Industry Insights: Culture’s contribution to performance and profitability amid digital transformation

Companies are attempting to keep pace with the rate of change by investing eye-watering amounts in digital transformation. The projected expenditure on digital transformation alone is set to reach $3.4 trillion by 2026. Throughout such change, and with this level of investment, organizations must ground their organizations and people by treating their culture as a strategic asset. They must not abandon their focus on culture’s impact during transformative times if they wish to engage and retain top talent, and ultimately, drive performance that hits the top-line metrics of their choosing.

In this industry insight round-up, we round up and examine important considerations for creating a stable and scalable culture that can drive such top-line metrics amid change.

The imperative of organizational culture

Culture has a profound influence on how employees perceive their work environment and how effectively an organization attracts and retains its talent pool. A strong organizational culture correlates closely with an employee’s likelihood to recommend the organization as an ideal workplace. Moreover, in the context of large-scale transformations or economic downturns, a well-defined culture can serve as a stabilizing force, fostering employee engagement and talent retention. Let’s consider some of the implications this has for HR leaders and how they can shape company culture.

Culture’s impact on employee experience

Culture’s dynamics extend beyond workplace satisfaction; they have a direct impact on the overall employee experience. Our traditional culture models tell us sustained patterns of behavior shape culture, influenced by the organization’s shared experiences, values, and beliefs. In the current landscape, borrowing some principles from product and design, we can see culture as a layer that runs beneath all other HR ‘products.’ In essence, culture serves as the bedrock upon which other organizational strategies rely. Organizational levers—key activities that shape internal behaviors and ways of working—such as work models and internal processes, gain their efficacy from how well they aligned with the prevailing culture.

Culture’s effect on change and transformation

Culture doesn’t just adapt to organizational transformations—it shapes them. In a transformative phase, whether it’s driven by digitalization or cost-cutting measures, macro-levers like rituals, symbols, and measurement metrics come into play. Organizations can employ these levers strategically to guide culture, thus making transformations not just more manageable but also more effective.

Culture’s contribution to performance and profitability

A coordinated approach to culture transformation can yield rich benefits. Gallup’s research shows that employees who feel strongly connected to their organization’s culture are 3.7 times as likely to be engaged and 5.2 times as likely to recommend their organization as a great workplace. Reinforcing the employee connection to culture also delivers genuine business impact. An improvement in employees’ connection with the mission or purpose of their organization leads to a decrease in employee turnover and an increase in profitability.

Shaping culture

Having examined how organizations can wield culture as a tool to drive business-critical projects and metrics, it is also worth considering the different inputs that can help HR leaders to craft their culture.

There are countless sources that can shape an organization’s culture, including L&D practices, talent acquisition leaders and recruitment strategy, and DEI&B groups. In this round-up, we are spotlighting just two of the stakeholder groups–people analytics and leadership–and the impact they can have on culture. 

The role of people analytics

People analytics is a crucial tool in the bid to enhance the employee experience and improve overall business outcomes. The key, as Laura Stevens, Vice President of Global Strategy, Analytics, and Employee Experience at DSM, suggests, lies not just in amassing data but in its relevant application. She advocates for an emphasis on actionable insights rather than complex analytical pursuits, stressing the value of people analytics in making culture and transformation strategies more effective.

The role of leadership

Bottom-up, or top-down? Organizations can take different approaches to shaping cultural change depending on their cultural context. Whilst change agents exist at all levels of the business, Allan Watkinson and Rohit Kar, Managing Consultants, Gallup, emphasize the role of leaders as both the creators and sustainers of organizational culture. Their vision and behavior set the tone and establish the parameters within which the culture evolves. Leaders need to commit to a clearly defined set of cultural principles and ensure these principles permeate every level of the organization.

Culture’s future focus: The only thing that stays the same is change

As we look to the future, several cultural considerations emerge for HR professionals and organizational leaders. From understanding how digital strategies interact with culture, to maintaining a cohesive culture across physical and virtual spaces, to the increasing importance of environmental, social, and governance (ESG) considerations, organizations must be prepared to see their culture as a crucial but flexible tool for coping with flux.

It is vital for HR leaders to stay abreast of the latest developments and research on culture and improve their understanding of how to shape employee behaviors. By doing so, they stand the best chance of ensuring their culture is a core driver of bottom-line metrics, from productivity to profitability.

HRD Connect Curators of the New Business Landscape. HRD Connect produces industry-recognized content for senior HR leaders. Through articles, case studies, Q&As, podcasts, events, and more, we offer truly progressive and cutting-edge insights designed to help people leaders address core HR challenges and add greater value to their business.

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