I touched on this chicken-and-egg issue in our October 16 cover story, “Culture-Change Agents.” The article looks at how Microsoft CHRO Kathleen Hogan and her team have been working to develop a “growth mind-set” among 118,000 workers at the tech giant.
Some experts argue the best way to get the culture you want is to rack up some business successes first. Bob Herbold, a business consultant and former Microsoft COO, says it’s no different than getting a football team on a winning streak. First you need to win, and then use employee excitement to create a virtuous cycle.
“The primary ingredient for changing the culture is winning,” he told me. The key, he says, is to get employees “to realize that we’re having fun, I have stake in this, I feel part of it.”
It’s a lot tougher to create success by first changing the culture, he says. “To try to create an ‘up’ culture in a ‘down’ business is almost impossible.”
But there is some evidence that culture change can improve the bottom line, says Felix Meschke, an associate professor of finance at the University of Kansas School of Business.
Research by Meschke and several of his colleagues in Lawrence, along with others, “suggests that a positive work environment is associated with higher firm performance,” he told me in an email interview over the summer as I was working on the Microsoft story.
Meschke worked with Minjie Huang , Pingshu Li and James P. Guthrie on a study published last year in the Journal of Corporate Finance. It found that in family-owned companies, at least, having a “human-capital-enhancing culture improves firm performance.”
Meschke says that study looked at a large number of companies and controlled for many variables. “Based on large-scale statistical analysis,” he told me, “I am quite confident that, in general, corporate culture can be an asset for companies that benefits shareholders and other stakeholders.”
But he notes that isn’t the same as saying a specific HR initiative at a specific company, like Microsoft, improves profits. Measuring the effect of a such an effort requires something that’s impossible: a “control” that researchers can use for comparison — a company that is identical in every way except lacking the culture change.
“In a nutshell,” Meschke wrote, “Is it plausible that the HR approach improves performance? Yes, it is. Is there a way to attribute its impact on MSFT’s performance through quantitative analysis? No.”Tweet This!