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The key role of culture in sustaining organizational performance

Human Resource Executive
Sarah Jensen Clayton and Mark Royal
Sarah Jensen Clayton is a senior client partner at Korn Ferry and global lead for Culture, Change & Communications. Mark Royal is a senior client partner at Korn Ferry who leads the annual World’s Most Admired Companies research.

Remember when companies considered unlimited snacks, casual Fridays and a foosball table in the lunchroom proof of their strong corporate culture? Everyone loves free food, but culture delves so much deeper than office perks. It’s about the shared values, beliefs and especially behaviors that serve as the backbone for how we do business. It’s the invisible threads that weave through our daily interactions and influence how decisions are made, how relationships are built and how work is approached. It’s the collective identity that shapes how employees collaborate, innovate and succeed as a team.

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And unlike a foosball table, it’s essential for success. Just ask the executives of the World’s Most Admired Companies.

Korn Ferry partners with Fortune magazine annually to identify the World’s Most Admired Companies (WMACs) and the business practices that make them both highly regarded and highly successful. Each year, we focus on an area of best practice that distinguishes the best companies from the rest. This year, it was culture.

How pivotal is culture to the success of the top global organizations? What cultural characteristics do these companies believe will be necessary to succeed in the future? And how do organizations face culture threats head-on and come out on the other side stronger than ever? The World’s Most Admired Companies have the answers.

See also: What are the Most Admired companies for HR?

The importance of culture

As most HR leaders know all too well, not all C-level executives prioritize culture. Some are too focused on short-term goals and outcomes. Others may talk the talk but resist change. Still others perceive cultural initiatives as a waste of time or lacking real impact.

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We believe culture is among the most underrated determinants for long-term success—and the data from the WMACs back this up.

In our survey of these impressive organizations, which includes companies ranking highly in the Most Admired for HR list, nearly two-thirds of WMAC executives said culture accounts for as much as 30% of their company’s market value, and one-third said it contributes 50% or more. Notably, 87% said that culture is so important that they would continue to prioritize it in an economic downturn.

With so much value and growth potential at stake, your organization has to be intentional about culture. The wrong one is as much a liability as the right one is an asset. But even companies getting it right can’t rest on their laurels. Economic pressures and recent world events threaten even the strongest cultures right now. World’s Most Admired Companies thrive in part thanks to their willingness to shift their priorities in response to the market, ensuring that their culture is aligned with, and in service of, their overall strategy.

Learn how leading organizations are developing people-centric cultures at the upcoming EPIC Conference, April 24-26 in Las Vegas. Click here to register.

Why is change to company culture so hard?

Culture is an established driver of productivity, innovation and motivation, so getting it right should be a top priority of every organization. But setting and executing new cultural priorities is tough. You can’t change culture without changing individuals, and that can require people to wrestle with some of their most deeply held beliefs, assumptions and values. And with workforces so diverse and dispersed, it isn’t always easy to create alignment around a singular vision.

Mark Royal, Korn Ferry
Co-author Mark Royal, Korn Ferry

Finally, let’s not forget the eternal challenge of overcoming organizational inertia. Disruption is hard! It requires leaders to consistently invest the resources to reinforce the right messages over and over again. Many organizations talk the talk when it comes to culture, but the WMACs walk the walk. And their results show that it’s worth it.

Emerging cultural priorities of the WMACs

In our survey of over 500 senior executives from companies participating in the World’s Most Admired Companies rankings, we discovered their organizations’ top cultural priorities, now and for the future. Today’s priorities are different from tomorrow’s. In the future, WMACs will continue to be focused on outcomes but with increased focus on how culture can help accelerate progress. In this period of rapid disruption, top companies understand that culture can’t be static. Almost half (49%) of WMAC executives indicate that changing market conditions are necessitating changes to corporate culture.

See also: Why an inclusive, sustainable culture is the biggest driver of performance

They know they need to evolve to win. Here are the top three cultural characteristics and priorities that the World’s Most Admired Companies believe will be necessary to succeed in the future.

