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Six Winning Ingredients of Corporate Culture

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SIX WINNING INGREDIENTS OF CORPORATE CULTURE

1.FOUNDING IDEA

Corporate culture is difficult to define and hard to measure. It’s what makes each company unique. But knowing what it is and capitalizing on it can make all the difference between success and failure. Culture can account for “20-30% of the differential in corporate performance when compared with ‘culturally unremarkable’ competitors,” says James L. Heskitt, a Professor Emeritus at Harvard Business School.1 In fact,

Every company starts with a spark; an idea that inspired the founder or founders to establish the enterprise. A company’s original idea is often its best, and 80% of respondents agree that a company’s biggest idea is the one upon which it was built. Whether a company is old or new, all stakeholders – both internal and external – should have the opportunity to share in its sense of purpose.

from around the world about the ingredients of corporate culture and why they are important. Our findings show there are six cultural ingredients that enrich companies and make them great organizations to do business with:

This survey suggests that the penalty for losing your culture and sense of purpose may be losing your customers or your best employees. Engaged employees are more likely to remain in an organization, leading directly to fewer hires, resulting in lower wage costs for talent – lower recruiting, hiring, and training costs – and higher productivity.

companies that succeed in developing long-term relationships prefer working with companies that clearly define what they stand for. Our latest survey, “Beyond the Brand: Why Business Decision Makers Buy Into Strong Cultures,” examined the role of emotion in business decision-making and builds on these very points. It reveals that the majority of top executives seek out longterm corporate relationships with culture-rich companies that stay true to their founding purpose, and are not shy about sharing their values with key stakeholders. But what is corporate culture? We asked 521 executives 1

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http://hbswk.hbs.edu/item/the-profit-power-of-corporate-culture

SIX WINNING INGREDIENTS OF CORPORATE CULTURE

VALUES

VISION OR MISSION STATEMENT

PROCESS AND PRACTICES

Companies change shape. They metamorphose. But they continue to draw strength from their founding idea. GE (founded in 1892), a direct descendant of Thomas Edison’s Edison General Electric Company, has become a conglomerate spanning healthcare, transportation and the power industry, but its watchword continues to be innovation.

NARRATIVE

FOUNDING IDEA

“GE was built on innovation and our structure is based on that initial idea. If we stay true to that and keep it strong, we can make sure culture flows from the idea.” - Ashutosh Banerjee, Global Chief Marketing Officer for Life Care Solutions at General Electric.

“GE was built on innovation and our structure is based on that initial idea. If we stay true to that and keep it strong, we can make sure culture flows from the idea,” says Ashutosh Banerjee, Global Chief Marketing Officer for Life Care Solutions at General Electric.

PEOPLE

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2.VISION OR MISSION STATEMENT The original business concept is the seed. Entrepreneurial drive germinates it. A sense of mission sustains it. Why a company was started therefore strongly affects why it remains in business. It’s a deeply human impulse2: remembering why we work at a company beyond our regular pay slip is likely to make us more committed to the enterprise. What is the purpose of the organization? Why is it in business? The company’s mission statement seeks to answer these questions. A mission statement is a guide to conducting business according to consistent aspirations and values. Eighty-one percent of executives feel that companies that are successful at building long-term relationships make a direct correlation between what they believe in and the way they conduct their business. However, a mission statement is of little use if it is not connected to the way a company conducts itself. It can even be a liability if the company tries to measure itself against a standard that’s almost impossible to operate by. Google has set itself a high bar with its corporate motto “Don’t be evil,” and has been criticized at certain times for

3.VALUES

not living up to this yardstick3. Its mission statement, dating from its inception in 1998, is different and equally ambitious: “to organize the world’s information and make it universally accessible and useful.4” Google, in recent years, has branched out into fresh endeavors, such as a self-driving car and a virtual-reality headset. But there’s the same urge to explore the technological frontier, fueled by data.

81

%

OF EXECUTIVES FEEL THAT COMPANIES THAT ARE SUCCESSFUL AT BUILDING LONG-TERM RELATIONSHIPS MAKE A DIRECT CORRELATION BETWEEN WHAT THEY BELIEVE IN AND THE WAY THEY CONDUCT THEIR BUSINESS.

