Linking Organizational Culture to the Bottom Line

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Linking Organizational Culture to the Bottom Line
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Introduction

• We present here an overview of the latest
  research linking organizational culture with
  profitability, sales growth, market value, and
  customer satisfaction.
• The results are based on a study of 102 public
  companies from a broad range of industries
  surveyed by Denison Consulting from 1996-2004.
  Companies are incorporated primarily in the U.S.
  (89).

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First, an overview of the model
Adaptability Pattern..Trends..Market Translating
the demands of the business environment into
action Are we listening to the marketplace?
MissionDirection..Purpose..Blueprint Defining a
meaningful long-term direction for the
organization Do we know where we are going?
InvolvementCommitment..Ownership Responsibility
Building human capability, ownership, and
responsibility Are our people aligned and
engaged?
ConsistencySystemsStructures
Processes Defining the values and systems that
are the basis of a strong culture Does our
system create leverage?
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Impact on Performance
If we compare the 102 firms in the top and bottom
25 based on their overall average of the 12
indexes, companies with higher culture scores
have greater profitability, sales growth, and
market value than those with lower culture scores.
Top 25
Bottom 25
Each color bar indicates the percentile quadrant
of the score. The more color the better.
Each of the 12 indexes has a score. It is the
percentile score based on our normative database
which shows you the percentage of 707 companies
that scored lower on the index.
These firms are earning almost 2 more on every
100 spent on assets!
The market value (share price x shares) is 440
of book value (which is a company's assets minus
liabilities). Managers in the top 25 are
creating more value in the marketplace.

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Impact on Sales Growth
Looking at the impact on sales growth, firms in
the top 25 of each trait in the Denison model
have dramatically higher sales in the year the
company was surveyed.

• Each bar represents the average sales growth of
  24 firms. For example, the 24 firms with the
  highest total mission score have a sales growth
  average14.3 versus the 24 lowest rated firms
  which have a sales growth average -.1.
  Therefore, focusing on culture is a great way to
  improve sales.

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What about the Long-Term?

• Todays culture impacts tomorrows performance!
  Here we show the return-on-assets for the top
  25 and bottom 25 of each trait over a
  three-year period.

On average, 72 of firms in their industry rank
below these companies in profitability.
These firms are only matching the industry
average in ROA.
Standardized within industry
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Customer Satisfaction

• In a separate study of 240 automotive
  dealerships, firms with higher culture scores
  have higher customer satisfaction ratings.

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Conclusion

• Your organizations culture can have a dramatic
  impact on your bottom line.
• Culture is a controllable aspect of your
  organization that can improve your profitability,
  sales growth, market value, and customer
  satisfaction.
• Developing your culture today will improve your
  performance tomorrow.
• For more information, contact us at
  www.denisonconsulting.com or [phone].