Culture is key for success and competitive advantage for private companies and family businesses

The latest swissVR Monitor for Switzerland revealed that two-thirds of the 363 Swiss Board members surveyed strongly feel that corporate culture provides an important competitive advantage for their business operations. In addition, more than half of all respondents strongly think that their company’s culture is a major driver of their company’s success. Both assessments are not only the view of Board of Directors of listed companies, but also very much of small and medium-sized companies (SMEs) of which many are private companies or family businesses.

The survey also showed that a high majority of respondents see culture as a key element of their company’s strategy. However, there are some differences by company size: Slightly more Board members of listed companies than of SMEs take cultural aspects into consideration when implementing strategic initiatives and say they have a corporate culture that promotes strategic transformation. Otherwise, slightly more Board members of SMEs than of listed companies say they adapt their culture as much as possible when there is a change in strategic direction. Changes in strategy happen more frequently in listed companies and do not always result in changes of the corporate culture. In SMEs however, strategic changes and cultural adjustments often go hand in hand when third party managers or new board members are joining or a new management is introduced.

At private and family companies, the preservation of independence and a long-term strategy to secure the company often precede the goals of increasing the market value of the company in the short term or achieving the largest dividends possible. Family shareholders are also willing to support bigger investments whose effects may take years to unfold. With regard to culture, family companies have at the same time the advantage that the main shareholders have grown up with the company’s values and can genuinely act as role models.

Unsurprisingly, two thirds of Board members from SMEs think that living the values (‘tone at the top’) is the best way to influence their corporate culture – an almost equally high number of respondents as for listed companies. However, almost every second respondent feels that the Board of Directors is somewhat removed from the day-to-day business of the company which makes it difficult to perceive and shape actual corporate culture. Interestingly, the size of the company does not really matter here. Other key activities for Board members to influence corporate culture are appointing and dismissing members of senior management and defining a framework of values and a code of conduct, both slightly more favoured by listed companies. The proportion of Board members who think that determining the company organisation and structure is an important opportunity to influence corporate culture is slightly higher in SMEs.

The biggest differences by company size exist when it comes to different ways in which the Board can gauge and evaluate corporate culture. Employee surveys, insights gained from corporate visits and interactions with employees, perceptions of the conduct of members of senior management and customer surveys are equally cited by Board members of listed companies and of SMEs as the most important methods. Overall, classic surveys, as well as trusting their own personal evaluation, are clearly preferred to other internal and external evaluation methods to measure corporate culture. However, Board members from listed companies focus much stronger on the perceived reputation of the company in the media and by the public, whereas Board members from SMEs favour evaluation by senior management and insights gained from customer and supplier feedback or complaints. Board members from SMEs seem to be much closer to their suppliers and customers whereas the often decentralised supply functions and customer interactions at larger entities make it more difficult for Board members to get such first-hand insights.

In a disruptive business environment that is increasingly shaped by new technological advances, a strong corporate culture is essential for a company’s success and competitive advantage. Listed companies as well as private companies and family businesses need to make sure that their culture fits their vision and strategy. Culture is not something static, but should be dynamically adjusted to changing circumstances. Board of Directors and senior management need to act as role models by setting the ‘tone at the top’ and together shape and regularly evaluate the required culture, values, norms and mindset that are applicable for all employees across all hierarchies.

Success will be measured by a corporate culture that not only enables better communication, less control and more motivation, but also has a positive impact across the whole business ecosystem of employees, customers, suppliers, partners and shareholders. This is especially important for family businesses that are strongly influenced by their founders; and where generational changes or overall succession have an important impact and can disrupt companies greatly.