Every company has its culture
Every company has its culture, only some have got what I call ´corporate soul´. It means a company lives its purpose and has built its strategy on that purpose. But most importantly, the behaviors with all stakeholders fully reflect that purpose. Companies with soul are masters in creating an integrity between words and actions. There is a German saying which goes like this: “Er (oder sie) ist die Seele des Unternehmens“ (He – or she – is the soul of the company) – I believe that there is a lot of wisdom in this expression. Harvard Professor Ranjay Gulati believes in the “soul of a start-up”. From his point of view, it captures the energy inside a company that is so unique.
Culture trumps brand
Culture trumps brand. It´s becoming the key criteria for jobseekers – as the three key reasons employees stated in a recent McKinsey study why they are leaving their current job are a lack of “being valued by the organization”, “being valued by the manager” and feeling “no sense of belonging”. If executives say that “our people are your biggest asset”, they better take this seriously. Because companies that have a workforce that writes engagement with a capital E are gaining a real competitive advantage. Companies with soul understand what ESG means for their business and take visible action. And their leaders walk the talk. In short: they have established a recognizable level of integrity between the intentions of purpose and strategy and the actions of the organization.
Higher returns on equity, higher dividends
The US non-profit Just Capital focuses on identifying organizations that are considered "just". The organization uses data to discover which companies are most involved with the priorities Americans find most important. Their annual, multi-phase survey identifies these priorities. The 2022 survey presents results that reinforce that culture and success are two sides of the same coin when they compare the top 100 firms to the other corporations they rank:
- They had a 4,4% higher return on equity and paid 19,2% more in dividends
- Created 7,7 times more jobs in the US from 2016 to 2020
- Are 6,8 times more likely to disclose a pay gap analysis
- Are 7,6 times more likely to disclose workforce demographic data by race & ethnicity
- Included ESG KPIs 2,6 times more in compensation metrics
The framework to build a strong corporate culture
To build corporate soul, companies need to engage at three levels. It starts with purpose. But purpose has become a buzzword over the past decade. And ever too often I witnessed that purpose statements were crafted and word-smithed in excellent ways, but they did not make their way into the board directors minds nor did they reach the frontline employees. In other words, they were useless.
The Soul System™ defines the first level as ´shared purpose´. Shared by the entire executive team and shared with all stakeholders. The second level is what I call the ´shared understanding´. It builds on the shared purpose and defines vision, mission, values and spirit. Spirit is often over-looked. To me, it defines the desired corporate culture. The third level allows the leap from theory into practice. I call it ´shared behaviors´. It looks at all interactions inside a company and aligns them with the shared purpose and the shared understanding.
Companies with Soul have leaders that continuously self-reflect
It starts with self-reflection. ´Have I bought into the purpose of our firm? ´ - ´Is the proposal that is presented to me in line with our mission? ´ - ´Are we handling internal promotions in a fair way? ´ - and I could go on and on. “Building Corporate Soul” contains 70 questions for leaders to do the appropriate soul searching across all key aspects of corporate realities. The key steps are to ensure buy-in to the shared purpose and the strategic imperatives – and then to get down into the nitty-gritty that impacts both employee and customer experience to ensure that they live up to what was defined in the boardroom. It is no rocket science. But it requires an open mindset and a firm belief into the shared purpose.
Integrity is the number one leadership trait
Integrity is the number one leadership trait that builds soul. Every leader might remember when they moved into that position that from that day onwards, they were ´dinner conversation´ for their team members. In today´s world the conversation does not stop at the dinner table. Social media conversations about corporate behaviours are nothing unusual these days. Employees do have a very fine antenna when it comes to believing into what executives tell them – or not. That is why they play a crucial role in the weighting of data behind the Soul Index, a global performance ranking. An interesting side fact in analysing the Global Top 20 companies in the Soul Index: their CEO´s stay longer in their position than the average which is according to KornFerry 6,9 years. 14 of the top 20 firms were (or currently are) led by CEOs that have been in this role for more than 14 years.
Corporate Soul drives outperformance
If you want to know what the real culture is inside an organization don´t ask management. The insight about the real culture can be found in employee ratings of any firm. Companies with soul are managing their human capital with the appropriate sensitivity and drive. But they don´t brag about it. They earn the trust of their people by taking action. For example, look at Adobe, the number 1 firm in the 2021 Global Soul Index. Their culture ratings are A+ in most areas – rated by the employees. In contrast, a company like Apple (ranking at number 11 in the Soul Index) which is much more in the spotlight is only rated A+ in one criterium.
The performance of the Soul Index over the period from 2016 – 2020 proves that companies that focus on corporate culture deliver higher returns than their peers. This is the cumulative performance in comparison:
SOUL INDEX: 199,44%
S&P 500: 83,77%
Dow Jones: 75,65%
Thriving cultures are driving success on many levels
The results of the Soul Index come as no surprise. The Global Culture Report from O.C.Tanner defines companies with soul as thriving cultures. These:
- are 13 times more likely to have highly engaged employees
- have an 8 times higher incidence of great work
- show a double likelihood to have increased revenues
At the same time, employees in thriving cultures are experiencing 3 times less burn-out situations. And the companies are 3 times less likely to face lay-offs. More reasons why investors should look into the S-factor when reviewing potential ESG-ratings.
The business of the future has soul
More engaged employees create better products and services for happier customers – that is one way to summarize of what happens when a company focuses on its corporate soul. In addition, these companies become respected partners in the communities and societies in which they operate. The publicly traded Soul Index companies represent a market capitalization of nearly 10 trillion US $ already – with their emphasis on creating a human centric performance culture, they are looking into a bright future.
Good companies have a purpose. Great companies have a soul. For more insights (and soul) please have a look at https://buildingcorporatesoul.com/
Specht, Ralf (2022). Building Corporate Soul: Powering Culture & Success with the Soul System™. Fast Company Press