Culture: 10-15% EBITDA Lever Business Leaders Are Missing

Business leaders will spend six months optimizing working capital to achieve a 2-3% EBITDA. They'll spend six hours on culture that returns 10-15%. In the frantic rush to use AI for productivity, they're learning a bitter lesson: AI compounds whatever culture you have. If it's dysfunctional, AI accelerates dysfunction. If it's good, AI becomes unstoppable. 

But this is the disconnect. Step into any boardroom or C-suite meeting and speak the words 'culture as a strategic driver', and you'll get polite nods and then maniacal discussions around AI deployment, digitalization, and growth in the market.  

Culture is relegated to HR programs and employee satisfaction surveys. It's the biggest lost opportunity in business leadership today, and AI is rendering it exponentially more costly. 

The Berlin Oat Milk Dilemma: When Culture as Decoration 

Culture is not employee socials and office benefits. I've watched businesses here in Berlin spend months deliberating whether to stock oat milk brand XYZ in the office fridge or what tier of Urban Sports Club membership to cover employees without realizing that 40% of their employees never contribute in meetings because they don't feel psychologically safe. This is not just bad culture. It's business inefficiency with a price tag. 

When you're missing half your team's ideas, issues, and solutions, you're making decisions on partial intelligence. You're making strategic choices with incomplete information. You're thinking problems through with half your brain and giving full salaries for individuals who've learned that silence is more secure than contribution. 

The trend persists across industries: companies that confuse culture with perks are worse off than companies that build culture as infrastructure by margins that CFOs can't afford to ignore. 

The EBITDA Effect No One's Tracking (But Everyone Should) 

Operational excellence has been delivered by business leaders. They know how to optimize supply chains, identify market opportunity, and drive strategic change. Double-digit profit growth and industry-leading profitability year after year are what the top performers deliver. 

Yet most organizations are leaving enormous value on the table by not using culture as a driver of top performance, but rather as an afterthought. Let's frame this in terms of P&L impact in actual numbers. 

Gallup's 2024 meta-analysis didn't study just dozens of companies. It studied 183,806 business units across 53 industries over multiple years. It's the largest dataset ever constructed correlating culture metrics with audited financial outcomes. The findings aren't projections or case studies. They're trends validated at scale across nearly 200,000 organizations. 

These are the companies that do get this right. They not only outperform on culture performance metrics. They outperform on all metrics that matter: revenue growth, margin expansion, customer retention, innovation velocity, and market valuation. 

The AI Amplification: Why Culture Defines Your AI's EBITDA Impact 

Here's what's actually re-writing the equation: artificial intelligence. 88% of organizations are highly investing in AI for operational efficiency. Boards are requesting AI plans. The productivity benefits promised are stunning: 20-35% boosts in specific workflows, automated decision-making, and better customer experiences. 

There's a dependence most leaders forget, and it's costing them millions: AI amplifies whatever culture you already have. 

And worse, AI can prop up current dysfunction: computerized processes that avoid necessary collaboration, data systems that accentuate organizational silos, decision tools that eliminate human judgment that was compensating for broken workflows. 

The financial math is brutal: An AI transformation spend of $10M by a $500M company expects to realize $30-50M in productivity improvements over three years. When they have a strong culture, they reach or exceed those metrics. With a poor culture, they achieve only $5-8M worth of real value and introduce organizational drag as automation exposes cultural breakdowns that were masked previously. That is why AI implementations have such dramatically different results at similarly situated firms within the same industry. Technology is the same. What differs is the culture it enters. 

Culture is not competing with AI for investment dollars. It is the infrastructure layer that will cause AI investments to return 10% or 100% of their potential. Technology is about enhancing human performance, not replacing it. Firms with engaged employees adopt new technology faster, apply it more creatively, and achieve much higher payoffs on technology investments. They don't just automate existing processes; they transform business models and discover new value opportunities their competitors ignore altogether. 

Why Culture Is No Longer Optional: Five Forces Reshaping Business 

The business environment has transformed dramatically in terms that make culture more crucial than ever. What worked during the 3 to 5 years of planning time frames no longer works when extended hold periods, AI uptake rates, and high valuations all rest on one variable: organizational culture. 

Extended Performance Horizons: The 7-10 Year Reality 

Whether you're a CEO strategizing for growth sustainability or an investor managing longer timeframes, culture is the generator of values that pay out over the long term. With economic uncertainty and market volatility, the ability to deliver performance sustainably through cycles depends significantly on organizational culture. The old playbook assumed 3 to 5 years of planning horizons. Now, 7 to 10 years of sustainable performance is what the world demands, a period when culture becomes the primary discriminator among companies that gain momentum and those that stall. 

AI Adoption Complexity: Technology Success Decided by Culture 

Research across various companies indicates the success rate using AI and digital transformation varies wildly, with culture as the key influencer of technology achieving 5% or 50% productivity improvement. The successful companies possess shared cultural traits: high trust, psychological safety, rapid experimentation cycles, open communication, and joint working on fixing problems. The underperforming companies possess different traits: siloed information, risk-averse management, blame cultures, and weak cross-functional integration. This is not happenstance. It is causation. 

Integration Imperatives: Where M&A Value Lives or Dies 

In a time of consolidation, platform development, and strategic M&A, culture will decide whether synergies envisioned in your business plan materialize or wither away. The EBITDA gains of your business plan only materialize if teams actually work together across organizational boundaries. 

McKinsey's research of hundreds of M&A transactions found that cultural integration failure wrecks more value than any other post-transaction variable, more than technology infrastructure, more than customer overlap, more than geographic challenges. And yet culture receives a fraction of the disciplined focus that financial and operating factors receive. 

