Does yourorganization's culture affect its success? You bet itdoes. Culture is the set of norms and values that are widelyshared and strongly held throughout the organization.

Study after study shows that culture and values matter for anorganization's success. The University of Chicago Booth School ofBusiness published “The Value of Corporate Culture“ by LuigiZingales et. al. (2013), which examined this question in depth.

The vast majority of organizations publicly promote theirculture. The Booth research noted that 85% of S&P 500companies describe corporate culture or values on their websites.The most commonly listed values are innovation (80%), integrity(70%), respect (70%), quality (60%) and teamwork (50%).

Additionally, safety, communication and hard work were eachlisted by about 30% of the companies. These principles andvalues should inform the behavior of all who work there, but dothey?

The researchers found, however, that what was stated did notmatter. There was no correlation between publicly statedvalues and firm profitability. All too often, organizational valuesare something to hang on the wall for all to see, but are not“lived”; they are not in the DNA of each person in the company.

The research did show, however, that the reality of the culturedoes matter. It affects outcomes. A healthy culture that is foundedon core values, particularly the value of integrity, leads tobetter performance that can be measured. The Booth researchersexamined how employees perceive their company's values. As a proxyfor integrity, they analyzed data in the Great Place to Work®Institute database of over 1,000 companies, investigating whetheremployees thought “management's actions match their words” andwhether “management is honest and ethical in its businesspractices.”

The research discovered that when employees worked in a healthyculture that valued integrity, the company did better. High levelsof perceived integrity were positively correlated with higherproductivity and profitability, better industrial relations,increased attractiveness to prospective job applicants and even adecline in the percentage of workers who were unionized. When topmanagement keeps its word, it validates this behavior as thecompany norm.

Surprisingly, culture is even more important than a “star”CEO. The research of Rakesh Khurana at Harvard BusinessSchool and others found no direct link between the fame orcompensation of a CEO and that firm's performance.

Khurana said that internal culture “exerts a far greaterlonger-term influence on the company's success.” That being said,it is the CEO's responsibility to lead by example in order toensure a healthy culture. Boards and investors often believe that astar CEO can make the difference, but the difference really occursin the myriad everyday decisions of each employee. The cultureengendered by the CEO and senior management who follow, guidesthose decisions.

Culture exerts social control that complements compensationsystems, including financial incentives. Employees facechoices that management cannot control in advance. A culture ofintegrity commits everyone to take the longer view; they areempowered not to trade off customers' satisfaction for immediateprofits. Impeccable customer service becomes a value thatneeds to be respected at all times, not something that is relaxedfor immediate monetary gain.

A healthy culture guides internal and external hiring decisions,attracting candidates who share the organization's values. Itaffects how satisfied workers are with their jobs and improvesretention.

Consistent with the Booth research, the recruiting websiteGlassdoor.com surveyed more than 600,000 employees at U.S.companies and found that they care most about having a family-likeand team-

oriented environment where they feel that colleagues “have yourback.” Importantly, employees care that the company operates withvalues which demonstrate that the company is doing the rightthing.

Stock analysts are finally beginning to understand theimportance of culture. They want to understand how seniormanagement teams are addressing employee satisfaction, retentionand engagement as well they should.

The Booth research notes that companies with higher employeesatisfaction rankings in surveys such as GPTW and Glassdoor.comenjoy measurable incremental long-term stock price appreciationcompared to companies with lower rankings.

Every organization must be aware of the importance of cultureand must understand that a healthy culture is clearly linked tolong-term success. Culture and values are not just the “warmand fuzzy stuff”. Rather, culture and values imply thateveryone in the organization is held accountable, that each personis productive and that customer service is elevated to anorganizational value that is lived and not compromised. Thenthe organization gets better because the climate for productivityis better.

Stuart R. Levine is chairman/CEO of Stuart Levine &Associates LLC. He can be reached at 516-465-0800 or stuartlevine.com.