These days, it is popular to explain the success or failure of companies everywhere with the simple statement “It’s their company culture!”  It’s an attractive and logical explanation. A strong corporate culture is hailed as the key to winning in a competitive marketplace; a weak one, the death knell. While the explanation is easy, the topic of culture is complex. We all think we know what we mean when we use the term, but do we? 

While we can begin to describe a company’s culture as ‘based on how things are done and the values they profess, a culture’s real essence is in the unconscious thoughts that drive employees’ decisions and behaviors each day.  These thoughts are based on employee contracts, the terms of which employees apply to solve internal and external challenges over time. This success serves to validate the assumptions and eventually results in a collective understanding of the right way to think, feel, act, and interpret the business world.

The terms of the employee contract (the hiring agreement), then, is the first element in the employee experience of company culture, how employees see themselves as part of the organization, how they relate to peers and customers, how they interact with authority, approach problem-solving, how they understand the business overall, make strategic decisions, describe their company’s purpose and more. 

The strength of a culture must be evaluated in relationship to the employee contract which defines it: in each company’s situation, there may be contract elements well-suited to achieving success in its current and expected future business environment, and others that are not. When leaders suspect that a part of their culture is becoming mal-adapted to overcoming the challenges they face, they must act to improve it, beginning with the initial agreement.

In a recent survey across four countries, Dale Carnegie & Associates set out to examine the perceptions of senior leaders on the strength of their own company cultures, their attitudes about its importance and impact, and actions they are taking to improve it. While studies of corporate culture are not uncommon, they often encompass employees at all levels in an organization. Dale Carnegie chose to focus specifically on those who lead in order to understand their mindset and the efforts being taken at the highest levels of an organization to address this important issue. 

The survey found that 21% of the respondents described their corporate culture as excellent.  We then added more objective measures designed to select only those organizations that truly stand out from their competitors as being successful. In addition to senior leaders indicating they have an “excellent” corporate culture, to be included in this best-in-class subset which we’ll call culture champions, the organization must also be exceeding its financial goals compared to expectations and have lower turnover with higher employee engagement scores relative to others in its industry. 

Employee Contract Terms Define Corporate Culture

According to Kellie Wong, “Organizational culture affects all aspects of your business, from punctuality and tone to contract terms and employee benefits. When workplace culture aligns with your employees, they are more likely to feel more comfortable, supported, and valued.” If the terms of the employee contract define corporate culture, why aren’t more than 21% of the companies getting it right? 

Creating and maintaining a positive, unifying culture in the face of a fast-moving business environment is difficult for many reasons, beginning with the challenge of creating contract terms that motivate successful behavior. Research shows that employees from different areas of the same organization often have very different perceptions of the company culture. In addition, simply because it is so ingrained and familiar, it can be difficult for those within the culture to see it clearly. One common element that employees do see clearly is the hiring agreement (employee contract) that they signed.

In the face of these challenges, the effective management of corporate culture depends heavily on the attitudes of an organization’s senior leaders towards hiring practices.

Attitudes

As Dale Carnegie is credited with saying, “Our thoughts make us who we are,” and culture champions’ thoughts and attitudes are different from their peers’ when it comes to corporate culture.  Success begins with leaders who believe in the importance of a positive hiring experience and who are convinced of its impact on their organizations’ corporate culture.  When we asked executives about their company’s commitment to supporting a high-performing culture, very few said that company culture is not a priority. Delving deeper, though, differences in attitudes emerged.

Almost all the leaders in our study from successful companies (92%) believe that culture has a high impact on financial performance or is critical to reaching financial goals. By comparison, just 58% of all other leaders in our study believe that company culture has an important impact on financial outcomes.  Since many leaders answer to shareholders who are primarily focused on financial performance, an understanding of this link is imperative. A landmark study by James Heskett, Professor Emeritus at Harvard University, suggests that as much as half of the difference in operating profit between organizations can be attributed to effective cultures.  

Engagement

A similar disparity in attitudes emerged on the financial impact of employee engagement which is an easy measure of corporate culture’s impact. Ninety-two percent of executives from the group of culture champions believe that having highly-engaged employees has a strong impact on financial performance or is critical to reaching financial goals. Therefore, the Terms of the Employee Agreement drives the initial metrics of employee engagement. (The co-author suggests the reader read that last sentence several times to absorb the implications.)

From a Dale Carnegie & Associates’ employee engagement study – disengaged employees are likely to feel anxious, bored and irritated – hardly emotions we’d expect to bring out an individual’s best efforts at work. But despite the significant and mounting evidence to the contrary, one third of leaders from the survey from non-high-performing companies said that engagement has only moderate, slight or no impact on financial outcomes. How hard is it for employees to feel engaged when their Hiring Agreement is a litany of negative Terms and disastrous consequences?

Culture champions (CC leaders) also differed notably from other senior leaders in terms of their perceptions of what they consider extremely important for creating a high-performing culture. They identified the following five factors as important areas of focus for positive employee attitudes and for fully engaged employees, in other words, a successful corporate culture:

1. employee training (64% of CC leaders vs. 32% of all other leaders), 
2. trust in senior leadership (62% of CC leaders vs. 35% of all other leaders), 
3. strong customer focus (62% of CC leaders vs. 34% of all other leaders), 
4. clear strategy and goals (57% of CC leaders vs. 34% of all other leaders) and 
5. encouraging strong relationships between employees and their managers (57% of CC leaders vs. 30% of all other leaders). 

Another notable finding from the survey was that senior leaders from culture champion’s companies recognize that creating and maintaining the desired corporate culture is very much an ongoing process, beginning with hiring. While by definition, these leaders claim to have an “excellent” culture, more than one third of them (35%) also said they currently have room for improvement.  

The Bottom Line

If creating a high-performing and engaging corporate culture were easy, the business world would have tired long ago of its obsession with the topic. Instead, it is becoming increasing clear that the spotlight on corporate culture is not misplaced, and in fact should be intensified. 

Given the impact corporate culture has on everything from strategy to employee engagement and financial performance, powerfully positive Contract Terms are an element that can’t be left unattended by senior leaders who hope to win. As the first official element in the employee experience, the Employee Agreement merits attention and strategic design. 

Organizations are well-served to make the Terms of the Employee Agreement define the positive attitudes that need to be modeled. If this becomes a priority, subcontractors can navigate their own unique path toward cultural excellence.  There is much to be gained by embracing the right attitudes and studying the successful actions of those who are demonstrating their ability to get it right from Day One.

About the Author and Co-Author:

Author, Mark Marone, PhD. is the director of research and thought leadership for Dale Carnegie and Associates where he is responsible for ongoing research into current issues facing leaders, employees and organizations world-wide. He has written frequently on various topics including leadership, the employee/customer experience and sales. Mark can be reached at mark.marone@dalecarnegie.com

Co-Author, Robert Graves, MBA, is a Dale Carnegie Certified Trainer for Rick Gallegos and Associates. His focus is creating sales professionals from average salespeople. He is the author of “Making More Money with Technology.” He often speaks on trends in the Marketing/Sales/Service triad. Robert can be reached at robert.graves@dalecarnegie.com

About Dale Carnegie: 

Dale Carnegie is a global training and development organization specializing in leadership, communication, human relations, and sales training solutions. More than 9 million people around the world have graduated from Dale Carnegie training since it was founded in 1912. Through franchises in over 90 countries and in all 50 states, Dale Carnegie’s mission is to empower organizations to create enthusiastic and engaged workforces by fostering confidence, positivity, and productive, trust-based relationships.