It’s common knowledge that the key business goal for all companies is revenue generation. Strong profits are driven by solid performances, and the “magic formula” for generating such performance continues to be one that is debated among key executives. Though leaders may be well-intentioned in the performance outcomes they seek to reap, there is the potential negative impact on the engagement, growth and accountability of teams, if the team is not adequately supported. Employee engagement is best facilitated through purposeful agility that enables collaboration and trust. Providing such support can only be driven by a people-first organisational culture.
In a survey by Heidrick & Struggles launched just last month, an increasing number of CEOs view culture as a strategic business imperative; with 59% of CEOs believing so compared to 50% 2 years prior. This emphasis on culture comes as no surprise with prominent authors and business speakers such as Stephen R. Covey highlighting the balance between creating the desired results and the production capability of the people that generate said results.
The takeaway is simple: culture is fundamental to the bottom line.
It’s not productive if it burns out your team
A survey from earlier this year reported that 1 in 2 Singaporeans feel anxious over job security amidst a looming recession and reports of layoffs in the country. While employees may be driven to opt for income stability and dissuaded to change jobs in such an environment, discerning leaders should still be thinking about how to strengthen a team’s performance – and maximising productivity through pushing the team harder and working longer hours is oftentimes not the answer. For instance, 3 in 4 HR professionals in Singapore experience burnout at least once a month.
Ensuring productivity without burning out is no easy balance to strike, but the key lies in culture. An example of how culture could potentially impede performance can be seen when more emphasis is put on frustration with failure rather than curiosity. Employee creativity is then withheld by blocking out the higher brain functions necessary for problem-solving.
Culture and financial performance go hand in hand
CEOs are becoming increasingly aware of the role that culture plays in influencing financial performance. Heidrick & Struggles identified culture as one of the top three positive influences on retention rates along with compensation, benefits, and work rules flexibility according to CEOs. Culture is also perceived as a driver of success in business and talent management strategies; and continues to rise in a CEO’s priority list. The same survey by Heidrick & Struggles found 35% of CEOs taking an intentional, rigorous approach to culture in relation to financial performance in 2023 compared to 11% in 2021
What makes culture so important?
In a separate 2022 survey by Heidrick & Struggles, positive aspects of company culture such as talent excellence and resilience were analysed in connection to financial performance, whereby the top-rated culture companies had double the average 5-year CAGR of lower-rated culture companies.
It is important to note that while focusing on culture can result in positive gains on financial performance, this should not be the only driving factor for companies. In fact, it is the shift towards a better balance in terms of a company’s ways of working and mindsets that underlie strong performance.
This beckons the question; how can CEOs dissect work culture in the work dynamic, the behaviours they see in teams and what might have contributed to them?
Strategies for aligning culture with the bottom line
CEOs seeking to reshape culture must first consider the purpose that drives their leadership and role model this purpose in everything they do.
Mining Industry Indonesia (MIND ID) is a state-owned business that historically consisted of five legacy-mining businesses. In a bid to be more competitive in global markets, the Indonesian government wanted to integrate the mining businesses. Culture played a key role in ensuring the integration would be smooth, and MIND ID decided that their culture needed to be rooted in a noble purpose that would result in a central core identity.
The company eventually landed on the purpose of being a company that created civilizations that benefited Indonesia, its people, and that as a result of mining activity at remote places, better lifestyles and amenities were created. The purpose was launched systematically in two principal ways:
- Leaders were consistently purposeful themselves
- By building teams that were aligned to the purpose and were fully bought in to what they were doing and why they were doing it
From the example above featured in Heidrick & Struggles’ book Future focused: Shape your culture. Shape your future, we can see that purpose should also not be regarded as a lofty goal, and instead be pushed out through broad employee engagement and systematic alignment across the company. This can ensure effective collaboration as institutional practices, performance drivers and capabilities are aligned.
The good news is a rising number of CEOs cited employee engagement as the most important reason for focusing on culture in 2023, compared to our survey in 2021 in which CEOs focused on culture mainly to improve financial performance.
The path forward
It takes two hands to clap, and our conversations with various CEOs have shown a strong complementary relationship between culture and purpose in driving financial performance. However, the key driver of culture shaping should not be financial performance, and instead leaders need to take a step back to explore the company’s purpose, embody it, engage broadly with employees and ensure they feel supported.
About the author
Tonny Loh is a partner in Heidrick & Struggles’ Singapore office and a member of Heidrick Consulting where he focuses on helping CEOs transform their organizations through strategic leadership development, culture, and organizational design solutions.
He has more than 20 years of experience in strategy and organization consulting across APAC, with a focus on the government, state-owned enterprises (SOEs), and industrial sectors.
