28: Jillian Grennan: The Financial Value of Culture

+ Follow

In this episode of The Manage Your Message Podcast host Jim Karrh speaks with Jillian Grennan, assistant professor of finance at Duke University’s Fuqua School of Business. Jillian is on the leading edge of research on how corporate culture affects the everyday workings of the business—as well as its marketplace value.

Before going into research and teaching, she worked for the US Federal Reserve, the World Trade Organization, and the consulting firm KPMG.

Jillian’s research has been featured in the news including The Wall Street Journal, Forbes, and Fortune, and has won numerous awards including the Thomas Edison Innovation Award.

Jim began the conversation by asking how Jillian and her cohorts have attempted to measure something that seems very difficult to quantify. As the research progressed, the team learned how to ask financial leaders and CEOs questions in a certain way. For example, they tied the question of cultural fit to merger and acquisition (M&A) decisions, a familiar area. It turned out that these executives would discount their offers for an acquisition target by 10 to 30 percent if the culture of that target was misaligned with their company.

When it comes to the indicators of a strong, healthy corporate culture the team found little if any differences by industry, between public versus private firms, or between family firms and non-family firms.

What are the characteristics of a strong culture when it comes to decision-making? A main factor is the balance between urgency and agreement. Jillian points to Amazon as a useful example. Within Amazon, she noted, “It’s okay to question decisions, to have this back and forth.” But once a decision is made, there is no longer a need to build consensus. “That balance of urgency and agreement, and also allowing creative types to fit in, is something that came up time and time again in our interviews.”

Another area of focus for the research team has been the consistency (or lack of consistency) between how a company expresses its cultural values to various constituencies. “Most firms have well-defined stated values,” Jillian notes, and these days we see more and more community-based values. Yet there is often a disconnect between what is on the “Careers” website page for attracting employees, for example, and what plays out in the everyday decisions within the business.

What are the most effective ways for companies to invest in, and communicate, their cultures? The primary areas that seem to make a difference are:

Consistent internal communication
Visible executive leadership (“executives who made the effort to get in front of all employees, to reinforce the culture”)
Strategically including the culture in onboarding activities (for example, going through critical decisions the company has made in light of the culture)
Celebrating extra and heroic efforts

Links:

Learn about Jillian Grennan and her research:

https://www.fuqua.duke.edu/faculty/jillian-grennan

“Communicating Culture Consistently: Evidence from Banks”

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3350645

“Corporate Culture: Evidence from the Field”

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2805602

“A Corporate Culture Channel: How Increased Shareholder Governance Reduces Firm Value”

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2345384

“Corporate Culture: The Interview Evidence”

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2842823

See different ways that Jim Karrh works with clients as a speaker and consultant: https://jimkarrh.com/