What does your company stand for?

BEYOND THE BRAND:

Why Business Decision Makers Buy Into Strong Cultures

gyro.com/beyondthebrand

IN COLLABORATION WITH

A NOTE FROM

A NOTE FROM

gyro

FORTUNE Knowledge Group

Eric Danetz

I have lost count of the number of conferences I’ve attended where people talk about changing the culture at their companies. But what exactly does “culture” mean when it comes to making an emotional connection with customers? The Merriam-Webster dictionary defines culture as “a way of thinking, behaving, or working that exists in a place or organization (such as a business).”

There is nothing more powerful than the culture of a business for establishing an emotional connection with the customer. It is more powerful than a reputation for dominance and innovation, and it is more powerful than the allure of short-term financial gain. These are the most telling facts that we discovered when reaching out to more than 500 top decision-makers.

When people talk about changing culture, they usually mean improving it and making it more remarkable. And too often these types of declarations are made only after a company has experienced a setback.

In contrast, consider some of the world’s most successful businesses.

Those on FORTUNE’s lists of Most Admired Companies and Best Companies to Work For (see p. 23) have a number of things in common, most notably a strong corporate culture. Employees aren’t the only people who benefit from such an environment; customers, vendors, and shareholders (heck, even regulators) appreciate great companies. They tend to do business with integrity. They inspire high levels of trust. They strive for excellence.

Too often company culture is discussed but not properly nurtured and elevated. Why? Because creating a successful culture is one of the most difficult tasks a company can undertake. However, frequently the solution is closer than it might seem—as this report reveals.

IN THIS REPORT, WE LOOK AT SOME OF THE WAYS IN WHICH CORPORATE CULTURE AFFECTS HOW COMPANIES DO BUSINESS—IN PARTICULAR, THE WAY THEY DEVELOP LONG—TERM RELATIONSHIPS. This builds on our 2014 report, “Only Human: The Emotional Logic of Business Decisions,” in which we quantified the important influence of emotional, situational, and cultural factors on business decisions.

Figuring prominently in those decisions is the goal of creating lasting bonds with other companies in order to enrich business and improve the bottom line. In the following pages, we examine the types of company attributes that promote confidence and lead to these important long-term relationships.

We hope this report will shed valuable light on the role of emotion and culture in the way we make business decisions.

Christoph Becker

In the age of transparency, where anyone can find out anything about any company, it’s up to businesses to safeguard their cultures.

It’s not easy.

THERE IS NOTHING HARDER THAN CULTURE BUILDING BECAUSE IT NEEDS TO BE AUTHENTIC AND IT NEEDS TO BE FOCUSED. Authenticity can be achieved by getting back to the foundations, by rebuilding from the purity of the idea that started it all.

It’s worth it. People vastly 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 huge external benefits. So much so, that the vast majority 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 builders of cultures, our own included, we know that businesses that apply an inside-out approach are the businesses that are winning.

This report offers tangible evidence and proof of this fact. Enjoy.

Christoph Becker ceo+cco gyro, the global ideas shop

Eric Danetz Publisher FORTUNE 2

BEYOND THE BRAND:

WHY BUSINESS DECISION MAKERS BUY INTO STRONG CULTURES

BEYOND THE BRAND:

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KEY FINDINGS

METHODOLOGY 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 sample comprises 521 respondents, 40% based in the United States, 40% in Europe, and 20% in Asia. All are directors and above, with 24% chief operating officers and 13% chief marketing officers. They all have influence over key business decisions, with 26% in operations and production, 18% in sales, 15% in marketing, and 13% in general management. All of the companies surveyed have annual revenues of $500 million or more, and 26% have revenues of $1 billion to $10 billion.

