Richard Barrett in his book, The Values-Driven Organization: Unleashing Human Potential for Performance and Profit states that corporate culture has a profound impact on corporate profitability. For many businesses, the biggest threat to profitability is cultural entropy, “the amount of energy that is consumed in doing unnecessary or unproductive work-the amount of conflict, friction and frustration that employees encounter in their day to day activities.”* (Barrett, p. 21) When employees spend a significant amount of time on non-productive activities, the bottom line suffers.
One form of cultural entropy, employee disengagement, robs organizations of their KEY resource – the effort necessary to produce and deliver their product or service. A disengaged employee expends only the minimum amount of energy to get by. A recent Gallup survey found that only 29% of employees in the United States are actively engaged in their work. The annual cost of employee disengagement for U.S. companies is $17,500 per employee. (Barrett, p. 22)
Corporate culture has a profound impact on a company’s financial performance. The top 40 best companies in the U.S. to work are four times more profitable than the S&P 500. The list of top 40 best companies to work for was compiled not by measuring pay, benefits and perks, but by (1) trust and (2) corporate culture (Barrett, p. 25).
Investing in building and maintaining a healthy corporate culture not only pays off with improved financial performance, it significantly improves employee retention and productivity. Peter Drucker summarized it well when he said, “Culture eats strategy for breakfast.”
Improvement of corporate culture flows out of the ordinary interpersonal interactions of everyday life. RightPath suggests three strategies that leaders can use to improve corporate culture.
- Intentionally build trust on teams. Trust requires more than honesty and keeping promises. Great leaders build trust by avoiding micromanagement, admitting mistakes, seeking the wisdom of others and spending time building relationships.
- Develop emotional intelligence. When leaders let their emotions get the best of them or fail to read the emotions of others, they are at a significant disadvantage. By reading the emotions of others and responding appropriately, leaders profoundly improve working relationships.
- Invest in professional development. Not only does professional development enable employees to excel, it also communicates that they are valued by the company.