about your culture is critical. This feedback can help determine whether your efforts are progressing in the right direction, or alert you to issues requiring course correction. Organizations are never static, so leaders need to watch for trends, keeping their finger on the pulse of the organization. The goal is to create momentum in a positive direction.

Building a Better Culture

Building a better workplace culture is a messy business. Organizations that foster a culture that inspires innovation, dedication, and enthusiasm among employees are best

positioned to achieve sustained success. Conversely, organizations that experience major setbacks and/or fail to adapt to a changing business situation can be correlated with a toxic culture. As we’ve heard in the familiar, anonymous saying, “Culture eats strategy for breakfast.”