Why Your Organization's Culture Is Crucial To Its Value

A candidate for the US presidency recently stated that welders earn more than philosophers and that society thusly needs more of the former.

Aside from the fact that he was dead wrong on the factual income data, he is evidently ignorant of the forces transforming value creation as well.

 In an economy increasingly  by intangibles like cultural values, and a society deeply attuned to perceptions communicated technologically, value is generated less by tangible manifestations of effort and more by the cultural, philosophical and social factors that create opportunities for innovation and success. Which is why, as the following article explains, leaders are focusing more attention on those sources of value generation. JL

Will Yacowicz reports in Inc.:

More than 50 percent of the executives said corporate culture is one of the top-three drivers of company value. 91 percent of the executives surveyed said they believe improving their company culture would increase their company's value. 84 percent of executives surveyed said that a poorly implemented culture increases the risk of employees breaking the law and/or committing unethical acts.
Your company culture differentiates your business from that of your competitors and influences the behavior and performance of your employees. But while you're immersed in it every day, you may not be fully aware of just how important it is.
A recent study of nearly a thousand CEOs and CFOs from U.S. companies casts new light on this subject. In the study, "Corporate Culture: Evidence from the Field," 91 percent of the executives surveyed said they believe improving their company culture would increase their company's value. John Graham and Campbell Harvey from Duke University and Shiva Rajgopal from Columbia Business School conducted the research.
More than 50 percent of the executives said corporate culture is one of the top-three drivers of company value, while an additional
27 percent said it is in the top five. Culture is so important, in fact, that 48 percent of survey respondents said they would walk away from a merger or acquisition if the company they were bidding on had an unappealing culture. Others said a unsatisfactory culture would cause them to lower an offer by up to 30 percent.
Culture also sets the tone for how ethically your employees behave: 84 percent of executives surveyed said that a poorly implemented culture increases the risk of employees breaking the law and/or committing unethical acts.
The researchers say their survey shows that it's essential for businesses to pay close attention to their culture if they want to cultivate a productive and innovative workforce.
"An effective culture improves firm value and profitability by fostering creativity and encouraging productivity; promoting more risk tolerance; mitigating myopic behavior; creating a climate for suggesting critiques and for allowing ideas to germinate organically; and by compensating for mistakes in ways that the firm's assets cannot," Graham, Harvey, and Rajgopal write.
With all that said, there also was one rather unfortunate revelation from the study: Only 15 percent of executives said their culture is exactly where it needs to be.