Culture is everything. Gapingvoid’s new CEO Report has uncovered something most of us already knew—CEOs who focus their energies on high-purpose cultures succeed on many levels. We found cultures nurtured by the best CEOs lead to:
- Engaged and loyal employees
- Enthusiastic customers
- Innovative processes, products and/or services
- Above-market-average financial returns
- Greater personal compensation
- Extensive, Positive Media recognition
Our new report “Culture as a Management System: How CEOs Who Lead High-Purpose Organizational Cultures Deliver Remarkable Business Performance” draws on Gapingvoid’s work with clients like AT&T, Microsoft, The U.S. Air Force, and Zappos, building on our own compiled data with proprietary analyses along with respected third-party studies.
We developed this study because we realized that although the conclusion that workforce engagement significantly predicts organizational financial return on assets, net margin, and customer satisfaction had been proven, no one had actually gone on to explore whether the CEOs who help drive these high levels of positive culture are rewarded with personal success. So we conducted the research.
Our report shows the answer is YES. Gapingvoid’s research team found CEOs who adopt well-executed organizational cultures drive value creation, influence, status and increase their personal income.
Here are some of the most significant findings from our study:
- The Best Talent Wants to Work for High-Purpose CEOs. The most successful CEOs recognize the value in cultivating a meaningful work environment where employees feel valued. Employees’ perception about their work matters, and it shows in the bottom line. Culture is frequently viewed as too “soft” to warrant concern. However, CEOs who focus on purposeful culture increase the workforce’s ability to produce extraordinary, sustainable results.
- Employees Stick With High-Purpose Cultures. Companies with high-purpose cultures have employee turnover rates of about 50% better than industry competitors. With average costs of turnover estimated at 90% to 200% of the exiting employee’s base salary, lower turnover rates result in significant cost savings, as well as knowledge retention. Low turnover maintains knowledge in the organization in addition to the cost savings mentioned above.
- High-Purpose Culture Organizations Show Higher Financial Returns. The CEOs of the best high-purpose culture companies command revenue growth of an average of 10.5% YoY while the worst suffer revenue declines at an unsustainable average of -4.4%. This is a 15 percentage-point difference.
- High-Purpose Cultures Enhance Share Performance. These companies averaged stock returns of 11.5% annually over a 17-year period, compared to a market average of 6.4%.
- CEOs Valuing Culture Make More. The CEOs analyzed who instill and oversee high-purpose cultures earned total compensation of about .16% of company revenues, while CEOs from companies with poor culture scores, overseeing low-purpose cultures, earned about .07% of total revenues.
- The Media Loves Culture-centric CEOs. The best-rated CEOs are “loved” by traditional media. Research shows they receive both more coverage and more favorable coverage in media channels with broad reach.
- High-Purpose Culture is a Competitive Advantage. This finding is backed by leaders who’ve ‘walked the walk.’ In the words of Louis Gerstner*, the former Chairman and CEO of IBM responsible for its celebrated turnaround, “Until I came to IBM, I probably would have told you that culture was just one among several important elements in any organization’s makeup and success – along with vision, strategy, marketing, financials, and the like. I came to see, in my time at IBM, that culture isn’t just one aspect of the game; it is the game. In the end, an organization is nothing more than the collective capacity of its people to create value.”
You’ve Got to Put Values Into Practice
Gerstner’s words sum up Gapingvoid’s research and our approach. To succeed over the long-term, culture needs to be the driving force behind all aspects of corporate management. Companies must do more than print mission statements and lists of core values; consistent initiatives must put these values into practice. Otherwise, they’re just platitudes.
We all know “honesty” and “integrity” are important, but what truly matters is that leadership does the work to build cultures that live these values at every level on a daily basis.
The wisdom of IBM’s CEO reflects another key finding from our CEO Study—Companies with High-Purpose Culture are More Innovative. And, as we know from real-world examples like Blockbuster and Netflix, survival and success rely on innovation.
Our CEO report found companies with higher levels of trust in leadership—backed by a greater willingness to hear input from all levels of the corporate hierarchy—are the ones that support innovation by forgiving honest mistakes, involving employees in decisions, increasing cooperation, and demonstrating appreciation for the extra effort.
These recommendations may sound basic, but successful leaders like LinkedIn’s Jeff Weiner, Enterprise Holdings’ Pam Nicolson and others featured in our report will tell you they take a lot of work to achieve.
*From Gerstner’s book, Who Says Elephants Can’t Dance.
By Jason Korman CEO Gapingvoid Culture Design Group