Journal of Financial Economics Study: Culture Can Enhance the Bottom Line, But…

Ninety-two percent of the 1,348 North American executives surveyed believe that improving corporate culture would increase firm value. A striking 84% believe their company needs to improve its culture.

This fascinating study investigates how culture relates to business outcomes by separating culture into values (big principles) and norms (day-to-day practices). 

It provides detailed information about how executives view culture, the elements that comprise culture (values and norms), the perceived financial value of culture, how culture influences employees’ decisions, and what forces work for and against a value-enhancing culture.

The study, by John R. Graham, Finance Department, Fuqua School of Business; Jillian Grennan, Santa Clara University; Campbell R. Harvey; Duke University, Durham, NC, and Shivaram Rajgopal, Columbia Business School, rates multiple industries based on the following key cultural characteristics.

  1. Adaptability: willing to experiment, fast-moving, quick to take advantage of opportunities, taking initiative
  2. Collaboration: team-oriented, supportive, not aggressive, low levels of conflict
  3. Community: respectful of diversity, community, and the environment, inclusive, caring, and open
  4. Customer-orientation: listening to customers, being brand driven, taking pride in service
  5. Detail-orientation: paying attention to detail, being precise, emphasizing quality and safety, being analytical
  6. Integrity: high ethical standards, being honest, transparent
  7. Results-orientation: high expectations for performance, focus on achievement, competitive, demanding.

Understanding how culture can impact employee performance and business results is key to designing a meaningful employee engagement, customer loyalty or incentive program.

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