Everyone agrees over cocktails that culture is important, and, of course, hopes their company has a “good” culture versus a “bad” culture. For all of its implied significance, however, cultural change tends to rate alongside tarot card reading and astrology in terms of credibility. It lurks in the unfortunate category of “soft” issues that leaders can’t quite discard for the nagging sense that there may actually be something there, something too important to dismiss out of hand.

In fact, culture is not a “soft” issue driven by cheerleading, posters, or picnics. Culture can be defined, and it generally develops out of tangible (and controllable) actions within a company. Moreover, its implications for corporate performance are real and can be significant. Recent research from Denison Consulting concludes that companies demonstrating higher levels of performance in key areas of corporate culture—including adaptability, consistency, mission, and involvement—deliver better results when it comes to return on assets, sales growth, and increased value to shareholders.[1] This finding builds on J. Kotter and James Heskett’s landmark 1992 study,[2] which revealed that over a 10-year period, companies that intentionally managed their cultures effectively outperformed similar companies that did not. Their findings included revenue growth of 682 percent versus 166 percent; stock price increases of 901 percent versus 74 percent; net income growth of 756 percent versus 1 percent; and job growth of 282 percent versus 36 percent.[3] Additionally, Fortune’s 100 Best Companies to Work For further demonstrate the concept that companies with effectively managed cultures significantly outperform the S&P 500.

Beyond the hard numbers, culture can play a prominent role in several key issues that top business leaders’ agendas. Ethics, for example, hinges on effective controls, proper systems, and—most important—a culture that values ethical behavior and discourages dishonesty. Further, business publications are full of stories about the war for talent and innovation as a driver for growth. Jeff Rosenthal and Mary Ann Masarech put a finer point on it:

Organizations depend on innovation for growth and high performance, which in turn depend on employee initiative, risk taking and trust—all qualities that are either squelched or nurtured by an organization’s climate. [4]

Moreover, they add, people are increasingly looking for more from their employment than a paycheck. Some “sense of purpose” and camaraderie, even joy, fit into many workers’ notion of a great job, and projected demographic trends suggest that retaining top talent will become increasingly important as the talent pool diminishes. If a company wants to attract and retain the best and the brightest, culture once again emerges as something that truly matters.

The crux is this: A high-performance culture can be a competitive weapon and one leaders can actively manage. Culture should not be something that simply happens and through some miraculous roll of the dice turns out in a way that works for us. We believe that a high-performance culture, one that meshes with business strategy, will emerge from consistent and appropriate decisions on those aspects of the company that are anything but “soft,” i.e., behaviors, symbols, and systems.

Before diving into the churning waters of cultural change, it’s important to take a step back and question the purpose. What sort of culture is most in line with the company’s strategy and, as important, how does this compare to the way things are today?

As an example, at a Medicaid agency in the Northeast, an initial survey found employees giving low marks to virtually every cultural attribute, marking the distance between actual and ideal as quite large. Culture assessment tools can help to map present and desired-state culture as a way to get to a focused list of desired behaviors. Comparing today’s cultural attributes to those desired is often used to identify the biggest bang when changing a company’s behaviors and culture.

But companies don’t get paid for finishing at the top of the annual culture awards: They meet or exceed their business objectives by gaining market share and becoming more profitable. And while culture can be influenced by outside factors (e.g., competition, industry structure, and technological change), it should be consciously managed with an eye toward improving the company’s ability to meet or exceed its business objectives. ^[5]

Culture is an issue that extends well beyond the HR department. There is a danger in confusing culture with morale, or any other narrow measure. We believe that culture has an enormous influence on defining how a company should conduct business—and on how it actually does. This is certainly a matter of strategy. And for culture to be competitive, it must find its source in this strategy.

Great cultures aren’t e-mailed into existence, and poster campaigns portraying the joys of collegiality aren’t much better. Symbols and behaviors, however, do speak loudly. In effecting cultural change, top-down and tangible are the bywords. Executives who embody the performance culture have license, in the minds of employees, to expect the same throughout their organization. Leaders should speak and do openly what supports the desired culture and be heard and seen in the process.

Is the company president sitting behind his or her desk and reading status reports on customer service issues, or visiting the call center and handling the occasional call? Are employee ideas slipped into a suggestion box and forgotten, or does the company hold live meetings to argue about the ideas? Are offices reserved for executives and cubicles for junior employees? Is someone part of a team of three, or do he and several hundred coworkers report to one manager?

