By Victor Assad, Managing Partner for InnovationOne, LLC
There is an irrefutable link between organizational culture and profitability.
Organizations with more collaborative, learning, and agile cultures have 22 percent higher profitability than those with static cultures, according to InnovationOne, LLC. Gallup shows even bigger numbers. Although Gallup’s’ expertise is employee engagement, not culture, they discovered that companies prioritizing culture experience a 33 percent increase in revenue.
Writing over 30 years ago, Harvard Professors John P. Kotter and James L Heskett in their book Corporate Culture and Performance discovered that firms with innovative and adaptive cultures achieve extraordinary financial results, including three times the revenue growth, 900 percent higher stock price growth, and 755 percent higher net income than those with staid cultures.
Aren’t those numbers that you would like to experience?
Characteristics of organizations with great cultures and improved performance
The empirical evidence from InnovationOne, LLC, has uncovered six characteristics of organizations that have cultures that lead to higher performance, innovation and financial outcomes. They are:
- Leaders who have innovation strategies and goals that are visible and well communicated across the organization. Employees, regardless of their roles and level in the organization, know how their actions connect to the strategies.
- There is a well-known and efficient process to manage and test ideas that come from employees.
- Employees have an effective environment for communicating across the organization and with external partners to develop and improve their innovative ideas.
- Employees have the time, resources and space needed to suggest and develop ideas and projects.
- Employee creativity is unleashed because employees know the improvement and innovation focus areas of the organization, and their managers sponsor innovation and provide valuable, honest feedback.
- Performance management and measurement processes at the team level and across the enterprise support innovation and learning and collaborative behaviors required for innovation.
InnovationOne’s clients who improve their cultures not only benefit from higher performance, but their clients report an easier time recruiting and retaining employees.
Improving cultures also improves the performance of publicly funded research and development (R&D) Labs
InnovationOne LLC has discovered that having improved cultures also improves performance among publicly funded R&D Labs.
Known as the Ethos Project by the US Department of Energy (DOE) the venture measured whether lab culture and an emphasis on technology transfer to industry and entrepreneurialism would improve lab performance. InnovationOne administered a modified version of the InnovationOne Culture Index© in six Labs. The modifications added seven questions regarding employees being encouraged and recognized for generating innovation, working on technology transfer projects, and being entrepreneurial.
Six DOE national laboratories were selected, with population sizes ranging from more than 1,500 to more than 10,000 employees, producing 2,328 responses. The surveys were sent to more than 1,000 employees at each lab to achieve greater than 350 responses and a 95% confidence interval, with a margin of error of less than ±5% at each lab. The scores of the six labs varied greatly, from 60 to 71 on the 100-point scale of the InnovationOne Culture Index©.
The results show that performance correlates strongly with culture. Higher innovation culture scores improve R&D lab performance. In fact, improving a culture score by just one point (on a 100-point scale) can increase performance in innovation, commercial deployments, partnerships with industry, and academic publications by up to 30 percent.
The irrefutable evidence link between culture and organizational performance exists in the private sector and among publicly funded R&D Labs.
Are you ready to significantly improve the performance of your organization? Start with your culture.
Contact us to learn more and get started.
About InnovationOne®, LLC.
InnovationOne®, LLC helps organizations worldwide build a culture of innovation and make it sustainable. InnovationOne® uses a scientifically developed assessment to measure, benchmark, and improve your company’s culture and capability to innovate and enjoy better outcomes and financial results. We have conducted research with The Conference Board and the US Department of Energy. Companies scoring in the top quartile of our InnovationOne Culture Index© reported higher financial performance than bottom quartile performers by as much as 22 percent. US Department of Energy labs scoring high on our assessment can have up to 3x higher performance over the lower scoring labs. Measure and ignite your culture of innovation.