SENIOR EXECUTIVES INTERVIEWED: Bob Aiken CEO, Essendant Ashutosh Banerjee Chief Marketing Officer for Life Care Solutions, GE Healthcare Heidi Browning Senior Vice President, Strategic Solutions, Pandora Kate Healy Managing Director, Marketing, TD Ameritrade Institutional Patrick O’Hara Global CSO, gyro John Stackhouse Senior Vice President, Office of the CEO, Royal Bank of Canada Diane Vaccaro Chief Marketing Officer, Kmart Apparel, Sears Holdings Kreg Weigand Vice President, Internal Audit, Target

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BEYOND THE BRAND:

WHY BUSINESS DECISION MAKERS BUY INTO STRONG CULTURES

STAND FOR SOMETHING: Relationships are founded on values. 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%). Companies that succeed in developing long-term relationships prefer working with companies that clearly define what they stand for.

DIAL UP THE SOUL OF YOUR BUSINESS:

A company’s original idea is often its best.

Eighty percent of respondents agree that a company’s biggest idea is the one upon which it was built. And whether a company is old or new, all stakeholders—both internal and external—should have the opportunity to share in its sense of purpose. This survey suggests that the penalty for losing your culture and sense of purpose may be losing your customers.

LIVE BY YOUR MISSION:

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.

PUT YOUR CULTURE TO WORK:

Approximately two-fifths of respondents believe a strong sense of purpose helps a company attract better-quality employees and enables employees to act more collaboratively, both internally and externally. And the benefits extend beyond the walls of the business: 89% of respondents agree that great companies build cultures that consistently create excellent customer experiences.

SHARE YOUR GOALS:

Talk openly about aspirations and values. Eighty-six percent of respondents say they are sharing their company’s purpose and values with key stakeholders more than they did five years ago.

BE DIFFERENT (IT’S OKAY):

Culture is an important factor in building a successful long-term relationship, but when corporate ties fray, it won’t be because of cultural differences. Much more damaging is losing trust (72%) or internal policies that prevented collaboration (69%). Only 14% say culture contributed to corporate relationships going bad.

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CORPORATE CULTURE: THE DECIDING FACTOR HARD TO QUANTIFY, BUT DIFFICULT TO MISS

In the age of transparency, a strong corporate culture has become the primary driver of long-term business relationships, according to more than 500 global executives surveyed by the FORTUNE Knowledge Group in collaboration with gyro.

While companies increasingly rely on massive amounts of hard data to improve decision making, it is a remarkable truth that soft factors like a business partner’s values, mission, and message are often the most differentiating. Whether for GE, Google or TD Ameritrade, these underestimated qualities have become primary competitive advantages.

Our latest survey examining the role of emotion in business decision-making reveals that the majority of top executives seek long-term corporate relationships with culture-rich companies that stay true to their founding purpose and are not shy about sharing their values with key stakeholders.

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BEYOND THE BRAND:

Indeed, the power of culture to lure talent and align corporate functions is well known.

BUT OUR RESEARCH FINDS THAT THE SAME ATTRIBUTES ARE EQUALLY LIKELY TO MAKE A COMPANY DESIRABLE TO WORK WITH AS TO WORK FOR. These new findings build upon a groundbreaking survey conducted by the FORTUNE Knowledge Group in collaboration with gyro in 2014 entitled, “Only Human: The Emotional Logic of Business Decisions.”

It found that executives rely on intangible differentiators (such as culture or reputation) more than quantifiable differentiators as a way of judging potential business partners (see sidebar on p. 7). To dig deeper, we focused specifically on culture’s true impact on business decisions. Here are some valuable insights about this oft-undervalued part of the business equation.

WHY BUSINESS DECISION MAKERS BUY INTO STRONG CULTURES

In the age of big data, it is often assumed that the analytical and rational are the primary drivers of business decision making. Our 2014 survey, “Only Human: The Emotional Logic of business decisions,” found just the opposite. While a majority of senior business executives believe that data is an important tool when making business decisions, it is subjective factors and reputation that truly play the pivotal role.

62

%

OF EXECUTIVES SAY IT’S OFTEN NECESSARY TO RELY ON “GUT FEELINGS” AND THAT SOFT FACTORS SHOULD BE GIVEN THE SAME WEIGHT AS HARD ONES.

Sixty-five percent of the 720 executives surveyed say subjective factors that can’t be quantified increasingly make a difference when evaluating competing business proposals. In many ways the deluge of data is making it more important to emphasize intangibles. In fact, 62 percent of executives say it’s often necessary to rely on “gut feelings” and that soft factors should be given the same weight as hard ones.

