Managers know intuitively that engaged, flexible and empowered work cultures easily outperform traditional, manager centred bureaucracies. The evidence is spread throughout the research literature and is an over-riding observation at all the best practice worksites.
One of the best studies on the subject came in 1992 from John Kotter and James Heskett at Harvard. Written up in their book, Corporate Culture and Performance, Kotter and Heskett conducted a 11-year study of corporate cultures across the US between 1980 and 1990. They reviewed the results for 207 large US companies, in 22 different industries, and found that Adaptive Culture Companies (ACC), those that are flexible, have great teamwork and work to satisfy the expectations of their customers, employees and stockholders always perform better than Strong Corporate Cultures (SCC), which are more traditionally focused, with rigid hierarchies.
Their research figures show the ACC’s experienced average revenue increases over the study period of 682% versus 166% for the SCC companies. Other performance differences included share price increases of 901% versus 74%, growth in staff numbers of 282% versus 36% and, most importantly, average profit increases of 756% for the ACC’s versus 1% for the SCC’s.
Jim Collins in Good to Great, Barry Macy at Texas Tech University, the people at Great Places to Work and a whole host of others have gathered extensive research evidence showing engaged and empowered workforces are the best performers.
Another frequently cited study by Daniel R. Denison, who researched 34 large American firms, found that companies with a participative culture reap an ROI that averages nearly twice as high as those in firms with less participative cultures.
Many companies complain that their employees are de-motivated, unproductive, and disloyal. Jeffrey Pfeffer, a business professor from Stanford University, argues that these companies get exactly what they deserve. If you create a toxic or dysfunctional work environment, then you’re going to get those types of behaviours from your workforce. According to Pfeffer’s research, companies that engage and empower their staff will outperform companies that don’t by 30% to 40%.
Pfeffer also found that over the 20 years from 1972 to 1992, the US companies Wal-Mart and Southwest Airlines had respective share price rises of 19,807% and 21,775%. Yet during this time, their industry competitors performed very poorly as a group. What these two extremely successful companies have in common is that their sustained advantage did not rely on technology, patents or strategic position but rather on how they managed their workforce. The evidence is conclusive; treat people well, engage them in running the business and the performance will follow.