CEO Culture Study

CEO Culture Study Shows Leaders of High-Purpose Cultures Deliver Remarkable Business Performance?

The research and analysis that went into Gapingvoid’s comprehensive report titled “Culture as Management System: How CEOs Who Lead High-Purpose Organizational Cultures Deliver Remarkable Business Performance” confirms results we’ve seen in our work with large clients like AT&T, the U.S. Air Force and Zappos—CEOs who emphasize culture over other success metrics thrive on many levels, professionally, personally and financially.

And when you think of some of the most iconic CEOs in recent history, GE’s Jack Welch, Apple’s Steve Jobs, Virgin’s Richard Branson, and most recently, Microsoft’s Satya Nadella, one trait they all share is a strong belief in purposeful, organizational culture.?

CEOs who lead by culture build high-performance organizations by aligning employees, customers, stakeholders and even shareholders toward common, mutually beneficial objectives. Our research shows that successful CEOs understand this truth. They prioritize organizational culture to drive business outcomes, to align workforces, create inclusion and constantly look to the future. Through our research and work with clients we’ve come to refer to the leaders who do this well as “culture-centric CEOs.”?

In our CEO Culture Report, Gapingvoid draws from some of the best third-party studies as well as data compiled with proprietary analyses from our insights to study the factors that drive culture, highlight those companies and CEOs who are getting it right and share how their culture design-based leadership is generating success.

Why Our Study is Groundbreaking

Organizational Culture may be defined as ”the shared basic assumptions, values, and beliefs that characterize a setting and are taught to newcomers as the proper way to think and feel, communicated by the myths and stories people tell.”?

In the past, analysis of publicly traded companies has found that workforce engagement significantly predicts organizational financial return on assets, net margin, and customer satisfaction. Engagement is an outcome of culture.??

However, what has never been truly explored is whether CEOs who drive high levels of positive culture are rewarded with personal success. In this study, we found that answer to be ‘yes. ‘?

These cultures are powerful drivers not only of organizational performance and value creation but influence, status and personal income to CEOs. Our research validates these findings:?

High-Purpose Cultures? are employee and customer-focused. They’re defined and make clear exactly what the organization stands for. Organizations that engage employees consciously through a High-Purpose Culture system realize:?

  • ? ? ? ? Higher financial returns
  • ? ? ? ? Better customer satisfaction scores
  • ? ? ? ? Increased employee retention
  • ? ? ? ? Greater innovation
  • ? ? ? ? Greater competitive advantage

Moreover, CEOs of High-Purpose Culture companies personally achieve:?

  • ? ? ? ? Higher compensation
  • ? ? ? ? Greater number of positive media mentions
  • ? ? ? ? Increased respect in their industry, communities and by employees as indicated by their presence atop “Most Admired CEOs” lists
How We Chose Our CEOs

For this research, we assume that the CEOs at the top of the Glassdoor’s best-rated list are successfully fostering High-Purpose Cultures. In the absence of great work experience and environments, employees will be unlikely to approve of the CEO. Given the high correlation between CEO approval rating and the likelihood of recommending a friend to work there, these two concepts go hand-in-hand.

For purposes of comparison, we chose six companies from the top of the best-rated CEO list that had corresponding companies in the same industry among the worst-rated companies in Glassdoor. Sectors included healthcare, grocery, employment services, food and drink, wireless telecom and rental cars. Our top-rated CEOs received an average positive rating of 96%; the worst-rated averaged 37%.???

Thousands of current and past employees rated the companies and CEOs that illustrate these points. A few of our high-performing CEOs are LinkedIn’s Jeff Weiner, T-Mobile’s John Legere, and Enterprise Holdings’ Pam Nicolson.

The Impact of Deliberate Design

Based on these findings, we concluded that deliberately designed organizational cultures can be a new form of management system that drives operational outcomes and elevates the careers of CEOs. Elaborating on some of the findings mentioned above, key highlights from the study are:??