The mission statement sustains a company and what it stands for. A company’s values are at the heart of its culture and breathe life into the mission. Founding principles are usually a few words that may be hard to translate into everyday life, but, in contrast, values apply to every action taken by the company. These values should be apparent to every employee and every business partner. When choosing a corporate partner, 59% of executives say that knowing what values a company stands for is much more important than innovation (22%) or market dominance (20%). The transparency trend extends to a company’s mission: 86% of respondents say they are sharing their company’s purpose and values with key stakeholders more than they did five years ago. It’s not surprising that this is a trend. A culture that is overloaded with information tends to make everything bland and uniform. To differentiate themselves, companies have to mine the uniqueness of their culture and then communicate it at varying levels of subtlety to their market. They have to set themselves apart if they are to be noticed by companies they want to work with.

59

%

OF EXECUTIVES SAY THAT KNOWING WHAT VALUES A COMPANY STANDS FOR IS MUCH MORE IMPORTANT THAN INNOVATION (22%) OR MARKET DOMINANCE (20%).

Sixty-five percent of the executives surveyed say subjective factors that can’t be quantified (such as company culture and corporate values) increasingly make a difference when evaluating competing business proposals.

Many self-help books are built on this premise, such as The Purpose Driven Life by Rick Warren. http://www.theatlantic.com/technology/archive/2013/10/what-is-evil-to-google/280573/ 4 http://www.google.com/about/ 2 3

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SIX WINNING INGREDIENTS OF CORPORATE CULTURE

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4.PROCESSES AND PRACTICES

5.NARRATIVE

Corporate values tend to affect not only behavior in the workplace and dealings with other organizations, but also practices and processes. Indeed, a firm’s culture is partly determined by business practices and processes. Do business decisions require many layers of approval or do managers enjoy a high degree of autonomy? Do employees work cooperatively or is the lone wolf widely admired? Whatever the answers, a strong corporate culture tends to breed confident employees.

Every company has a history, but not all build a strong story around it. They should do so for the same reason a political candidate needs a personal narrative. Voters need a reason to cast their ballot, and a narrative is something that everybody can relate to. In the same way, a narrative for a company provides a reason for working there or for doing business with it. Often, the richer the narrative, the stronger the culture.

39

%

OF EXECUTIVES SAY EMPLOYEES WHO UNDERSTAND THEIR PURPOSE ARE ABLE TO ACT INDEPENDENTLY.

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SIX WINNING INGREDIENTS OF CORPORATE CULTURE

A clear sense of purpose affects the ways in which work is carried out. For instance, when we asked executives about the effect of having a clear sense of purpose on work practices, 39% of executives say employees who understand their purpose are able to act independently. This is an attribute that generally helps companies to form strong long-term relationships with other businesses. In fact, 40% say a strong sense of purpose encourages employees to be more collaborative, both internally and externally. Poor work practices can therefore weaken relationships. When executives were asked why corporate relationships went bad, the second most important reason (after a lack of trust) is internal policies – either at an executive’s own firm or the other company – that prevented them from collaborating fully (69%).

“Humans are about our roots and we hang onto the story of our roots,” says Heidi Browning, Senior Vice President, Strategic Solutions at Pandora. She recounts the way Tim Westergren, Pandora’s CEO and cofounder, employs his storytelling skills to knit employees together.

The story starts from our humble origins to becoming a disrupter of the music industry. We understand the sacrifice Tim and the original members of Pandora made, and that’s core to believing where we’re going in the future. We’re all one team and we trust each other.” Heidi Browning, Senior Vice President, Strategic Solutions at Pandora

“The story starts from our humble origins to becoming a disrupter of the music industry. We understand the sacrifice Tim and the original members of Pandora made, and that’s core to believing where we’re going in the future. We’re all one team and we trust each other,” she says. In the survey, 68% agree with the statement that ordinary companies have lost their sense of where they came from and why. By contrast, a compelling corporate narrative binds people together. SIX WINNING INGREDIENTS OF CORPORATE CULTURE

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6.PEOPLE Employees embody the culture and drive it, but they are not the only ones. Customers, suppliers and owners do, too. All benefit from a company with a strong culture and appreciate great companies who live by it. These firms tend to do business with integrity. They inspire high levels of trust and they strive for excellence.

COMPANIES WILL ALWAYS SUCCUMB TO CHANGE

This type of energy is often directed inwardly, because people underestimate the external value of culture. They tend to focus on the internal benefits – the ability to keep people and improve performance. But culture has significant external benefits as well. So much so, that the majority of respondents (60%) in this survey say that culture is the key factor not only in deciding whom to do business with, but also how long the relationship will last.

