Embracing diverse values in company culture pays off—literally

graphic of 5 different people facing each other and various icons above them (cloud, chess pieces, ladder, etc.)

Originally published on Berkeley Haas Newsroom 

Zappos says its 10 core values are a “way of life,” while Netflix details seven aspects of its culture, nine “highly valued behaviors and skills,” plus deal-breakers like “no brilliant jerks.” Nordstrom has just one rule of thumb: “Use good judgment in all situations.” More and more companies are asking employees to adopt a set of core values, seeking to build a culture that will give them an edge. But while getting everyone on the same page makes it easier for people to work together, too much of the same thinking can stifle creativity. What’s the right balance of cultural values to drive profitability, growth, and innovation? An analysis of 500,000 Glassdoor.com reviews of S&P 500 firms found that companies whose employees disagree on core values are, indeed, less profitable than similar companies where workers are culturally aligned. Meanwhile, the firms that are the most highly valued and innovative have something in common: They embrace a diverse range of cultural values throughout the organization. “Past research has suggested there’s a tradeoff between diversity and productivity,” said Berkeley Haas Assoc. Prof. Sameer Srivastava, co-author of the study, which is forthcoming in Administrative Science Quarterly. “We suggest it’s a false tradeoff. You can have a multiplicity of ideas and values and also have cultural alignment on those ideas and values.”

A new way of thinking about cultural diversity

The paper defines a new way of thinking about diversity in organizations and reconciles a fundamental contradiction in current thinking. On the one hand, deep differences in how people think can create problems when they have to coordinate on tasks; research has found that a strong and unified culture increases productivity and efficiency. On the other hand, diverse viewpoints and perspectives can help people respond to change and uncertainty, and ultimately recombine ideas into something novel.

To get a more nuanced view of the cultures of different organizations and their relationship to business performance, Srivastava and collaborators Amir Goldberg of Stanford and Matthew Corritore of McGill drew on the power of the Computational Culture Lab, which Srivastava and Goldberg co-direct. The joint Berkeley-Stanford lab uses data science to develop new ways of measuring organizational culture. (Srivastava, Goldberg and co-researchers previously analyzed 10 million internal emails from a technology company to learn about culture fit within an organization.)

This time they looked at differences between organizations, turning to Glassdoor, a job search platform with 17 million monthly users who post anonymous reviews of their employers. The company has a data science team that agreed to share data with the research team to gain new insights...

To read the full article on cultural diversity, visit Berkeley Haas Newsroom.