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Shearman & Sterling LLP 42 | Internal and External Forces — The Rising Importance of Corporate Culture Review 3 See T. Clifton Green et al, "Crowdsourced Employer Reviews and Stock Returns," Journal of Financial Economics (March 25, 2019). 4 See Neel Doshi & Lindsay McGregor, "How Company Culture Shapes Employee Motivation," Harvard Business Review (November 25, 2015). INTERNAL FORCES Internal perceptions of corporate culture can have measurable impacts on employee engagement, and ultimately, performance and retention. Companies should actively seek to foster a positive and authentic workplace culture in order to achieve sustained success. Turnover Rates Companies that suffer from a negative culture, and, in particular, those that suffer reputational damage, frequently lose talented employees. Increased turnover impacts the bottom line by ratcheting up recruiting and training costs. It also creates lost continuity and institutional knowledge. A negative culture can even make it difficult for companies to attract and retain the right leadership, which could ultimately impede a company's short- and long-term development. Conversely, companies can recruit employees that embody particular traits or skills as part of a cultural reformation effort. Employee Performance Companies can face challenges in maximizing the productivity of their workforce if the corporate culture leaves employees feeling unfocused and disconnected. Employees are most productive when they feel happy and inspired at work. By developing clear cultural goals, companies can make their mission more concrete, engaging their employees and enhancing performance. Employee Reviews Employee assessment of culture not only manifests in the day-to-day experience of workers, but is also a predictor of more global and long- term outcomes. A recent study in the Journal of Financial Economics found that companies that experienced improvements in their Glassdoor ratings demonstrated better stock market performance than companies that experienced declines in their Glassdoor ratings. The rating categories that most clearly correlated to market performance were "career opportunities" and "perceptions of senior management." 3 Customer Satisfaction Surveys Workplace culture impacts how employees engage with customers. A 2015 study in the Harvard Business Review surveyed employees regarding their motivating factors and analyzed the results against customer satisfaction surveys in the airline and grocery industries. The study found that strong workplace cultures (i.e., companies where employees were motivated by the work they were doing and believed the work would lead to future benefits) were predictive of higher customer satisfaction. 4