THINKING

2. A friendly culture has zero impact on financial performance

The second finding from the largest study into corporate purpose and financial performance is that a friendly culture has zero impact on financial performance.

Yes, you read that right.

According to Peter Drucker, culture is critical to organisational performance. So critical in fact that he is often quoted as saying, “Culture eats strategy for breakfast”.2

On the surface, this makes perfect sense given the fact that in most organisations people represent the single biggest cost. That’s why culture is increasingly being included in the remit of boards and vast sums of consulting dollars are being spent on cultural improvement and optimisation.

However, one of the most surprising findings from the research highlights the fact that although they may be purpose-driven, too many organisations focus primarily on the wrong component of culture: camaraderie.

Harvard Business Review reports that companies annually spend an average of $2,200 per employee attempting to improve work culture3

Within this study, camaraderie comprises the popular metrics of organisational culture that leaders like to espouse: teamwork, unity and fun. It captures how people feel about their organisation; what it’s really like to work for.1

Contrary to popular management theory, camaraderie has no impact whatsoever on financial performance or, as the research states, “Purpose-Camaraderie has no significant association with Return on Assets”.1

Surprisingly too, Purpose-Camaraderie has little impact whatsoever on voluntary employee turnover.1


[1] Gartenberg, Claudine M., Andrea Prat, & George Serafeim. (2016). Corporate Purpose and Financial Performance. Columbia Business School Research Paper No. 16-69. Retrieved from https://repository.upenn.edu/mgmt_papers/274.

[2] Campbell, David, David Edgar, & George Stonehouse. (2011). Business Strategy: An Introduction. Palgrave Macmillan: London.

[3] The Wrong Ways to Strengthen Culture. (July-August 2019). Harvard Business Review. Retrieved from https://hbr.org/2019/07/the-wrong-ways-to-strengthen-culture.

Jaimie Ratten
Posted by Jaimie Ratten
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