As Starbucks’ newly hired CEO, Brian Niccol, takes the company’s reins this month, he’ll bring more than 20 years of experience as a senior executive in the food and beverage industry, including as CEO of Chipotle. In announcing Niccol’s hiring, Starbucks touted not only Chipotle’s financial growth under his tenure but also his success strengthening the company’s corporate culture.
Culture issues can be a hurdle for incoming leaders, says Wei Cai, an assistant professor at Columbia Business School. “Matching the CEO’s strategy to the current company culture, and whether the CEO has the courage to shape the current culture to a new one, is always a challenge for new leaders,” she says.
That is because an organization’s culture can be one of the most important drivers of overall workplace performance. Among organizations both large and small, culture can have a serious impact on financial performance as well as employee retention and well-being.
As such, it is imperative that organizational leaders use modern tools to introduce and shape workplace culture. One is an employee selection system, which helps companies identify and hire employees who hold company-aligned values and can spread their influence to existing employees.
New research from Cai and the Reuben Mark Initiative for Organizational Character and Leadership has found that new employees hired through this system can have a massive spillover effect on existing employees — when the conditions are right. Her paper examined an organization with nearly 20,000 employees across more than 200 offices.
The tipping point for shaping existing employees’ values is when 20 to 40 percent of new employees are aligned with the desired company values, according to Cai. In some cases, however, this spillover effect can lead to a negative impact on company culture. “Leaders need to be very careful with any culture-fit system that they implement and also think of the potential spillover effect,” she says.
Cai shared other key insights from her findings and what business leaders stand to gain — and, in some cases, lose — from new, culture-fit employees.
CBS: What is the main background and findings of your research?
Wei Cai: If leaders would like to shape their company’s culture, they need to think about how they’re going to do that, especially if they already have a large number of employees in their organization. The values held by these existing employees can be anything, so how do you shape their beliefs? One way is to select new employees who are more aligned with new organizational values, even if these new employees are just a small part of the organization.
In this study, after the firm implemented this employee selection system that is based on culture fit, the findings show that new employees had a spillover effect on existing employees but conditions matter. It's not always the case that the spillover could be positive — sometimes it could even be negative.
CBS: What are some of the negative outcomes of spillover?
Cai: Culture clash can impact employees’ performance. If the new employees are so different from the existing employees, both the new employees’ performance and the existing employees’ performance could decrease.
CBS: What is the approximate timeline for spillover effects?
Cai: This research suggests that it is more based on the extent to which the system is implemented. For instance, if a firm hires a new employee who is way more aligned with organizational values than existing employees, this one person generally wouldn't cause a significant spillover effect. In other words, no matter how long the person stays in the firm, if this is just one person versus 100 existing employees, the finding shows that this new employee, in general, wouldn't affect the existing employees’ beliefs or values.
What matters is the critical mass. The more new employees are hired through the system, the more influence they exert on the existing employees. The tipping point is 20 to 40 percent of new employees in the organization in this study. The tipping point may vary across firms, but I think it's kind of important to be aware of the potential existence of the tipping point.
CBS: You studied a large company in your research. Are these benefits replicable in small companies of, say, 100 employees or less?
Cai: In large organizations, cultural problems are usually more pronounced. In a small startup, for example, it's relatively easier to shape beliefs. As the firm grows, it may not be that easy, especially when the company is geographically dispersed and there are different offices and different selection processes. Then, I think leaders are more likely to lose control on the culture side.
CBS: What other factors or tools should leaders consider when shaping organizational culture?
Cai: If firms would like to shape their culture, employee selection is just one way. Leaders can also shape organizational culture through other methods, such as training or communication.
Read Professor Wei Cai's related op-ed on strategic hiring in IndustryWeek.
Also, watch Cai discuss her work on how management control systems can shape desirable organizational outcomes in this TEDx video:
