Why corporate culture is hard

In a recent study, Columbia Business School Vice-Dean Shivaram Rajgopal and his collaborators report on an in-depth survey of senior executives, capturing their views on the importance of culture in the corporate space.  More than half of the respondents said that corporate culture is one of the top three drivers of value at their firms, and a full 920 percent also said that improving their culture would increase their company’s value.  Notably, the respondents were CFOs, treasures, and others in roles related to financial function — hard number types — rather than from roles where “soft stuff” like culture typically resides.  (e.g., HR)

Unfortunately, while nearly every respondent said that improving culture would improve firm value, only 16 percent said that their culture was where it should be.  The heart of culture, Professor Rajgopal contends, is in informal elements that are not written down or codified:  specifically, the company’s values and norms.  In order for a culture to be effective, the respondents agreed, the company’s formal institutions have to align with and support these informal elements.  This is a critical point, as usually the attempts to create change happen the other way around.  Check back next week for more on this topic as it applies to the banking sector.