Culture matters. Stakeholders agree.
But what is culture? How does it influence performance? What aspects of culture have the greatest effect on what outcomes? How can this data help organizations strengthen and improve culture for greater performance?
We published the results of our multi-year, collaborative research effort to gain insight into these questions and more. Among the findings of the LRN Benchmark on Ethical Culture:
- There is a need to shape ethical culture globally. The data show there is a pervasive and consistent need to improve ethical culture in all regions across the globe, regardless of company size. There are important variations by industry with Information Technology reporting the highest levels of performance and Chemicals, Coatings, Fibers and Plastics reporting the lowest performance across the various dimensions that make up ethical culture.
- Companies with the strongest ethical cultures outperform – by approximately 40% – across all measures of business performance, including levels of customer satisfaction, employee loyalty, innovation, adaptability, and growth. This provides a strong and compelling case for business to invest in building more rigor in the management of ethical culture.
- There is a leadership disconnect. Senior leaders report more favorable perceptions of the state of their cultures. Middle management report average, and individual contributors and those on the front lines report the lowest perceptions of their cultures.
- There are aspects of culture that have an outsized influence on achieving ethical behavior. There are strong correlations between what we refer to as Cultural Catalysts and demonstrated ethical behavior. For instance, having high levels of Trust and Organizational Justice—meaning employees report experiencing workplace behaviors that foster trust and that the organization maintains a sense of fairness— are predictive of employees upholding ethical standards even when facing pressure to perform.
- People identifying as female and persons of color observe unequal treatment in the workplace in the U.S. The numbers are particularly troublesome given the increasing corporate commitments to diversity, equity, and inclusion, globally and particularly in the U.S.
- There are three primary drivers of employee loyalty. These are environments characterized by high trust, a sense that one’s company is ethical and purpose driven, and a clear company commitment to diversity, equity, and inclusion. Our data suggest that intentional focus on these drivers will help companies be resilient as our economy faces the so-called Great Resignation.
- There also exists a Pandemic Paradox. Even though frontline workers were heralded publicly as heroes for keeping our economy running early in the COVID-19 pandemic, people whose job titles are “office, administrative, individual contributor, skilled manual, warehouse, or factory worker” gave their organization the lowest scores across the various dimensions of cultures, suggesting a disconnect between what a company says it values and the real-life experience of employees.
We set out to measure aspects of culture and the impacts they have on business. We did so knowing the ability to assess culture is a critical capability for business leaders seeking to keep pace with rising stakeholder expectations, a period of uncertainty, and updated regulatory guidance demanding it. What we found builds on three decades of work and supporting research that conclusively proves that ethical cultures don’t just protect corporate reputations, they also propel the bottom line.
About the Authors: Emily Miner manages LRN’s E&C Advisory practice for organizational culture and behavior assessment processes. She advises organizations undergoing large-scale culture transformations across a variety of industries, emphasizing co-creative processes, and relying on data-driven insights.
Arieana Thompson is an E&C Advisor at LRN, where she conducts ethical culture assessments, consults on data analytics and employee productivity, and develops healthy workplaces through data-driven insights and thought leadership.