How is company’s culture linked to performance

Both organization culture and performance are very important and are vital for a company’s liveliness and success.

“If culture comes first, performance will follow,”

-Dan Pontefract, Forbes

Executives, managers and employees value a company’s culture as important. In the PWC’s Global Culture Survey 66% of C-suite executives and board members believe culture is more important to performance than the organization’s strategy or operating model. And how do employees think? In Eagle Hill Consulting’s Workplace Culture Survey 77% of employees reported that culture influences much of their job – performance, productivity and efficiency. And the survey of the Institute of Corporate Productivity in 2019 shows the practice that a healthy culture in high performance organizations brings out the best performance in employees 3.5x more than in low performance organizations. 

Company’s values and mission

Well communicated and strong culture brings clarity of company’s goals, a shared vision, and a clear mission. It shows and maintains direction to common beliefs, results and success. And the performance can be divided in two bigger categories – financial and non cost based.

According to PWC’s Global Culture Survey those who say they have a distinctive culture are 48% more likely to reach revenue, 80% more likely to gain employee satisfaction and 89% more likely to reach customer satisfaction.

The Gallup’s survey shows that a 10% improvement in employee’s relations with an organization’s mission and purpose is able to reduce turnovers for 8,1% and increase profitability for 4,4%. Researcher Dermol on his study found that the company’s mission and it’s introduction increased the organization’s performance by 50%. As we can see the reminder from time to time plays an important role here.

Clarity and transparency of the company’s values and mission motivate the firm’s employees in all levels to work toward certain goals and find meaning in their work they do daily.

Read more: Qualities of great organizational culture

Organization’s culture impacts work performance

Many researchers have examined the existence of a relationship between an organization’s culture and performance. Oberföll, Adame and Garcia found that these specific organization’s culture elements: structure, values, conflict resolution have an impact on elements of performance: financial performance, innovation, market share, quality and employee satisfaction. According to Kotter and Haskett, a distinctive culture that is concentrated on customers, associates, managers and owners has the ability to increase a company’s profit.

It’s interesting to compare which dimensions are chosen to measure the culture’s impact on performance in various studies.

Berg and Wilderom named the factors that help to measure impact of organizational culture on its performance: employee empowerment, external emphasis, interdepartmental collaboration, human resource orientation and the performance  improvement tendency. 

AlShehhi, AlZaabi et al., used certain identifiers in their study to research the correlation. For organization culture they choose goal achievements, employee engagement, adaptive orientation, team spirit, innovation-supportive orientation, integration, reward orientation. And for performance they choose financial, customer, job satisfaction, quality achievement and internal business process factors. The study shows that employee engagement from culture’s identifiers have the closest correlation with financial performance and quality achievement.

Summary

A whole and rich research field and companies practice have shown the impact of an organization’s culture on its performance. Strong and positive culture unites employees and managers for work toward certain goals. M. Valentina and P. Ileana gave a glorifying statement: “When a company has a strong culture, it can save the consequences of an unfavorable economic or social environment.”

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