60

%

OF RESPONDENTS IN THIS SURVEY SAY THAT CULTURE IS THE KEY FACTOR NOT ONLY IN DECIDING WHOM TO DO BUSINESS WITH, BUT ALSO HOW LONG THE RELATIONSHIP WILL LAST.

AS THEY MERGE, DIVEST AND ENTER NEW MARKETS. CUSTOMER EXPECTATIONS, COMPETITION AND CONSTANT TRANSFORMATION MEAN THAT NOTHING CAN BE TAKEN FOR GRANTED ANYMORE. 8

SIX WINNING INGREDIENTS OF CORPORATE CULTURE

SIX WINNING INGREDIENTS OF CORPORATE CULTURE

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METHODOLOGY

CONCLUSION Corporate culture is often hard to measure, but it is one of the most important factors for companies looking to conduct business. Whether it’s the founding idea, vision or mission statement, values, practices and processes or narrative, all the essential ingredients of corporate culture are more salient than ever.

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“Companies will try to hold onto what is best in their culture and continue to germinate fresh business growth from the original seeds.”

Companies will always succumb to change as they merge, divest and enter new markets. Customer expectations, competition and constant transformation mean that nothing can be taken for granted anymore.

the company: employee decision-making becomes easier, customers know what they are buying into over the long-term, and investors have a clear sense of what they are investing in.

Despite all of the transformation, companies should never lose sight of their original purpose, or the “why” of their existence. Companies must continue to germinate fresh business growth from the original seeds, and continue to conduct business according to the original values upon which the company was built.

Yes, the power of culture to lure talent and align corporate functions is imperative. But the same attributes are equally likely to make a company desirable to work with as to work for. People are a company’s biggest asset, but it’s the founding idea that creates a truly magnetic brand.

In these fast-changing, transparent times, all stakeholders – both internal and external – need to know what a company stands for from the inside out. There’s no faking it anymore. This shared sense of purpose contributes to the long-term health of

Now more than ever, culture must be clearly defined and nurtured. It’s important not only for employees, but also for the survival of your brand. And it is an absolute necessity for attracting long-term business partners for life. Without a strong corporate culture, your company will cease to exist.

SIX WINNING INGREDIENTS OF CORPORATE CULTURE

WHO TOOK THE SURVEY? The FORTUNE Knowledge Group, in collaboration with gyro, a global advertising agency, conducted a worldwide survey in June 2015 on whether a sense of purpose affects the way a company is perceived by its corporate partners and whether it has an effect on its business relationships. The overall sample comprises 521 respondents, of whom 50 work in financial services. Thirty-two percent are based in the United States, 32 percent in Europe and 36 percent in Asia. All are directors and above. They all have influence over key business decisions, with 34 percent in operations, 20 percent in sales and marketing, and 14 percent in general management. All of the financial services companies that respondents worked at have annual revenues of $500 million or more, and 20 percent have revenues of $1 billion to $5 billion.

A majority of respondents say that knowing what a company stands for is much more important than a reputation for innovation or market dominance.

RESPONDENTS:

32% based in the United States 32% based in Europe 36% based in Asia

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The FORTUNE Knowledge Group (FKG) is a custom business intelligence division of Time Inc., publisher of FORTUNE. FKG develops proprietary research and analysis on a range of issues, such as management, regulatory compliance, innovation and strategy. The views expressed by FKG do not necessarily reflect the views of FORTUNE editors.

As a global ideas shop, our mission is to create ideas that are humanly relevant. gyro is Advertising Age’s 2016 B-to-B Agency of the Year and the BMA’s 2015 and 2014 Global B-to-B Agency of the Year. Our 600 creative minds in 14 offices work with top companies, including BlackBerry, Danone, eBay, FedEx, Google, HP, Jabra, John Deere, Tate & Lyle, TD Ameritrade, Time Inc., USG and Vodafone.

gyro.com © 2016 TIME INC.

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Six Winning Ingredients of Corporate Culture  

The role of emotion in business decision-making. It reveals that the majority of top executives seek long-term corporate relationships with...

Six Winning Ingredients of Corporate Culture  

The role of emotion in business decision-making. It reveals that the majority of top executives seek long-term corporate relationships with...