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REGIONAL DISPARITIES How respondents from around the globe rated themselves compared to the survey average:

NORTH AMERICAN RESPONDENTS RATED THEMSELVES ABOVE AVERAGE AT BUILDING LONG-TERM RELATIONSHIPS COMPARED TO ASIA PACIFIC.

WHEN IT COMES TO EMOTIONS IN THE WORKPLACE, NORTH AMERICANS ARE MORE LIKELY TO REPORT THAT OVERRIDING PERSONAL FEELINGS ARE PREFERABLE.

-6

-9

%

NORTH AMERICA

EUROPEAN

+10

8

BEYOND THE BRAND:

NORTH AMERICA

ASIA PACIFIC

+7

%

European respondents place less emphasis on whether a business partner is widely admired (13% less than average) compared to those in North America and Asia Pacific (both 7% more than average).

NORTH AMERICA EUROPEAN

When it comes to emotions in the workplace, North Americans are more likely than average (+10%) to report that overriding personal feelings are preferable, while Europeans are less likely than average to prefer this approach (9% less than average).

ASIAN-PACIFIC RESPONDENTS ARE LESS LIKELY TO SHARE COMPANY VALUES THAN NORTH AMERICAN RESPONDENTS.

EUROPEAN RESPONDENTS PLACE LESS EMPHASIS ON WHETHER A BUSINESS PARTNER IS WIDELY ADMIRED.

-13%

%

%

North American respondents feel better about their ability to build long-term relationships compared to those from Europe and Asia Pacific regions (7% more than average rate themselves very good or better).

North American respondents are also sharing company values a lot more (7% more than average) than their Asia Pacific counterparts (6% less than average).

+7%

WHY BUSINESS DECISION MAKERS BUY INTO STRONG CULTURES

-6

%

ASIA PACIFIC

NORTH AMERICA

+7

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%

When comparing respondents by job title and function, CMOs rely more heavily on gut instincts for decision-making than do COOs (+13% versus -11%).

People in IT and finance are sharing their values a lot less than average (-14%).

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FOUNDING IDEA

STAND FOR SOMETHING Businesses seek out cultures they can buy into.

The choice to do business with one company over another is driven by many factors.

A corporate partner can open markets that would otherwise be closed. Its strong brand can produce a halo effect for its suppliers. But one of the most important drivers is culture, in all its complex manifestations (see below).

VISION OR MISSION STATEMENT

SIX INGREDIENTS OF CORPORATE CULTURE Corporate culture is hard to measure, but it is omnipresent. It’s what makes each company unique. Corporate culture consists of six elements:

>1 FOUNDING IDEA.

Every company starts from an idea that inspired the founder or founders to establish the enterprise.

>2 VISION OR

MISSION STATEMENT. What is the purpose of the organization?

The company’s mission statement seeks to answer this question.

>3 VALUES.

>4 PRACTICES AND

VALUES

PROCESSES.

Do decisions require many layers of approval, or do managers enjoy a high degree of autonomy? Business practices and processes help to determine, and are an expression of, a firm’s culture.

SIX INGREDIENTS OF CORPORATE CULTURE PRACTICES AND PROCESSES

>5 NARRATIVE.

Every company has a history, but not all build a strong story around it. Often, the richer the narrative, the stronger the culture.

NARRATIVE

The company’s values are at the heart of its culture. They should be apparent to every employee and every business partner.

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>6 PEOPLE.

Employees, customers, suppliers and owners embody the culture and also drive it.

WHY BUSINESS DECISION MAKERS BUY INTO STRONG CULTURES

PEOPLE

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59

%

“It is worth making short-term financial sacrifices to cultivate long-term relationships.”

- Kate Healy, Managing Director, Marketing,

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

TD Ameritrade Institutional

In this survey, we have asked what characteristics of corporate culture executives prefer when building a business relationship. Remarkably, 59% of executives say that knowing what values a company stands for is much more important in choosing a partner than innovation (22%) or market dominance (20%). Notably, 62% of companies that say they are very good at developing long-term relationships prefer to do business with companies that clearly define what they stand for.

