December 15, 2021
Company culture, linked to share price, funding success and growth
A new research report from Culture Amp, claims that company workforces’ overall confidence as well as employees’ belief in their leaders are the biggest differentiators when it comes to achieving sustained stock price increases between July 2020 and June 2021.
Culture Amp commissioned comprehensive research across 4,000 organisations globally to explore the correlation between company culture and stock market performance, funding success and company growth.
Recognising that the strategy, culture and mindset that takes a company from Seed to Series A funding is not the same as that needed for a later-stage company, Culture Amp explored a number of data sets to test its hypotheses.
This included 1275 venture-backed or public organisations which had either successfully or unsuccessfully secured funding.
Of the 274 of those companies that were publicly listed, there was a 9 percent difference in confidence in the company vision from employees whose organisations were outperforming others in the top third of the stock market (76 percent) compared to those employed by organisations underperforming in the bottom third of the market (67 percent).
Additionally, 76 percent of employees working with organisations at the top third of the stock market believed in their leaders compared to 67 percent of those employed in the lower third of the scale.
In contrast, achieving a positive work-life balance for employees had the least impact on companies’ share price success, with organisations at both ends of the performance scale scoring the same – 78 percent.
The findings also suggest that organisations which received VC funding had employees with high levels of engagement (80 percent for funded, 74 percent at unfunded); confidence in the company (77 percent funded, 71 percent; unfunded); a belief in their leaders (82 percent funded; 75 percent unfunded) and sense that there is a culture of innovation (77 percent funded, 71 percent unfunded)
Significantly, it also showed that companies displayed elevated levels for these four factors as early as three years prior to successfully securing funding.
To explore the impact of culture as a company grows, Culture Amp also analysed data from different segments spanning small organisations (0-100 employees) to large enterprises (5000+ employees).
• As organisations grow, favourability of leaders drops from 77 percent in a small company to 70 percent in a large enterprise.
• Larger organisations provide less flexible working – 83 percent compared to 88 percent in a small organisation
• While there is a 7 percent drop in motivation as an organisation grows, from 74 percent in a small organisation to 67 percent in a large organisation, employees are more inclined to stay with their employer in the long term at a large enterprise (70 percent) compared to those at a small company (67 percent).
• Employee perceptions precede company growth (measured by headcount). Companies that went on to grow in the following year scored 12 percent higher on the leaders communicating a motivating vision (73 percent), than companies that went on to shrink (62 percent) in the following year.
“When employees are heard, they help deliver sustained business growth and resilience”
Kevin Diestel, partner, Sapphire Ventures, says: “Great companies require visionary products and iconic leaders. Equally as important, and increasingly a top priority for business around the world, is an emphasis on teams and culture, which ultimately determine the success of a business. A company’s culture is key to ensuring employees’ voices are front and centre. And when employees are heard, they help deliver sustained business growth and resilience. As more and more companies prioritize culture, it has become a critical benchmark of an organisation’s management strength, strategic direction and ability to thrive in the long-term.”
Fresia Jackson, lead people scientist, Culture Amp adds: “Many leaders still see a positive work culture as a nice-to-have, and a coincidental by-product of organisational success. However, this research demonstrates that employee perceptions of culture actually precede company growth and profit. We can confidently say that in the organisations we work with, culture actually drives the bottom line, rather than the other way around. Given the time-frame of this research, this has been true before COVID-19, during COVID-19, and beyond.”
Culture Crunch: Top Trends Throughout the Company Lifecycle can be viewed in full here.