To some degree, every aspect of the work experience expresses the culture of the company. Context is essential—annual photo ops with the minions are nothing compared to genuine behavior modeling in real business situations. Big-production rollouts or cafeteria-style culture building that throws in three months of coaching to solve the “accountability problem” are both common and superficial. Reality is what people touch, see, and hear, and no “campaign” can beat a visible executive role model or a thoughtfully designed environment that shows junior employees are valued.

When misused, symbols can offer a tempting shortcut, but in truth any change in culture requires time, effort, and a learning process. The notion that a “culture change” team, even with executive backing, can impose a mindset on employees is flawed. Employees may fall into line and comply with directions—but with no commitment to the programs or their strategic intent. Real change, cultural or otherwise, involves real debate and leader advocates.

The processes by which a company conducts business can play a fundamental role in defining its culture. Systems can aid leaders in governing a company. Among the most important categories of systems are the following:

Performance Management Systems

What is rewarded gets done. Period. And performance ratings and compensation remain the fundamental rewards mechanism. Unfortunately, we have found that compensation is also among the most sensitive areas to change in many companies, and, as a result, the tight links between performance and adoption of new desired behaviors are often deferred. Badly calibrated or disconnected performance and rewards systems can override virtually any other cultural imperative.

The talent management life cycle encompasses recruiting, developing, deploying, and connecting employees within a company. Each aspect helps to create and foster the attributes of the company’s culture. For example, a company can actively recruit new hires based on culturally consistent, desired behaviors and reinforce these when people join the company. Among existing staff, who are the high-potential employees based on the new attributes? Which experienced employees were on board with the new culture even before it became the new culture? And it’s possible—and helpful—to identify both near- and long-term role backups based on new attributes; often this may involve looking to other divisions or functions.

As mentioned previously, top-down behaviors (not e-mails, but visible actions!) can have a significant impact. Culture change should be linked to leadership assessment and development programs, because leaders have the biggest impact. If it’s important that the customer-support and order-handling teams behave in a way that supports the new culture, it’s crucial that the management team serve as a constant role model.

Assuming that systems support the focus of the new culture, they can be helpful to explain the rationale behind the processes, i.e., the reason we do things this way is not arbitrary or mandated by IT—it’s because the company values this result. If smart, independent decision-making is a key new behavior, for example, coaching in this skill can both help employees develop in this area and serve as a visible symbol of this new emphasis for the company.

The converse is also true: Work systems that are implemented without regard to culture can undermine much of what leadership hoped to achieve. An ERP system implemented at an oil company, for example, resulted in cost savings with regard to data processing efficiency. However, it imposed customer-facing processes that reduced the company’s ability to cater the product to customer needs and effectively constrained what had been an effective culture.

Even with supportive symbols in place and systems properly aligned, a company’s culture can be constantly buffeted by competitive and technology-related pressures, making it periodically necessary to determine whether the company is on track. Measurement is essential, and it also can be difficult, as anyone who has administered any kind of “corporate happiness survey” can attest.

While anecdotal evidence can serve as confirmation of changed attitudes and behaviors, the most accurate metrics of a high-performance culture should be associated with outcomes. For example, suppose a company was striving for a culture in which innovation was supported and shared, rather than losing product and service ideas to the hoarding that can happen in a competitive environment. One (bad) way to measure this would be to survey everyone to find out whether they felt good about sharing ideas. A better approach would be to assess how the company had done in terms of producing ideas and how those ideas had generated income for the company.

Measurement is also worth attention because human behavior is notoriously difficult to predict. Even in a company that astutely manages cultural change, it’s rare to have addressed everything the first time out. Measurement allows for course correction and reinforcement as needed.

Commitment matters. Companies whose cultures generate commitment—and support their strategies—win in the marketplace. They tap their talent more fully than their competitors, where cynicism, confusion, frustration, and echoes of “what’s in it for me?” sap energy and motivation.

Companies and leaders who delight and inspire their employees find that their employees, in turn, delight and inspire their customers. And just as companies that delight their employees can expect significant “discretionary effort” from their workforce, so, too, can these same companies expect to see significant “discretionary revenue” from customers willing to pay more to be delighted and inspired in their customer experience. Positive culture leads to positive cash flow.

In the coming years, companies will have no choice but to seriously rethink their company culture and whether it is suited to achieving their business vision in light of global competition and talent scarcity. Opportunities to seize culture as a competitive weapon will become apparent to some and remain a mystery to others. In the meantime, it’s important to recognize that culture matters—and can be managed.

The information contained herein is based on the experiences of our Deloitte Consulting LLP professionals.