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Ashutosh Banerjee, Chief Marketing Officer for Life Care Solutions at GE Healthcare, offers a very personal way of thinking about corporate relationships. “We always like to think of it as similar to a marriage; it’s all about mutual benefit and about being content with each other. As long as both partners see value in the relationship, it will continue, but you have to work to understand each other and communicate regularly. We immerse ourselves in the culture of our corporate partners,” he says.

Building lasting connections to other companies entails staying loyal in bad times as well as good. In the early 2000s, TD Ameritrade Institutional was regarded as the custodian for smaller financial advisers.

By continuing to support their growth when markets were difficult, TD earned important, loyal partners that have returned the favor.

“Our customers have stuck with us when we have had hiccups,” says Kate Healy, Managing Director of Marketing at the company. This mirrors survey results.

Sixty-nine percent of respondents agree that “it is worth making short-term financial sacrifices to cultivate long-term relationships.”

“We immerse ourselves in the culture of our corporate partners.”

- Ashutosh Banerjee, Chief Marketing Officer for Life Care Solutions, GE Healthcare

62

%

OF THOSE WHO ARE GOOD AT DEVELOPING LONG-TERM RELATIONSHIPS VALUE KNOWING WHAT A COMPANY STANDS FOR.

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DIAL UP THE SOUL OF YOUR BUSINESS

LIVE BY YOUR MISSION Conduct business according to your aspirations and values as a company.

Harking back to the founding idea is a key differentiator.

Building a culture may seem difficult, but going back to what a business was created to achieve can provide a solid foundation.

According to 80% of respondents, the biggest idea of a company is often the one upon which the business was built.

Healy says TD Ameritrade was able to bring in more financial advisers in challenging markets because “we have accessibility and humanness the other firms don’t have.

We realized it’s a differentiator that we could take advantage of.”

As inspiration for this idea, she cites Simon Sinek, an author who has popularized the notion that successful companies clearly know “why” they are in business. His TED talk “How great leaders inspire action” has received 23.5 million views. In it, Sinek says: “If you don’t know why you do what you do…how will you ever get people to vote for you, or buy something from you, or, more importantly, be loyal?” TD Ameritrade’s leadership team spent an entire day looking back on the evolution of the company since its founding in Omaha, Neb., in 1971 and asked: “Why do we do what we do?”

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BEYOND THE BRAND:

“We got into this business to challenge the traditional financial advice model, because we truly believe the American consumer deserves better. To meet their goals they need an adviser that is transparent, objective and puts the client’s interests first. Because of that, we have created this business to support the financial advisers that support the consumer,” says Healy.

Since its inception in 1892, GE (consistently one of FORTUNE’s Most Admired Companies — see p. 23) was built on innovation. “If we stay true to this initial idea and keep it strong, we can make sure our culture flows from the idea,” says Banerjee.

But how can a $149 billion conglomerate stay nimble? “One way is to immerse ourselves in startups’ culture,” he says, adding that GE executives regularly spend time with startup companies “to shock ourselves when we see what the outside world is doing and learn from them to see how we can adapt and improve.”

EXECUTIVES WANT TO DO BUSINESS WITH COMPANIES THAT LIVE BY THEIR VALUES. Given the fact that every culture is unique, the founding idea often represents an untapped opportunity for companies to distance themselves from the competition.

WHY BUSINESS DECISION MAKERS BUY INTO STRONG CULTURES

“Companies make choices every minute about whom they deal with, and the best ones to work with are those you are aligned with in terms of values.”

Tying day-to-day operations back to the “why” is powerful. Eighty-one percent of executives feel that what companies believe in and the way they conduct their business correlates directly with building successful long-term relationships. After all, the values that a business promotes end up governing decisions made on the ground. A company’s mission statement is the most precise articulation of those values, and there’s consensus that a strong, purpose-driven stance matters. Ninety-eight percent say having such mission statements is beneficial, and more than half of these hope “more companies will be purpose-driven in the future.” Less than 2% say it is a distraction from things that matter to the business.

