An organization’s culture directly influences financial performance. This is what a number of studies have found, challenging the notion that the topic remains only at the level of discussions, rather than real impact. The fact is that even the corporate governance process has neglected, or at least underestimated, the magnitude of the impact of culture on an organization’s financial stability. “For years, unhealthy cultures have posed tremendous risk to shareholder value, yet that risk went largely undetected by corporate boards until it was too late.”, Kevin Oakes, CEO of Institute for Corporate Productivity (i4cp), wrote.

A recent study by icp4 drew a parallel with the fitness world and examined cultural health as a range of how “in shape” an organizational culture is: from unfit (often referred to as “toxic”) to very fit. All organizations fall somewhere on this scale and undoubtedly certain departments, divisions, or regions within those organizations are healthier than others. 

Researchers found that high-performance organizations are 6x more likely than lower performance organizations to have fit cultures, while companies that have fit cultures are 2x more likely to report increased employee productivity. Given that, they have identified core health characteristics, as well as impactful interventions and new habits to maximize the cultural fitness and improve the performance of any organization. Participants were asked to describe the top culture traits of their organizations. The main findings are:

Fit Culture Defined

“A culture that employees rated as very healthy (compared to somewhat healthy, somewhat toxic, or very toxic), and one which they commonly described using these six traits: Employee-Focused, Inclusive, Quality, Learning, Innovative, Collaborative.

Culture Impacts Productivity. Culture fitness explained nearly 20% of the variation among organizations’ employee productivity over the past two years (controlling for size and market performance.)”.

The Unfortunate Reality

More than a third of large organizations surveyed (34%) report becoming more toxic in the past two years, struggling with:

• Disrespectful behavior
• Senior leaders who don’t trust employees
• Employees who don’t trust senior leaders
• Leaders favoring on-site vs. remote employees
• Unsafe environments for expressing opinions/concerns
• Bullying
• Pay inequity
• Lack of recognition
• Lack of inclusiveness

The Seven Habits of Very Healthy Cultures

• More flexible work arrangements
• A learning mindset
• Boards care about culture
• Leaders lead by example
• Leaders held accountable for employee outcomes
• Leaders regularly communicate values
• Poor behavior is addressed immediately

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Source: i4cp