Valuation Dynamics: The 20-30% Premium Multiplier  

Financial and strategic acquirers increasingly evaluate organizational capability as well as financial performance. High-culture companies are given premium multiples, often 20-30% premium multiples, because the acquirers see lower integration risk and higher probability of continued post-acquisition performance. Due diligence processes previously 90% financials and 10% "soft factors" are trending toward 70/30 ratios as the acquirers recognize that culture is a better predictor of future performance than prior finances project it. 

The Trust Crisis: When Leadership Loses Its License to Lead 

The 2024 Edelman Trust Barometer introduces a dire reality: there exists a mind-boggling trust gap between front-line employees and executives that is directly impacting business performance. Executives are 2.5 times more likely than associates to trust their CEO, while associates are much more likely to trust their immediate team members than leadership. This is not a people problem. This is an operational failure. When the employees do not trust the leadership: 

The Culture Operating System: Engineering Performance, Not Hoping for It 

Most companies approach culture like they're trying to boil the ocean: vague values, inspiring speeches, and crossed fingers that something changes. Wake up, it doesn't work! Culture doesn't shift because you declared it should. It shifts when you engineer it systematically, the same way you'd architect any mission-critical business system that determines whether you succeed or fail. Based on our experience, building a culture operating system requires four key steps: 

Step 1: Measure What's Actually Happening 

Most leadership teams are working on perilous assumptions as $8-12M of EBITDA seeps through hidden cultural dysfunction. They assume engagement is high because employees smile in meetings, but they are blind to where decisions get stuck, silos destroy collaboration, and high performers fall silent. The answer lies in robust culture diagnostics that reveal the exact moments where your culture creates or destroys value. 

Step 2: Define Your Decision-Making Code 

Values like "ownership" and "accountability" on a PowerPoint slide provide no behavioral instruction, and therefore culture becomes what the loudest person in the room makes it. Instead of an inventory of inspirational values, you need to have a core code based on purpose, values, and crisp trade-offs that teaches individuals how to make choices when priorities conflict. 

Step 3: Build the Human Capabilities 

Awareness doesn't drive change, capability does. Your team needs to shift their mindset, change behaviors, and develop hands-on skills to bring your culture code to life daily. That requires the ability to provide feedback that matters, call out the right action in the moment, and hold violations accountable without drama. Strengthen these by focused training and include behavioral feedback loops that turn culture building into a continuous process, not some activity that was done at an offsite last year. 

Step 4: Embed Culture Into Your Business System 

The inherent failure of most cultural initiatives is that they require a hero to survive. When the hero departs or becomes bored, the initiative dies, and cynicism flourishes. The solution is to embed culture into the systems that already run your company, e.g., linking cultural behaviors to the same dashboards and KPIs as revenue and EBITDA, and incorporating them into hiring, onboarding, performance reviews, and promotion decisions. 

The Strategic Choice: What Leaders Need to Decide Now 

Corporate leadership stands at the crossroads. Established competitive advantages are being eroded faster than ever. Automation and AI are putting operational gains into commoditization within a few months. Market position is undermined by AI-fueled competitors accelerating at record speed. 

Culture-driven performance is the last competitive distinction in a universe where AI can copy all other things overnight. The choice is urgent: continue competing on dimensions that AI is rapidly making commoditized, or build the sole capability that decides whether your AI bets multiply performance or just accumulate cost. 

For CHROs: Culture Is Now AI Readiness 

You now have the business case for why culture is a strategic imperative. Culture drives 10-15% EBITDA growth supported by Gallup's study of 183,806 business units. More importantly, it's the variable that separates AI winners from losers. Organizations with weak culture get AI investments bogged down in resistance. Organizations with strong culture achieve 3-5x faster AI adoption and immediate productivity benefits. 

The opportunity: Connect culture metrics to AI adoption pace. Be the CEO who can ensure your organization actually leverages the technology you are buying. 

For CEOs: Your AI Investments Are at Risk 

Your board looks at AI strategy, but there's a more important question: Can your culture absorb the AI transformation you're considering? Culture determines if AI delivers 10% or 100% of the projected value. If groups embrace or resist new tools. If you possess hybrid talent, everyone else is fighting to recruit. The numbers are staggering: 23% profitability gap, 51% better retention, 18% improved productivity. In an AI-driven world, these gaps multiply exponentially. 

The reality: Weak-culture companies are having their AI investments sit on a shelf as culture-ready rivals irreversibly gain ground. The window is shutting. 

For Investors: AI ROI Depends on Culture Infrastructure 

Culture transformation provides 10-15% EBITDA improvement, yet in the age of AI it's become the tipping factor for whether your portfolio firms' tech investments create or eliminate value. 

All portfolio firms are leveraging AI. Returns will vary greatly not on what tools they buy, but on whether their culture enables rapid adoption and continuous learning. AI-fueled organizations with strong culture infrastructure achieve 3-5x faster AI adoption rates. 

Others fall behind with expensive bets that collapse while rivals rocket forward. The imperative: Assess culture infrastructure with the same rigor as technology architecture. The firms doing both right are building compounding advantages that will be impossible to close. 

I Want to Hear Your Take 

Every CEO has an AI strategy. Almost none have a culture strategy to make it work. Some teams are flying high with AI adoption. Others can't get people to utilize tools they invested millions in. 

What's actually happening in your world? Are your people embracing AI or avoiding it? 

Hit reply and tell me. What’s one thing about AI adoption or culture shift surprising you right now? 

I read every response.