INDUSTRY INSIGHTThought Leadership

The role of culture transformation in driving business performance

An organization’s culture can be the single, most important factor in determining its success. In this four-step journey, Heidrick & Struggles highlights how to nurture a culture of winning throughout your organization and among employees

Every organization has its own culture, crafted by behaviors and values that define how things get done. An organization’s culture is shaped by both its formal and informal rules of engagement. In today’s fast paced environment, there is a constant and pressing need for competitive edge in leaders, teams, strategies and overall performance.

Culture, if shaped to act as an enabler, can be a company’s strongest differentiator. In addition to boosting a firm’s attractiveness as an employer, culture has strong links to financial performance and is a key driver in achieving many business goals. Heidrick & Struggles’ research with the GPCA showed that member organizations displayed a strong culture of purpose, something that is a vital ingredient to business success.

Figure 1: Key Findings of Heidrick & Struggles Culture Impact Survey on Culture Clients

“In addition to boosting a firm’s attractiveness as an employer, culture has strong links to financial performance and is a key driver in achieving many business goals.”

Research has shown that culture matters, it can drive organizational benefits that are both measurable and considerable. After undergoing work around culture, Piedmont Natural Gas, for example, saw a 100% increase in their market capitalization. Other companies saw a 45% increase and revenue and a 145% increase in EBITDA. Work carried out by another survey participant, UK Power Networks, resulted in a 40% improvement in reliability, while the bond rating of Methodist Le Bonheur Healthcare went up to A+ from BBB previously.

The most successful companies have thriving and high performing cultures. Working intentionally and strategically towards shaping a cultural transformation is a complex journey, not a “one time thing”. The commitment starts from the top and requires time to be properly ingrained and disseminated throughout the organization. It requires a personal commitment by the organization’s leaders and needs energy and momentum to ensure this commitment spreads to the rest of the organization. If not executed properly, many well intentioned attempts at culture transformation simply end up fizzling, lacking the necessary support to create impact and most of all to uphold sustainability.

To avoid such a failed attempt, we believe the following four principles of shaping culture are at the core of any successful and sustainable culture transformation.

  1. Purposeful leadership

Change starts at the top. Leaders must define a very focused and compelling purpose for the transformation, reasons that resonate with them personally as well as those focused on business rationale and an alignment with company strategy. Leaders are the owners of the culture transformation process and as such. CEO and other senior stakeholders should embody and display the behaviors, the values and the change that they want to see ingrained within the rest of the organization. The organization will evolve to shadow its leaders, so it is important, therefore, that leaders cast a large shadow.

  1. Personal change

No culture change is successful without individuals, particularly leaders, within the organization committing to personal change. An intentional dedication to breaking old habits and investing in the institutionalization of new mindsets is at the core of any successful cultural transformation. In order to evoke such a sense of commitment, however, the company needs to ensure that there is a clear understanding of the desired cultural journey; what is our culture now and what do we want it to look like? Only through this can individuals make a real connection with the culture change process and only in this way does the change start to properly grow roots within the organization.

  1. Broad engagement

As mentioned, change starts at the top, however, it should not end there. The energy, commitment and momentum of the culture transformation must be carried through to the wider organization. With the support of the CEO and other senior leaders, HR should execute an integrated process that emphasizes the desired principals, habits, learnings and measures culture changes across the organization. The faster the entire organization is brought into the culture transformation, the more likely it is to succeed. The process should quickly trickle down from c-level to senior leaders to all echelons of the organization. In order for this to happen, there should be a visible, committed and active group of “culture champions” including senior leaders as well as employees from the wider company. These individuals understand, live and act the culture, and will ensure they communicate it to the rest of the organization in order to give the culture transformation a stronger chance at sticking.

  1. Focused sustainability

There needs to be a visible application of the culture, in order to reinforce its existence and in order to create a true sense of accountability around upholding it. Results that can be measured and associated rewards and penalties are one such way of reinforcing the presence of the culture. Ongoing training, coaching and feedback are key to ensuring long term sustainability of the ever developing culture journey. The organizations systems and practices, not only within HR, need to adapt to ensure they are supporting a constant movement towards the desired cultural state and reinforcing the associated behaviors and mindsets.

A strategic, dedicated and sustained commitment to culture can have a massive positive impact on business performance. Companies with strong cultures are outperforming their competitors in key areas ranging from revenue growth to employment growth. With that in mind, underestimating the importance of culture is a slippery slope and organizations can run the risk of losing competitive edge. The most forward thinking leaders of today have become more and more aware that culture matters. Leaders of those organizations that have thriving and high performing cultures are those who have fully understood that culture can be the most powerful tool in driving a company to achieve its business goals, ensuring it continuously adapts, grows and of course, sets itself apart from its competitors.

“Companies with strong cultures outperform their competitors in key areas ranging from revenue growth to employment growth.”