How Important Is Company Culture?

For the last 11 years, I have attended the biannual University of California, Davis, Agribusiness Seminar. The three-day gathering includes 90 agribusiness executives from across the ag supply chain: egg farmers to cattle ranchers, grape growers to bagged salad producers, investment bankers to consultants and people in the food business. Ninety percent of the attendees are from California and some repeat attendees have gotten to know each other pretty well over the years.

This year we read, studied, and discussed seven case studies about other companies that were willing to open their business to the case writers (usually university professors and professional case writers). The cases are confidential.

Each year I attend, I learn so much that has helped me grow my business and refine my approach as a business leader. I am fortunate to be a member of the steering committee, so I had some input into the programming. The cases usually focus on a business challenge the company is facing. Our discussions revolve around us developing alternative strategies. When the case is actually presented, the company executive responds to our insights and questions, and tells us what the company ultimately decided to do, and why. It is super interesting!

This year, we had a keynote speaker who flew in all the way from New Zealand. As it turns out, our speaker, Michael Henderson, is a corporate anthropologist. In my opinion, he is part psychologist, part therapist, and mostly incredibly insightful. His company brochure says, “He has a degree in Anthropology and uses this unique skills set to support organizations to create high performance cultures.”

We received his latest book “Above the Line” a few weeks before he spoke and were expected to read it before we arrived. I admit when I saw that I had to read a binder full of cases, plus the book, I wasn’t sure I would get through it all. But once I started reading Michael’s book, I couldn’t put it down. I grabbed my highlighter and started marking it up; so many things resonated with me.

What I learned from Michael was: “Company culture fundamentally does one of two things. It either makes your business money or costs your business money.” He told us that culture has proven to be eight times more influential to business performance than strategy. Eight times more! That definitely got my attention.

One of the biggest insights he shared is how companies approach culture incorrectly. Many companies think the company sets the culture. In fact, the employees control the culture. Michael suggested that, when you interview a potential new employee, instead of sharing your company culture, you should ask the candidates what their values are. And if those values are not in alignment with your company’s values, then you should not hire that person. Personal values determine compatibility; their personal values will not change. For example, if your company’s values include being goal-oriented and -driven, and the candidate values a low-key, non-pressure work environment, you can see how they might not fit into the culture (no matter how good their skill set is).

We asked Michael about acquisitions. Many companies attending this conference will be making acquisitions in the future. Statistics show that 85 percent of all acquisitions fail…mostly due to a lack of culture alignment. So what advice did he have? He told us that while most companies focus on doing financial audits of the company under consideration, what they really need to include is a culture audit. Such a great suggestion.

Michael also told us that if you want to change the culture, you need to be mindful of whom you promote in your company. Those who are promoted should have personal values aligned with the company’s values. It makes culture alignment so much easier and natural.

And if you are wondering if culture alignment can add money to the bottom line of a company, he gave us several examples. Two stood out for me: Coca Cola NZ added $30 million to its bottom line in one year; Z Energy (another NZ company) hit its three-year financial targets in 18 months. Both credit their culture as the major significant contribution to achieving these results.

“Great culture makes wealth. A toxic culture destroys wealth.” – Warren Buffett

I think Mr. Buffett said it succinctly.

Karen

P.S. During the agribusiness seminar, I was fortunate to receive an invitation to this year’s Berkshire Hathaway meeting in Omaha, Nebraska! I am beyond excited that I am able to attend and see Warren Buffett and Charles Munger in person. Stay tuned.