Translating "Soft" Changes into "Hard" Dollars: Financial Returns from Organisational Culture Improvement

Culture change initiatives can lead to real financial returns. This research paper, first presented at the ASTD Expo in Orlando, Florida in June 2005, summarises the results of a series of studies that demonstrate the strong relationship between constructive organisational cultures and financial performance.

Eric J Sanders, MBA
Robert A Cooke, Ph.D

Financial Returns from Organisational Culture Improvement

We discuss five different studies that validate and support the importance of the work carried out by training and development practitioners to improve organisational culture. The studies referenced use quantitative data to measure both organisational culture, via the Organisational Culture Inventory® (OCI) (Cooke and Lafferty, 1987), and financial performance (based on corporate financial reports), and draw strong correlations between the two. The OCI is a well-respected survey that has been completed by over two million individuals over the past twenty years and is statistically reliable and valid (Cooke and Szumal, 1993).

Three cross-sectional studies linking organisational culture and financial performance are of key interest to us here. The first focuses on organisations in a variety of industries and demonstrates a positive correlation between the strength of constructive cultural norms and earnings/sales ratios. The second is a study by Martin Klein (1992) that focuses on retail stores within a single chain and shows stronger sales growth at the stores with constructive cultures than at sister stores with less constructive cultures. The third is a large study of newspapers which shows many bottom-line measures are positively related to the strength of constructive norms. (Human Synergistics/Center for Applied Research, Inc. and The Readership Institute, 2001).

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