Healthy work culture a key business advantage

• A healthy culture can triple output, new study shows.
• Shared values are at the core of corporate success. 
• Healthy culture attracts top talent.

A healthy work culture can triple a corporate venture’s returns by defining underlying beliefs, focusing on leadership, and modeling and celebrating desired behavior. The premis is made in a research report by Markus Berger-de León, a senior research partner from Berlin, German.

In the research paper, co-authored by Maria Ocampo, the scholars point out that; “It’s easy for a start-up culture to survive in a new corporate venture that comprises just a handful of like-minded people. But when corporate ventures grow to hundreds or even thousands of people, the culture can break down.”

To avoid this outcome, corporate leaders can and should systematically build and maintain a healthy culture that takes the unique corporate context into account. “The cost of not doing so can be high. In fact, our research shows some 26 per cent of corporate start-up failures are linked to cultural issues,” Leon points out.

Wary of slowing their venture’s growth, many leaders typically don’t take deliberate steps to shape a strong culture in their new ventures, the researcher says.

Titled, ‘When building new businesses, culture matters’ the research explores how to better understand how successful leaders build healthy cultures as their corporate ventures scale.

The scholars analyzed hundreds of endeavors and tested their findings with six corporate venture CEOs around the world. “The results show that instituting a specific set of supporting mechanisms—such as fostering and understanding conviction, role modeling, reinforcing mechanisms, and building skills and capabilities—should be core elements of any venture growth strategy,” Leon attests.

Healthy work culture

“Building a healthy culture is always a challenge, but a healthy culture is a superpower,” Leon writes. The paper describes a healthy workplace culture as, the behaviors, mindsets, and beliefs that shape how people work as well as their daily interactions with one another. “Companies with a healthy culture significantly outperform their less-healthy peers,” he writes.

It shows that as companies with top-quartile cultures have a total shareholder return (TSR) three times higher than the bottom quartile. Also, companies that focus on organizational health that is, how effectively the organization rallies around a common vision and strategy, show an 18 per cent increase in EBITDA after only one year.

According to the research findings cultural health is a strong indicator of long-term financial performance. In fact, healthy companies achieve 2.5 times the ROIC of unhealthy organizations.

“Corporate ventures with healthy cultures outperform those that do not have it,” they note. Leon warns that, many leaders believe they are the culture and that they simply need to role model it rather than work on it.

“However, creating culture does not have an end date, rather it requires leaders to continually focus on evolving it,” they advises.

Worse still, the research shows that leaders often perceive culture as “soft” and a secondary concern to more pressing business issues. “Establishing a new culture from scratch is hard and requires a tool kit that many leaders in large enterprises lack.”

Establishing workplace cultures in new businesses

For business leaders looking to establish exceptional workplace cultures in their new businesses, they should determine the key qualities of the culture and build support for them, the research advices.

“Our competitors have copied our products, but they cannot copy our culture,” the research quotes Paul Taylor, CEO of HUB, a provider of data-driven software for asset managers and hedge funds.

“Leaders can build the support necessary to create a fresh culture by creating direct policies, resources, and support structures,” Leoan suggests, adding, “To ensure alignment and balance, leaders should clearly communicate their core values and expectations from the outset and establish decision rights.”

The research calls on business and corporate leaders to foster an inclusive and collaborative environment, support continuous improvement and emphasize sustainable growth and social responsibility.

Corporate ventures are urges to hold cultural activities and training sessions that involve employees and leaders from both the parent company and their branches such as a ‘Values Day.’

“This can also help foster a sense of unity and shared purpose, and allow for the exchange of ideas and cultural values between the parent company and its corporate venture,” the research shows.

“Regular values focused feedback and dialogues can help align all employees both new and established with the values of the parent company,” Leon explains.

Formal check-ins be structured as periodic interviews or surveys that can be conducted by human resources officers or team leaders. “They can take place during performance reviews or as stand-alone yearly assessments specifically centered on aligning values.”

Additionally, a well-defined and positive culture is a powerful magnet for talent, drawing in and retaining highly skilled individuals. “Specifically, people are drawn to organizations with characteristics similar to the ones they value.”

“Making an engaging culture that supports and empowers employees is crucial. Our research shows that more than 70 per cent of job seekers worldwide actively seek referrals from current employees when looking for job opportunities,” Leon writes.

He says to attract and retain the best people, founders and leaders of a corporate venture should build teams with attitudes, beliefs, and behaviors that align with the parent company’s values but also seek out individuals with more nimble mindsets who would thrive in a flat, fast-moving start-up environment.

“Giving corporate ventures the leeway to build their own cultures through independent hiring practices is a good way to strike this balance,” he suggests, adding, “While like-minded colleagues can facilitate collaboration, start-ups grow through out-of-the-box thinking from diverse teams not monocultures.”

It also shows that inclusive hiring practices, diversity training for employees, and a culture of open communication and respect can help guard against the implicit biases that can otherwise stifle innovation and cause ventures to myopically miss opportunities.

“On this point, companies can adopt rigorous hiring processes that include value-fit interviews to help determine whether employees are likely to succeed in the start-up work environment,” Leon concludes.

NB: Do not miss the second part of this article, where we will look at research based steps to build a healthy culture that creates value and strengthens your companies culture.

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