“Culture eats strategy for breakfast,” goes a popular corporate refrain.
According to a new study by consultancy Grant Thornton and Oxford Economics, it’s true: Employee collaboration, worker engagement, talent retention, and customer satisfaction—essential elements of corporate culture—have a material impact on revenue growth and stock price.
Executives who say their culture is “extremely healthy” are 1.5 times more likely to report average revenue growth of more than 15% over three years, according to the study. And executives at public companies with extremely healthy cultures were nearly 2.5 times more likely to report significant stock price increases over three years.
The report surveyed 1,000 workers from U.S. companies with revenues between $200 million and $5 billion.
So what’s a healthy corporate culture look like? One indicator is low turnover. Such companies are more likely to retain employees for more than six years on average—a rate of 45%, versus 29%. Half of employees surveyed said they would leave their jobs for a lower-paying job in exchange for a better organizational culture.
Yet management and lower-level employees don’t necessarily see eye-to-eye on what defines a company’s culture. Leaders tend to focus on office décor and amenities. Workers, in contrast, prefer job security, collegiality, trust, and work-life balance.
Exacerbating things, executives tend to overestimate employee satisfaction and underestimate employee’s abilities to do their jobs without working long hours. Almost two-thirds of executives believe the workplace environment is important to culture, but only one-third of employees agree.
The kicker? More than 9 out of 10 executives believe they’re attuned to, and working to strengthen, company culture—but 7 of 10 companies don’t have any way to measure it. And only 1 in 10 companies uses employee surveys to determine priorities.
“The focus of the conversation has been on how culture makes people feel,” said Grant Thornton executive Chris Smith in a statement. “Now we have hard facts showing significant savings.”