Ethics. Integrity. Doing what’s right for the customer.
The words might seem like good indicators of a healthy corporate culture, but those specific examples were pulled from Wells Fargo’s annual report a year before it was discovered the bank had set up millions of fraudulent accounts using customers’ names.
“At least anecdotally, we see that the fact that you espouse these aspirational values doesn't ensure that you have a healthy corporate culture,” said MIT Sloan senior lecturer
“Culture works as an intermediary that translates purpose into day-to-day behaviors that have very significant influences on employees’ experience, but also performance and corporate reputation,” Sull said.
Myth No. 1: Culture only matters for employee engagement.
An employee who likes working at a particular organization and feels their job is meaningful is likely to be engaged in their work. But that’s not the only role culture plays. Culture also contributes to a company’s financial success. Sull analyzed 500 U.S. companies and found that 21 of them embodied values that made them “culture champions.”
“What we found over a 5-year period was that they earned twice the returns of NASDAQ … almost four times the returns of S&P 500 … and 80% of them outperformed their industry,” Sull said. “So yes, culture helps you to attract and retain great people, but it also helps with performance.”
Culture impacts reputation. Rio Tinto, one of the world’s largest mining companies, recently released a workplace culture report detailing sexual harassment, bullying, and racism among its workforce and leadership. The report came after a 2021 Australian parliamentary inquiry into sexual harassment within the mining industry. The goal of the report was “to identify the strengths and opportunities for Rio Tinto to enhance workplace culture,” the company stated.
“Part of why it’s so important for a company like Rio Tinto’s culture not to be toxic is that their reputation shapes their ability to deal with governments and secure mineral rights,” Sull said. “Culture matters for employee engagement, but it’s much more.”
Myth No. 2: It’s OK to be all talk, no walk with cultural values.
As the Wells Fargo annual report illustrated, it’s not enough to say an organization has core values. There has to be some action behind them.
In another study of those 500 companies, Sull found that 75% of them had a published list of core values. However, when it came to how employees assessed their companies on those values, there was a disconnect.
“The correlation coefficient between how heavily a company weighted a set of values and how well employees said they did on those specific values hovered around zero,” Sull said.
Culture translates purpose into action, he said. Hanging core values on the wall or including them in a financial report does not mean an organization has a healthy culture that’s driving purpose for employees.
Myth No. 3. For enough money, any employee will stay in a toxic culture.
Money can’t buy happiness, and neither can it buy employee loyalty.
Sull looked at the resignation rates among those 500 companies for the first six months of the Great Resignation (April – September 2021) and learned that toxic culture was the strongest predictor of a company’s attrition rate compared to its industry’s average attrition rate. Overall, toxic culture was 10 times more powerful in predicting attrition than compensation — one of the most common reasons given for people leaving their jobs in the last year, according to the study.
How can you spot a toxic culture? Sull offers five indicators:
- Employees feel disrespected at work.
- A noninclusive environment makes people feel left out because of their race, gender, or other factors.
- There is a pattern of unethical or illegal behavior, such as a lack of regulatory compliance.
- People are cutthroat, choosing to go out of their way to undermine one another.
- Leaders are abusive — for example, shouting or yelling at people.
“The things you need to look at are the leaders and the social norms that are shaping behavior on a day-to-day basis,” Sull said. “If you don’t look at those things, you have no idea what the culture is.”