  1. ?High-Purpose CEOs Attract Top Talent. The most successful CEOs recognize the value in cultivating a meaningful work environment where employees feel valued. Employees’ perception of their work matters, and it shows in the bottom line. Culture is frequently viewed as too “soft” to warrant concern. However, CEOs who focus on purposeful culture increase the workforce’s ability to produce extraordinary, sustainable results.
  1. ? ? High-Purpose Cultures Predict Employee Retention. Companies with high-purpose cultures have employee turnover rates about 50% better than industry competitors. With average costs of turnover estimated at 90% to 200% of the exiting employee’s base salary, lower turnover rates result in significant cost savings, as well as knowledge retention. Low turnover maintains knowledge in the organization in addition to the cost savings mentioned above.
  1. ? ? Companies with High-Purpose Culture are More Innovative. Companies with higher levels of trust in leadership more often support innovation by forgiving honest mistakes, involving employees in decisions, increasing cooperation, and demonstrating appreciation for extra effort.
  1. ? ? Companies with High-Purpose Culture Have Superior Financial Returns. The CEOs of the best high-purpose culture companies command revenue growth of an average of 10.5% YoY while the worst suffer revenue declines at an unsustainable average of -4.4%. This is a 15 percentage-point difference.
  1. ? ? High-Purpose Cultures Enhance Share Performance. These companies averaged stock returns of 11.5% annually over 17 years, compared to a market average of 6.4%.
  1. ? ? CEOs Valuing Culture are Compensated More. The CEOs analyzed who instill and oversee high-purpose cultures earned total compensation of about .16% of company revenues. At the other end of the spectrum, CEOs from companies with poor culture scores, overseeing low-purpose cultures, earned about .07% of total revenues.
  1. ? ? Culture-centric CEOs are Highly Regarded by the Media. The best-rated CEOs are “loved” by traditional media. The research shows that they enjoy more favorable coverage and higher numbers of positive-toned mentions in media channels with broad reach.
  2. ? ? High-Purpose Culture is a Competitive Advantage. This finding is backed by leaders who’ve ‘walked the walk.’ In the words of Louis Gerstner, the former Chairman, and CEO of IBM responsible for its legendary turnaround, “Until I came to IBM, I probably would have told you that culture was just one among several important elements in any organization’s makeup and success – along with vision, strategy, marketing, financials, and the like. I came to see, in my time at IBM, that culture isn’t just one aspect of the game; it is the game. In the end, an organization is nothing more than the collective capacity of its people to create value.”
The Power of Organizational Culture

For more than ten years, Gapingvoid has worked with scores of organizations designing positive, productive cultures. This work has spanned numerous fields, including government, tech, healthcare, retail, higher education, and many promising start-ups. We’ve learned that organizational culture is one of the most influential tools CEOs can wield to drive remarkable business outcomes.

But, at the same time, the role of culture is often misunderstood. In most organizations, culture is relegated to HR and managed through a lens of employee engagement. In other cases, culture is a marketing exercise that’s articulated through vision and mission statements and documented as the organization’s core values, with limited genuine cultural change.

In reality, culture is a designable, executable and measurable Management System. It is your strongest tool for delivering consistent operational outcomes. A designable collection of ideas, culture is the psychology of your organization, the norms, practices, and rituals (usually unstated) that drive behavior.

High-Purpose Culture is Achievable

We’re proud of the work that went into this report, but realize its impact will only be felt if organizations struggling with stagnant morale, lack of innovation, falling share price and other indicators of failing culture rise and create change, beginning at the highest levels of leadership.

Great CEOs already understand the findings presented in this report, while those who are falling short need to grasp that culture is becoming a metric that can be tracked. The CEO is the instigator of a High-Purpose Culture, not the recipient of prior goodwill. CEOs who lead conscious cultivation of organizational culture have sustainable success. This is not a one-time action. Successful CEOs understand culture as an “invisible human operating system” that is felt in everything the company does.

This human operating system functions at a higher level when CEOs support innovation by forgiving honest mistakes, actively involve employees in decisions, put some real backbone into the core value of “cooperation,” and show clear, demonstrable appreciation for excellence and extra effort.?

When approached in the right way, culture is a designable, executable and measurable Management System and your strongest tool for delivering consistent operational outcomes.?

To read more about these topics in-depth and learn which CEOs made our “best performing” and “poorest performing” lists across multiple sectors, SIGN UP FOR THE ABSTRACT BELOW

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