Strategy & Operations » Governance » Investment in culture boosting financial performance of FTSE 350

CULTURE is fundamental to the business performance of UK PLCs with over half of FTSE 350 companies stating that that investing in culture has increased their operating profits by 10% or more.

However, the majority of boards still need to take greater responsibility for defining, shaping and monitoring culture in their organisation, according to a new report by EY.

Based on a survey of 100 board members from  FTSE 350 companies, the EY report found that a strong cohesive culture helps organisations to deliver long term growth and reduce risk, and that this ‘intangible asset’ is increasingly part of how businesses are valued by investors.

The majority (86%) of survey respondents said that culture was fundamental or very important to their company’s overall performance and strategy and 92% said that investing in culture had improved their financial performance.

Benefits of investing in culture extend beyond the bottom line

The amount invested in culture varied depending on the size and complexity of the organisation. While 27% of respondents said they had invested over £1m in culture, this rose to 48% among FTSE 100 companies, compared to just 6% among FTSE 250 companies. The most common response – cited by 35% overall and by 56% of FTSE 250 companies – is between £100,000 and £500,000.

In terms of outcomes, 61% of respondents said they has seen a reduction in breaches of organisational standards and 61% saw improved employee performance as a result of their investments.

Kevin Hills, EY’s head of integrity and compliance in the UK comments: “A 10% or more increase in operating profits is the kind of improvement that makes shareholders and potential investors sit up and take notice. However the rewards often extend far beyond the bottom line.

“Many of the businesses we spoke to didn’t fully anticipate the range of additional benefits that they accrued from their investments in culture. Some of these were unrelated to the issues they set out to manage, but nevertheless had a positive impact on the business. For example, even though respondents did not specify it as a driver, 32% cited fewer regulatory issues or legal actions as one of the top three benefits of their investments.”