“Companies make choices every minute about whom they deal with, and the best ones to work with are those you are aligned with in terms of values. It’s a good way of filtering potential corporate partners,” says John Stackhouse, Senior Vice President in the office of the CEO at RBC.

A mission statement encapsulates the reason why a company is in business and its purpose. It’s easy to lose sight of the purpose, so it pays to be reminded of it.

Some companies such as Royal Bank of Canada (RBC), however, don’t use the phrase “mission statement,” but build their navigation around purpose and vision.

“Purpose” is why an organization exists and “vision” is what they are trying to achieve.

That’s why Pandora, the streaming music service, lives by six principles (see p. 16) crafted by the founders. “People here are proud to be working at Pandora and want to share the reason why they are here,” says Heidi Browning, the company’s Senior Vice President, Strategic Solutions. “The secret is you have to live and breathe the principles; the moment the company doesn’t stand behind them, they are meaningless.”

BEYOND THE BRAND:

- John Stackhouse, Senior Vice President in the Office of the CEO at Royal Bank of Canada

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Companies can enjoy a competitive advantage when they live by their principles.

In the survey, 89% of respondents agree that great companies build cultures that create excellent customer experiences.

Diane Vaccaro, Chief Marketing Officer, Kmart Apparel, Sears Holdings says it’s useful to go back to these founding principles regularly: “It is the North Star that helps set objectives for an organization.

When we talk about transformation at Kmart, the core principles are the same, but the

language and nuances could change as the environment does.”

As Vaccaro notes, this does not mean that companies should be stuck in the past.

Patrick O’Hara, gyro’s Global Chief Strategy Officer, believes that challenging the mission statement can itself be a useful management exercise. “Disruptions come so fast that companies can’t afford to be complacent.

PANDORA’S SIX PRINCIPLES Crafted by Co-Founder Tim Westergren WE VAL UE MUS IC AND THOSE

WHO MA KE IT

WE BELIEVE IN THE POW ER OF PERS ONAL WHAT’S GOOD FOR THE LISTENER IS GOOD FOR THE ADVERTISER

We see that while the values and purpose of a company shouldn’t change, sometimes the mission might need to be reconsidered in the context of marketplace inflections and disruptions.”

In mid-2015, RBC was in the process of better articulating its corporate values as well as the purpose of the company. This had not been done at RBC before, despite its 151-year history. Why now? In part, because RBC’s leaders found that clients, employees and communities were increasingly calling for clear sense of purpose.

The new language will spotlight RBC’s strong global growth plans as well as the need to be flexible and innovative amid these rapidly changing times. “The core values are the same,” says Stackhouse. Through the process, however, the mission “becomes crystallized and strategic. The way we approach the mission is sharper because the world is changing so much.”

WE ARE ONE TEAM

WE TRUST EACH OTHER

BEYOND THE BRAND:

WHY BUSINESS DECISION MAKERS BUY INTO STRONG CULTURES

– Patrick O’Hara, Global CSO, gyro

89

%

OF RESPONDENTS AGREE THAT GREAT COMPANIES BUILD CULTURES THAT CREATE EXCELLENT CUSTOMER EXPERIENCES.

TY E POWER OF HUMILI WE BELIEVE IN TH

16 16

“While the values and purpose of a company shouldn’t change, sometimes the mission might need to be reconsidered in the context of marketplace inflections and disruptions.”

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PUT YOUR CULTURE TO WORK Purpose has operational benefits.

All stakeholders—both internal and external—should have the opportunity to share a company’s sense of purpose. In fact, 41% of respondents believe that A STRONG

SENSE OF PURPOSE HELPS A COMPANY ATTRACT BETTER QUALITY EMPLOYEES. One who firmly agrees is Kreg Weigand, who spoke in his role as a partner, Risk Advisory Services, at KPMG, before joining Target as Vice President of Internal Audit in August 2015. “If a company is not communicating its mission, then it will miss out on the next generation of rising stars, because the best people won’t want to work there,” he says. “People have to feel connected to the organization and feel that there is a larger purpose overall. If you want them to be passionate, they have to be aligned with the mission.”

