One-third of CEOs rank culture as the most important influence on financial performance

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Across all the industries surveyed, "increasing employee engagement" was the number one goal for business leaders. 

CEOs across the world have identified the five factors that have the greatest influence on their financial performance:

• Culture
• Strategy
• Talent
• Operating model
• Leadership

Meanwhile, as to positive impact on retention rates, the results varied across the regions surveyed, but roughly the following were the five most important factors affecting employee retention:

• Company culture
• Compensation & benefits
• Flexibility in work rules/locations
• Being identified as high potential
• The quality of leaders at all levels

These findings come from Heidrick & Struggles' recent survey of 500 international CEOs, called 'Aligning culture with the bottom line: Putting people first', which polled CEOs in Australia, Brazil, Canada, France, Germany, Hong Kong, Singapore, Spain, the United Kingdom, and the United States. 

Diving a little into the importance of culture in driving the bottom line, the following findings emerged:

• Globally 71% of CEOs highlighted culture as a top factor positively influencing financial performance—up from 26% in 2021,
• 92% of Australian and 86% of Hong Kong and Singaporean CEOs are actively working on culture, higher than the global average of 83%,
• 98% of CEOs in Australia, Canada, United Kingdom, Hong Kong and Singapore agree that culture has improved retention rates,
• Australian and UK organisations shows marked improvement in DE&I performance due to actively working on culture, in comparison to other markets.

What aspects of culture are most important to CEOs?

In a sectoral cut of the findings, the report broke down the goals that CEOs have for their culture per industry:

• Across all the industries surveyed, "increasing employee engagement" was the number one goal for business leaders.
• "Improving diversity and inclusion" was particularly important to CEOs in the sectors of consumer goods, hospitality, leisure, retail; and, financial services.
• For companies in the sectors of healthcare/pharmaceuticals, industrials/energy, and technology/telecom, "increasing innovation" as a key cultural imperative.
• Other cultural priorities raised across industry segments included: 
  • Creating stronger alignment with organisational purpose
  • Addressing ethics or compliance issues
  • Managing new ways of working

Responses from the three APAC markets surveyed (Australia, Hong Kong and Singapore) revealed that more than half of Australian CEOs surveyed (52%) rated culture as the most important factor in retaining employees, followed by flexibility in work locations (44%), and compensation and benefits (40%) as the third priority. For Hong Kong and Singaporean CEOs, culture was similarly rated as the top factor (54%), followed by compensation and benefits (50%), and flexibility in work rules and locations (46%).

By way of contrast, in the US flexibility in work locations was ranked highest (61%) of all markets surveyed, while less than half of US CEOs (45%) rating culture as important, the lowest of all markets surveyed.

Gaby Riddington, Partner and Heidrick Consulting Lead at Heidrick & Struggles Australia and New Zealand, noted: "Company culture can no longer be separated from business strategy. Rather, it must be positioned at the core of any organisation."

Australian CEOs displayed a higher tendency than most markets to utilise culture to enhance diversity and inclusion (50%), boost employee engagement (48%), align more closely with organisational purpose (40%), foster innovation (36%), and manage new styles of working (24%). Furthermore, Australian CEOs reported an 88% improvement in diversity, equality, and inclusion (DE&I) performance due to culture, the highest among all markets surveyed.

In contrast, CEOs in Hong Kong and Singapore saw DE&I performance improving by 71%. Hong Kong and Singaporean CEOs were found to take much more importance in increasing employee engagement (51%) and innovation (45%), with improving DE&I (35%) coming in third in priority.

"CEOs in the region are increasingly placing a spotlight on their people and how they work together," observed Tonny Loh, Partner and Heidrick Consulting Lead at Heidrick & Struggles Singapore. 

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