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Does Workplace Culture Drive Business Performance?

Can having the right culture cause your organization to succeed and improve?

Maybe. We know that aspects of workplace culture are correlated with indicators of business success.

But then again, it could be the other way around.

It’s possible that organizations first experience success, and then see changes in culture as a result. Or it could be something even more complicated. Which one is it? How can we tell the difference? A recent study—one of the first of its kind—followed 95 sales franchises across 6 years. Their results provide us with some very useful insights.  

How do we know if workplace culture causes success?

It’s probably not possible (or ethical) for researchers to do true experiments. In other words, we can’t just randomly assign different workplace cultures to different business units, then see what happens as a result. What we can do instead is follow different organizations and their workgroups over time. (These repeated measurements allow for something called a “cross-lagged panel analysis.”) Now we know what changes, and when. Which comes first: changes in culture or changes in business success? The results of this research suggest that changes in culture almost always come first. Increased business success happens a bit later.

How does workplace culture lead to success?

The researchers identified 4 areas of workplace culture that contribute to success further down the line:

  • Mission—Having a clear strategic direction and goals
  • Employee involvement—Promoting empowerment, cooperation, learning and development
  • Consistency—Having a clear set of values that are known and shared across the organization
  • Adaptability—Focusing on learning from competitors and customers, and adapting responses and strategy as a result
When these areas improved within a business unit, success was soon to follow.

And they found something that makes this even more interesting.

Changes in culture led to greater success because of customer satisfaction. First the workplace culture changed, then customers were happy, and then sales increased. Besides, compliance hotline was helpful, too. Of course, the results of this study can’t generalize to every organization and industry. But knowing how to really test these ideas is a step in the right direction.
Image credits: Ingrid Taylar, Don DeBold