This is an example of a tangible benefit derived from seemingly unquantifiable factors (see sidebar).

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MEASURING THE BENEFITS OF A STRONG CULTURE One reason why corporate culture is not paid as much attention as other factors is because it seems hard to quantify. But it is possible, as Harvard Business School Professor Emeritus James Heskett argues in

The Culture Cycle: How to Shape the Unseen Force that Transforms Performance (Pearson FT Press, 2011.)

“Organizational culture is not a soft concept,” he says. “Its impact on profit can be measured and quantified.

Culturally committed employees are more likely to remain in an organization, leading to lower hiring costs, higher productivity, stronger customer loyalty, and better sales,” he says. His research shows that, overall, up to half the difference in operating profit between companies can be attributed to strong cultures.

WHY BUSINESS DECISION MAKERS BUY INTO STRONG CULTURES

What’s more, 41% agree that a strong sense of purpose enables better internal and external collaboration. Kmart buys from a wide variety of apparel manufacturers that contribute toward its multi-billion dollar annual revenues. If they don’t collaborate closely, orders will be delivered late, and Kmart might miss fickle consumer trends.

Vaccaro says the factors that lead to good collaboration are “a culture of trust and transparency and a seriously defined purposefulness in setting objectives together.” She adds, “There are a lot of soft factors involved, but if both sides are not crystal clear on the deliverables, the relationship can go off the rails.”

Soft factors can also have an operational impact. “We have seen how gyro clients like HP, BlackBerry and John Deere are using sustainability to impact the bottom line by encouraging employees and partners to seek out better, more efficient ways to run their operations. What used to be window dressing is now part of the infrastructure,” says gyro’s O’Hara.

It has become clear that businesses are interested not only in profit, but also in purpose. THREE-FIFTHS OF RESPONDENTS

PREFER TO DO BUSINESS WITH COMPANIES THAT ARE INTENT ON DOING WHAT’S RIGHT EVEN WHEN IT DOESN’T NECESSARILY MAXIMIZE REVENUE.

BEYOND THE BRAND:

“Demonstrating a shared value and belief with customers can be a powerful driver to brand preference.”

– Bob Aiken, CEO of Essendant

“Demonstrating a shared value and belief with customers can be a powerful driver to brand preference, which ultimately drives sales,” says Bob Aiken, CEO of Essendant, the fastest and most convenient solution for workplace essentials. “Clear communication of your organization’s purpose provides a bond that increases the brand value with existing and potential customers.”

For example, the Essendant Charitable Foundation is led by a board comprised of associates from across its businesses and operating locations. “While an organization’s purpose-driven culture can be exhibited in a number of ways, the central element is that the program or service is not driven by product revenue, but is instead measured in social reward,” says Aiken.

“Essendant’s approach to purpose is driven by the passions of all of our stakeholders — including management, associates, and even customers — to ensure that the company’s contributions are authentic and beneficial to all involved.”

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SHARE YOUR GOALS All stakeholders should have the opportunity to share a company’s sense of purpose.

Companies recognize that sharing their principles can be good for business. That is why they should talk openly about their aspirations and values. This can be a source of pride. Indeed, increasing numbers of companies see the value of telling people what their business principles are. Eighty-six percent of respondents say they are sharing their company’s purpose and values with key stakeholders more than they did five years ago. COMPANIES THAT ARTICULATE THEIR

PURPOSE CAN BUILD GOODWILL IN THE MARKET AND STRENGTHEN THEIR CULTURE. The digital world demands transparency, particularly channels such as Facebook and Twitter. The immediacy and uncontrived nature of social media makes it an important tool for communicating corporate culture to external audiences. Indeed, 86% of respondents have increased their use of this medium to reach out to new collaborators.

“Social media has a huge effect on corporate culture because it allows business to be human and sometimes even adds a bit of humor to interactions with customers,” says Healy. When John Stackhouse was Editor-in-Chief of Canada’s Globe and Mail, before his current job at RBC, he observed the powerful effect social media had on the newspaper. “It is a wonderful challenger to corporate mores, especially on transparency and on speed. Companies are required to respond to the public’s concerns, questions, and challenges transparently and quickly,” he says. “If you don’t, you will be savaged.

