Adaptability, consistency, focus and engagement the key to success

Jan 26 2006 by Nic Paton Print This Article

A workplace that values adaptability, consistency, a clear direction and employee involvement is more likely to deliver better returns, sales growth, productivity and shareholder value, according to new research from the U.S.

The study by Denison Consulting has found that, when it comes to delivering positive, bottom-line results, an organisation's culture can make a huge difference.

"It's possible to measure, monitor and influence organisational culture, and we have developed scientifically valid tools to accomplish such vital tasks," said co-founder Dan Denison.

The organisation's latest study of 102 companies found that businesses with the best organisational culture earned an average return-on-assets of 6.3 per cent versus. 4.5 per cent for firms with the lowest organisational scores.

The top-quartile firms achieved average, one-year sales growth of 15.1 per cent, as compared with 0.1 per cent for the lowest-quartile group.

Companies with the best culture also led in shareholder value
And companies with the best culture also led in shareholder value, with average market-to-book values (the ratio of the market price of its shares over its book value in total equity) of 440 per cent as compared with 350 per cent for firms with the lowest culture scores.

"These results represent a dramatic affirmation of the importance of organizational culture, and its link to real-world business results," said Denison research analyst Ryan Smerek.

"The companies that achieved higher scores on mission, consistency, involvement and adaptability earned $6,300 (£3,533) for every $100,000 (£56,089) in assets, while those with lower cultural scores earned $4,500 (£,2524) for every $100,000 (£56.089).

"That's a huge difference Ė a return-on-assets difference totalling 40 per cent," he added.

The researchers also took a longer-term look at the 102 companies in the sample.

During a three-year period, the firms with the best scores around organisational culture significantly outperformed their industry peers, as well as the companies with the lowest organisational culture scores.

This outperformance came in all three outcome areas: return-on-assets, sales growth, and shareholder value.

"Organisational culture is extremely important to business success, and the really good news is that it is not a soft science," said Denison.

"With valid data on an organisation's culture, we can pinpoint areas for improvement and predict the positive business results that are likely to be achieved with the right interventions and action plans," he added.