EDITORIAL: CULTURE AND THE BOTTOM LINE

We’re all aware of the importance of having a strong and positive culture in an organisation, and the importance of tone from the top. As leaders work to maintain resilience in hybrid and fast-changing working conditions, the increased sense of purpose, inclusion, and collaboration that culture nurtures matters more than ever, but it also influences the bottom line.

In a recent survey, Heidrick & Struggles surveyed 500 CEOs at large companies to ask how they define culture and financial performance. The survey showed that 82 per cent of CEOs said they had made culture a key priority over the past three years, often to improve financial performance. But, when asked about the most significant drivers of financial performance, 74 per cent picked alternatives to culture, most often strategy and leadership.

A small group of CEOs (54 or 11 per cent) of the total survey said culture is a top-three driver of their financial performance and that it’s important to link culture to strategy to ensure a positive effect on financial performance, and that they have focused on culture-shaping as a priority over the past three years.

Heidrick & Struggles found the financial performance of the companies led by these CEOs had financial performance (measured by the compound annual growth rate over three years) more than doubled that of other companies in the survey, 9.1 per cent as opposed to 4.1 per cent.

Coupled with other notable differences described in the report, the data suggests that these CEOs are far more consciously intentional about culture than other leaders. They are purposeful in acting on their belief that culture makes a difference in financial performance and start with a direct link between culture and strategy. 

They then focus on building broad engagement by putting people first to ensure that culture has a positive effect on performance.