Why Top Companies Balance Compensation and Company Culture

Companies must win the best efforts of their employees to differentiate themselves in a competitive marketplace.

After all, it’s the employees that earn sales, deliver on the brand promise, and generate customer loyalty with day-in-day-out relationships and deliverables. Without their dedicated best efforts, true excellence is out of reach.Top performing companies know that it’s essential that everyone, from the CEO to the intern, understand and strive for the organization’s goals—and feel that they are part of its community and success along the way.

In their recent article in the Wall Street Journal, "Compensation or Culture? The Best Companies Lean into Both,” Rick Wartzman and Kelly Tang report on this strategic view of employee engagement and compensation. They cite Peter Drucker’s work, now carried forward by the Drucker Institute with a joint WSJ assessment of the Management Top 250, wherein they created investment portfolios with the top 15 scorers in ranking categories.

This year, their standout findings include:

• From 2013 to 2023, portfolios prioritizing employee engagement and development outperformed comparators, with an average return of 21.3%

• Portfolios focused on companies scoring highly in employee sentiment and satisfaction with company culture and development opportunities had an average return of 19.3%

• Portfolios centered on how well employees were compensated averaged 19% returns

These engagement and compensation driven organizations outperformed the S&P 500 by 7% or more on average. As Wartzman and Tang put it, “If a company wants to attract and retain the talent it needs to thrive, it can’t skimp on compensation. But neither can it neglect culture.”

In fact, leaders in the incentive, recognition, and engagement industry have solid research that shows the same effect. The Incentive Research Foundation recently released the “2025 Top Performer Study” showing that among many other metrics, Top Performing companies invest more in incentives and rewards, take a broad view of the qualifications for top rewards to capture employee best efforts across performance and relationship metrics, and offer a wider array of rewards to prioritize personal relevance to program participants.

We’ve been working with our clients to create successful teams and drive results for nearly 50 years.

Let’s talk about how your company culture can complement compensation to achieve your goals.