Culture’s impact on business performance is becoming increasingly evident in the business world, an article published by Forbes explored this idea by asking CEOs about their views of organisational culture and they unanimously agreed that organisational culture was especially important during and after the pandemic.
Could hybrid work, often seen as a must-have by employees, be leading us towards more siloed behaviour and a lower trust environment? What other factors of our ‘culture’ have an impact on business performance? This blog seeks to answer these questions and explore the apparent relationship between culture and performance.
The important values among organisations
With organisational culture being a broad term, it would be best to define some fundamental values/beliefs that organisations currently hold. For example, DEI (diversity, equity, and inclusion) is at the front of a lot of people’s minds and many organisations are looking to produce strategies that will help them improve their own DEI.
Psychological safety is also a big topic now, organisations are realising that employees need to feel safe to speak up and truly innovate and we see that this can work through companies like Google, giving employees a ‘20% time policy’ where employees can work on side projects; Apple who encourage employees to challenge the status quo and Amazon providing a program called ‘Working Backwards’ which encourages employees to start with the customer and work backwards.
The Agile framework is also becoming an exceedingly popular methodology to follow creating a culture that embraces agility and is willing to fail fast, adapt quickly and generally experiment much more. Spotify is known for operating in an agile manner, scaling agile practices across the entire organisation.
And finally, ethical leadership is of immense importance, especially with recent events regarding mass lay-offs in a lot of big-tech companies like Amazon, Meta, Google etc.
The impact
Keeping in order with the last section of the blog we will cover the values and impact of said values in the following order:
- DEI
- Psychological Safety
- Agility
- Ethical Leadership
Diversity, equity, and inclusion
DEI is of growing importance in the modern business world. Having a positive DEI can only help in adding more valuable input into every facet of an organisation. Cutting anyone from having an input in decision-making is just a bad idea full stop, as innovative thinking can come from anyone in the business and is not limited to the majority group within an organisation. Utilising the ideas of your employees is a large factor in what has led to organisations like Apple, Google and Amazon experiencing such huge growth due to their innovative culture and giving employees the opportunity to affect decision-making.
It is abundantly clear organisations should have DEI front of mind not only from an obvious ethical point of view but there is also a strong business case to be supporting and pushing this value within any organisation. Forbes has a great article where that highlights the clear benefits of organisations accepting and adopting a positive approach to DEI.
Psychological safety
Psychological safety is critical for allowing open communication and encouraging a collaborative and innovative approach within your organisation. When employees feel like they can speak up and share their ideas they are more likely to add value in team discussions like sharing their knowledge and engaging in constructive debate. As a result of this, organisations can yield improved decision-making and more effective problem-solving.
This concept can also positively impact, the widely measured, employee engagement and help retain employees as people within the organisation feel respected and that they are adding value to their organisation. And psychological safety does not only benefit employees but also the organisation’s customers can reap the benefits. Employees can address the customers’ needs more effectively as they can share their concerns more openly resulting in a better customer experience.
Agility
Most companies are now attempting to operate in an agile manner to remain competitive and react to their customers’ needs. But what does organisational agility entail? and are organisations practising this methodology?
Agility is the ability to learn and innovate through experimentation and optimisation and the encouragement to take risks and fail. And in this sense, psychological safety can act as a precursor to organisational agility as for these aspects to manifest, employees need to feel as though they can speak up. However, an aspect that is slightly more exclusive to organisational agility, is the ability to utilise data and technology to inform decision-making and truly drive innovation. Agility is a much more rational approach to innovation compared to psychological safety.
Operating in an agile way can increase efficiency, improve customer satisfaction, and therefore have a positive impact on business performance. Agility is a critical factor in our rapidly changing world and being able to adapt is often the make or break for most organisations as challenges need to be overcome quickly and opportunities need to be embraced entirely.
Ethical leadership
Finally, ethical leadership, this is a given in the current era with social media where any person/company can be held to account for unethical actions, and this can lead to a decrease in business performance due to a bad reputation or worse case, regulatory/legal sanctions that could more directly impact performance.
Despite ethical leadership being such a blatant and necessary characteristic of a ‘good’ leader/culture, we still see some controversy like the Facebook, now Meta, Cambridge Analytica data scandal where tens of millions of user’s privacies were breached. And the recent layoffs in big tech as mentioned earlier. These are all quite recent examples of leadership failing and deservedly receiving financial and/or social backlash.
In a more positive light, business leaders that follow ethical practices will often act as models to their employees and build an ethical company with a high-trust environment. Companies like Patagonia Inc. do this very well where they are not just greenwashing their customers, their founder, Yvon Chouinard, was very much an environmentalist and this philosophy has carried through all the way to Patagonia as we know it today. Patagonia’s acts of philanthropy in environmentalism and sustainable supply chains have given it a great reputation and, as a result, experienced greater sales numbers likely due to its ethical practices.
Conclusion
In conclusion, organisational culture has a significant impact on business performance. The importance of organisational culture is becoming increasingly evident in the business world, as seen by CEOs who unanimously agreed that organisational culture is especially important during and after the pandemic. Several values and beliefs, such as DEI, psychological safety, agility, and ethical leadership, have a positive impact on business performance. Organisations that embrace diversity, equity, and inclusion, encourage psychological safety, practice agility, and adopt ethical leadership models are more likely to have engaged and motivated employees, which in turn translates to improved decision-making, problem-solving, and ultimately, better business performance. As such, companies should focus on creating a culture that fosters these values and beliefs to achieve a high-performance workplace, which will result in long-term success.
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