1. Learning & development

When the WMAC were asked about their current cultural priorities, the fifth most-cited answer was learning and development, with customer focus and accountability No. 1 and No. 2 on the list. Intriguingly, when looking toward the future, learning emerged as the unequivocal No. 1 priority.

In the face of so much uncertainty and disruption, the top organizations know that even if their teams have the skills they need to succeed today, they might not have what they need to get ahead tomorrow. In tough economic times, when people are being asked to do more with either fewer or the same number of resources, learning and development goes a long way to ease the strain. It shows teams you value them, even if you can’t give them big bonuses or pay raises right now, which helps attract and retain talent. Creating learning opportunities grows and empowers leaders at all levels. And learning fires up the synapses and helps the brain make new connections—turning regular learners into agile thinkers.

Yet, it’s not all about courses or training. A learning culture is more about creating the conditions where learning can happen every day—and that has to do with providing psychological safety, encouraging a growth mindset and creating an atmosphere where people can make mistakes and learn from them. This is an area of opportunity for many organizations and a place where WMACs shine.

2. Customer orientation

It’s unusual to find a business that doesn’t say it puts its customers first. But how well is your organization looking after clients in practice? If your sales and customer feedback scores aren’t as strong as you like, it might be time for a cultural shift to consciously focus on winning over clients.

The World’s Most Admired Companies tend to embrace an employee-first focus, knowing that customer care will naturally follow. In this way, a culture of learning and development supports strong customer relationships. Some also make customer focus a KPI, putting the systems, structures and leadership in place to make hitting that goal achievable. Combining the KPI with clear support from leaders can transform a product-focused business to a client-centric one.

3. Collaboration

Nearly a third of the WMAC executives agree that, whether virtual or in person, collaboration is the behavior that will have the biggest impact on business performance in the future. When times are tough, it’s the teams that stick together and benefit from each other’s skills that get the best results.

But collaboration doesn’t come naturally at all organizations, and even many of those that were nailing it before the pandemic noticed a change as their workforce moved to hybrid or remote.

To get the balance right, the word we heard most from the World’s Most Admired Companies was “intentional.” When done right, collaboration will fuel innovation and growth. To leverage collaboration to ignite their culture, WMACs watch for it and reward it. They leverage the online collaboration tools that came out of the pandemic to encourage collaboration, especially among team members whose location or lack of seniority might have previously kept them out of meetings. And they test their collaboration methods and policies and adapt where necessary.

Sarah Jensen Clayton, Korn Ferry
Co-author Sarah Jensen Clayton, Korn Ferry

DHL Group, No. 1 in the Most Admired for HR rankings, recognizes that with intentional collaboration, any team can be greater than the sum of the people inside it. Oscar de Bok, CEO of DHL Supply Chain, notes: “Our CEO awards always have an element of collaboration. That drives the right behaviors.”

Key steps for company culture change and evolution

The last few years have forever changed the landscape of culture. Current market conditions are forcing a shift, and it’s more important than ever to get it right. Your culture could be the secret to your market success.

If you are ready to unlock the potential of culture in your organization, here is a suggested plan of action.

  • Define a clear vision. Gain alignment on the culture you need for the future to support your business and talent objectives.
  • Gather data: Assess the culture you have currently against the culture you want to get precise on the gaps.
  • Generate a movement. Create a sustained campaign led by a dedicated group of people to mobilize resources and accelerate change. Research shows that if you can get to the tipping point with 10% of people adopting new beliefs and/or behaviors, they are likely to be widely adopted.
  • Determine your culture accelerators. Identify ways to shift mindsets and behaviors through changes in communications, training, processes and practices as you build your roadmap. Supporting structures and systems help ensure that new norms are codified.
  • Reinforce with communications. Highlight “aha” moments with provocative storytelling.
  • Capture success. Determine the KPIs that best tell the story of your cultural evolution.

Culture change doesn’t happen overnight, but with focus in these areas it can be accelerated—with the power to help organizations overcome tough challenges and create sustained competitive advantage.