Many organizations don’t like social media or don’t get it, but it’s a very good window on corporate culture.”

BE DIFFERENT (IT’S OKAY) Corporate culture is a powerful way for companies to differentiate themselves.

If a firm does business only with like-minded companies, it has no opportunities to learn.

Exposure helps it stay fresh by forcing the company to question its assumptions. Far from corroding a business relationship, differences can hold it together. GE’s Banerjee says: “The best way of doing that is to go out to meet different companies with different cultures to share our own purpose with them and see how we can change.”

When corporate ties fray, dissimilar cultures aren’t blamed for failure. Lack of trust (71%) or internal policies that prevented collaboration (69%) are viewed as much more damaging. Only 14% say culture contributed to significant corporate relationships going bad.

WHEN CORPORATE TIES BREAK RESPONDENTS SAY WHY RELATIONSHIPS FRAY:

“Social media has a huge effect on corporate culture because it allows business to be human and sometimes even adds a bit of humor.”

- Kate Healy, Managing Director, Marketing, TD Ameritrade Institutional

69%

INTERNAL POLICIES PREVENT COLLABORATION

71

%

LACK OF TRUST

+14

%

CULTURAL DIFFERENCES

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CONCLUSION However, it’s critical to get some things right from the start. Stackhouse says RBC’s purchase of City National Corp., a bank based in Los Angeles for $5.4 billion, “was the result of a conversation that took place between the two CEOs over the course of two years and came down to shared values.”

Conversely, it’s hard for two companies to get along if their values differ significantly: RBC’s acquisition of Centura Bank of North Carolina in 2001 failed a decade later because RBC and Centura were not aligned in terms of vision and how to get there.

The survey shows that financial headwinds and day-to-day friction are not necessarily reasons for failed business relationships.

Executives can overcome these difficulties; they are not deal breakers. In fact, an honest difference of opinion can clear the air and enhance trust. One of Pandora’s strongest relationships is with Taco Bell, which has advertised on the music service for more than four years. But it has not all been smooth sailing. “Our relationship is even stronger, and they thanked us for our honesty,” says Browning.

Business decision makers buy into strong cultures.

“A simple test to a really deep relationship is that we had bumpy moments and had to sit and talk with [Taco Bell] about our challenges, and together we solved those problems.”

- Heidi Browning, Senior Vice President, Strategic Solutions, Pandora

14

%

A SMALL PERCENTAGE SAY CULTURE CONTRIBUTED TO CORPORATE RELATIONSHIPS GOING BAD.

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At a time when trust and reputation are so highly valued yet in such short supply, companies have a responsibility to consider the best ways to develop strong corporate relationships that will last. Executives need to reprioritize their company’s most important assets to take full account of the human factors that are important for cementing long-term relationships.

Many companies pay lip service to the idea that their employees are the source of their greatest strength — but culture building goes beyond having the right talent.

Excellent employees need to be connected

by shared aspirations. Founding principles, mission statements and shared values can bind people and customers together and serve as a catalyst for long-term business success.

Executives are human. Business decisions are as much about buying into an idea as buying a product, and the most powerful idea of all is the one on which a business is built. By using this idea to establish a strong culture and share it externally, companies can attract the kind of business partners who will remain loyal for years to come.

THE ANNUAL BENCHMARK OF REPUTATION AND CULTURE: FORTUNE REVEALS THE MOST ADMIRED COMPANIES AND THE BEST COMPANIES TO WORK FOR FORTUNE’s Most Admired Companies FORTUNE’s Best Companies to Work For 2015 APPLE GOOGLE GOOGLE THE BOSTON CONSULTING GROUP BERKSHIRE HATHAWAY ACUITY AMAZON.COM SAS INSTITUTE STARBUCKS ROBERT W. BAIRD WALT DISNEY EDWARD JONES SOUTHWEST AIRLINES WEGMANS FOOD MARKETS AMERICAN EXPRESS SALESFORCE GENERAL ELECTRIC GENENTECH COCA-COLA CAMDEN PROPERTY TRUST

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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.

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