Corporate Culture Is Fake News?
Discover the surprising truth behind the claims that productivity and culture are linked.
At its core, this is intuitive. Of course, your workplace culture affects productivity. After all, your business is made up of people, and their actions determine the success or lack thereof of whatever you’re building. But stopping there, with a common trade trope is a lazy assumption that should be backed up by facts.
And is it backed up by facts?
Does Science Back Up These Claims?
Well, perhaps not. Just because a common sense belief is held by the majority does not make it true necessarily. We have to dig deeper than that.
And I say ‘we’ on purpose here. I’ve spent my career striving to empower business leaders with the knowledge, tools, and inspiration they need to build exceptional organizations. These leaders need to recruit brilliant minds, cultivate a hyper productive culture, and build something that fulfils and retains those exceptional people.
I’ve drunk the Kool-Aid. I’ve fully bought into the ‘power of corporate culture’ rhetoric. It’s considered universal wisdom in my profession, something that forms the foundation of everything we do. So I’ve never thought to scratch under the surface.
That is until now.
In this article, we’ll investigate the science linking productivity and culture in order to answer the question: ‘Should leaders invest in corporate culture or not?’.
Spoiler alert – it might not be what you expect.
The Tenuous Link Between Culture and Performance
Two researchers from San Diego State University, Shifei Chung and Kamal Haddad, tackled this question with some scepticism in a research paper called ‘Corporate Culture and Performance’ and made the astute observation that while the “literature recognizes the impact of corporate culture on performance, such findings are either speculative or mostly based on US companies.”
Another alarm bell should sound when Siew Kim Jean Lee and Kevin Yu wrote in the Journal of Managerial Psychology that “While many culture researchers have devoted numerous articles to the nature and definitions of culture, relatively fewer articles have contributed towards culture and performance research.”
John P. Kotter, in his book Corporate Culture and Performance, shows a chart where dozens of companies are plotted on a scatter diagram. One axis is Culture Strength and the other Annual market value growth. It looks much like a murmuration of starlings.
He remarked: “We can conclude from this study that there is a positive relationship between the strength of corporate culture and long-term economic performance, but it is a modest relationship. The statement ‘strong cultures create excellent performance’ appears to be plain wrong.”
It seems that the connection between corporate culture and performance is much more tenuous than we might have expected.Would you like to hire twice as fast, double retention and half costs? Here's how!
Corporate Culture Peddlers
Where do we go from here? What about all those experts that told us how important corporate culture was for improving performance?
As it turns out Kotter goes on to describe some of the misattribution here. When he looks for reasons why organisations with strong cultures score display weak performances, he draws the extinction that a strong culture doesn’t necessarily mean an effective one.
His key example is that one from tyre manufacturer, Goodyear: “The centralised and bureaucratic behaviour in Goodyear’s culture had been identified by its own CEO as a major reason why the company’s performance has been disappointing”.
It’s clear that we associate strong corporate culture with success because we only have positive connotations associated with the idea. But Kotter is very clear in saying that “the cultural drummer can lead a firm into decline as well as success”.
This sentiment points to something that looks obvious in hindsight. A strong corporate culture is but one component of a complicated mix of interrelated effects that impact on company performance.
It’s Complicated
Whenever we try to tie causality down to one variable, we’re going to find ourselves in trouble. As we’ve discussed above, elevating corporate culture to a level of importance all on its own seems to be a mistake.
Bernard Lim, in his paper entitled ‘Examining the organizational culture and organizational performance link’, does a great job in illustrating the muddy waters here by showing how difficult it really is to attribute success to something like culture. The concept itself is somewhat vague and difficult to pin down. In addition, it's perhaps naïve to suggest that one consistent culture exists throughout a whole organization. Lim writes eloquently about sub-cultures, where different parts of an organization develop their own way of doing things based on the various incentives that they face.
Just by suggesting that corporate culture can drive business performance, you are implicitly making the assumption that you, as a leader, have control over the culture and can craft one designed for productivity. This is a delusion, and we need to stare the facts in the face here – a business is a complex system of moving parts. We cannot reduce our assessments to consider only one piece of the puzzle.
So what do we do with this?
Ok. So, once we’ve processed the fact that corporate culture might not be the be all and end all – how do we move forward? How do we drive productivity within our organization?
We have to accept the nuance that we’re faced with. Running a successful company requires a vast collection of different components. It needs the right incentives, the right market positioning, effective distribution, the required capital, regulatory oversight, and a thousand other things.
Corporate culture, as we’ve discussed, can be of instrumental value for a lot of what we care about. When you get it right, it can be a driving force for employees – keeping them going even when times are tough. So, it's a concept we should keep. But your productivity is not solely dependent on good culture. All the bean bag chairs in the world are not going to save a business that is misaligned with its customers. Friday drinks are just a band-aid if the rest of the week unfolds in a chaotic fashion.
Don’t let talking about corporate culture become a crutch for you and your organization. Don’t let it become a distraction that gets in the way of you doing the real work you need to be doing. Keep it in the proper perspective, and you’ll be in a much better position to adapt to changing market circumstances, innovate on your current offerings, and deliver exceptional value to your stakeholders.
Don’t fall for the ‘fake news’. Stick to the facts.
