Company culture matters more now than ever. The average employee spends 40 percent of their waking hours at work. A toxic corporate culture can not only be soul destroying, but it can sink a company. On the other hand, a vibrant culture can help people thrive professionally, enjoy their job, and find meaning in their work. A growing body of research has shown that a good corporate culture can lead to better financial performance, more innovation, and greater customer satisfaction.
A recent survey of CEOs and CFOs found that 9 out of 10 believe that improving corporate culture would increase their company’s value, and nearly 80 percent ranked culture among the five most important factors driving their company’s valuation. Companies listed among the best places to work based on their corporate culture delivered nearly 20 percent higher returns to shareholders than comparable companies over a five-year period. And, according to Glassdoor data, company culture is among the top factors that job seekers consider as part of their job search.
But what exactly is “culture”? Culture has often been an arbitrary term measured on a binary good or bad scale, with no clear guidelines on what makes a culture “good” and “healthy” or “bad” and “toxic.”
A few years ago, we set out to change this. We wanted to create a more precise definition of culture, quantify its effect on bottom-line performance, and compare the corporate cultures of more than 500 companies driving the U.S. economy. (The result is an interactive tool, the Culture 500, in partnership with Glassdoor and MIT Sloan Management Review.)
First, to create a more precise definition of corporate culture, we were guided by the definition put forth by Charles O’Reilly and Jennifer Chatman, who define organizational culture as “a set of norms and values that are widely shared and strongly held throughout the organization.” We then mined the official statements from large companies in which they list specific values of their corporate culture, such as integrity, customer-centricity, or respect, that together defined the culture the company aspired to achieve. In this exercise, we identified more than 60 distinct values that companies listed in their corporate values statements, and narrowed down the values to the nine that were cited most frequently by companies.
These values, which we call the Big Nine, are as follows:
- Agility: Employees can respond quickly and effectively to changes in the marketplace and nimble seize new opportunities.
- Collaboration: Employees work well together within their team and across different parts of the organization.
- Customer-centric: Employees put customers at the center of everything they do, listening to them and prioritizing their needs.
- Diversity: Company promotes a diverse and inclusive workplace where no one is disadvantaged because of their gender, race, ethnicity, sexual orientation, religion, or nationality.
- Execution: Employees are empowered to act, have the resources they need, adhere to process discipline, and are held accountable for results.
- Innovation: Company pioneers novel products, services, technologies, or ways of working.
- Integrity: Employees consistently act in an honest and ethical manner.
- Performance: Company rewards results through compensation, informal recognition, and promotions, and deals effectively with underperforming employees.
- Respect: Employees demonstrate consideration and courtesy for others, and treat each other with dignity.
Some cultures excel across all dimensions. Facebook, for instance, scores in the top quartile in its industry across eight of the nine dimensions. A higher percentage of Nvidia employees say that agility, innovation, and performance are going well in their company than at any of the other 500 leading companies we measured: a truly remarkable accomplishment.
However, these are exceptions to the rule; normally, there are tradeoffs in culture. But a company does not have to excel across all nine dimensions to be successful. Companies can strategically choose a handful of values to focus on, based on their circumstances. For instance, Levi Strauss has built an industry-leading culture around respect and integrity in a space where those qualities are seldom realized.
Now that technology exists to measure culture with accuracy and precision using the language of employees in Glassdoor reviews, human resource professionals, managers, and executive leaders are able to take an audit of these nine dimensions in their company culture, and measure culture just like other important metrics in their company. They can tune in to feedback on whether the values they’ve defined as important to the corporate culture are also the norms that guide employee behavior, and pinpoint ways to improve their culture.
Our hope is that by making this new measure of corporate culture available, not only will this lead to a happier, more vibrant workplace, but also that it will measurably add value to company bottom lines and help executives boost their company’s overall performance.