Cultivating Effective Corporate Cultures

By AMA Staff

Many corporations are increasingly aware that their corporate cultures affect not only their employees’ attitudes and values but also the bottom line. As a result, corporate leaders have become more interested in finding ways to mold their corporate cultures to become more powerful drivers of high performance. Yet, many are unsure how to accomplish that goal.

To gain a better understanding of the effect culture has on organizations, American Management Association (AMA) commissioned the Institute for Corporate Productivity to conduct a global study of corporate cultures in today’s organizations.

The survey not only examined the common and best practices displayed by organizations but also identified some of the factors that characterize the corporate cultures associated with high performance.

For the purposes of this study, the AMA/Institute for Corporate Productivity team melded various definitions of corporate culture into one sentence that was used as the reference point from which survey participants answered questions. That one-line statement: “Corporate culture is the shared values and beliefs that help individuals understand organizational functioning and that provide them with guides for their behavior within the organization.”

Here are some of the major findings from the AMA/Institute for Corporate Productivity Corporate Culture Survey 2008:

1. A “positive corporate culture” is associated with higher performance. The AMA/Institute for Corporate Productivity team identified eight characteristics associated with positive corporate cultures. The more that organizations displayed these characteristics, the higher they were ranked on the AMA/Institute for Corporate Productivity Culture Index. And, as it turns out, the higher the rankings on the Culture Index, the more likely it is that organizations do well in the marketplace, based on self-reports.
2. Few companies display all eight dimensions of a “positive corporate culture” to a high or very high extent. Perhaps most worrisome is the finding that only a third of the corporations see themselves as having a culture that, to a high or very high extent, fosters the best performance from their workers.
3. Having a more positive culture is related to higher productivity and better talent retention. Positive corporate cultures tend to have more engaged and satisfied workers.
4. Positive corporate cultures are associated with the greater facilitation of change initiatives. This finding flies in the face of conventional wisdom that sees a strong culture as entrenched and resistant to change. Instead, the study found the opposite—positive corporate cultures are more receptive to change and adapt quickly to meet new challenges.
5. Leadership style makes a difference. Leaders who use an empowerment style to direct employees show a significant correlation to a positive culture and market performance.
6. Most companies are mediocre or worse at developing leaders. The study found that only about a third of the organizations that participated felt their companies are good or very good at leadership development.
7. In most organizations, employees are not very familiar with the business strategy. Business strategy is one of the factors most closely associated with marketplace success, yet only 27% of participants were sure their strategy is well understood by all members of the organization. This could represent an opportunity for leaders to make sure employees understand the company’s goals and to enhance buy-in.
8. “Economic conditions” is the key outside influence named by most as influencing corporate culture. The condition of the economy is not only seen as the number one outside factor influencing today’s corporate cultures, it is also seen as the prime outside influence for the future.
9. Talent shortages are seen as becoming an increasingly important influence on corporate culture. The prospect of losing top employees as the Baby Boomer generation retires already concerns respondents. And, as more Boomers are lost, the need to replace them is expected to become a prime issue within the next decade. Respondents ranked this problem second only to the condition of the economy in its influence on the corporate cultures of the future.
10. Organizations with positive cultures are more likely to have successful mergers. Yet, it is the rare organization that successfully manages to combine two cultures into a unified culture—only 22% of respondents whose organizations had undergone a merger said they had managed to do so to a high or very high extent.
11. Success in the area of talent management, including effective corporate training programs, as well as its various strands (hiring, retention, etc.), are all significantly associated with positive corporate cultures.
12. Corporate culture is a prime factor in ethical behavior. Instilling ethics and values into the workforce is the characteristic most highly associated with the Culture Index and is the number two factor associated with market performance. These are only a few of the insights derived from this study, which also contains guidance about the strategies successful organizations are using to develop their corporate cultures. The study analyzes trends and makes forecasts about the state of corporate culture in 10 years’ time.

Generally speaking, the AMA/Institute for Corporate Productivity team believes that corporate culture is, and will continue to be, a prime influence on market performance and issues such as talent retention. The team also believes that most organizations should strive harder to create the kind of healthy, performance-based corporate cultures that will make them more competitive in the marketplaces of today and tomorrow.

About The Author(s)

American Management Association is a world leader in professional development, advancing the skills of individuals to drive business success. AMA’s approach to improving performance combines experiential learning—“learning through doing”—with opportunities for ongoing professional growth at every step of one’s career journey. AMA supports the goals of individuals and organizations through a complete range of products and services, including seminars, Webcasts and podcasts, conferences, corporate and government solutions, business books and research.