Corporate leaders pay considerable attention to the strategy and finances of their organizations but often less attention to organizational features that impact whether their strategy is successful, including the decision-making structure and the incentives, values, and culture that motivate individual employees to act in the interest of the firm. How important are these elements in contributing to financial results? We examine this question in detail through the example of Keller Williams Realty. Keller Williams is the largest real estate franchise in the world, with over 115,000 agents. It is also a company with a unique economic and cultural model, embracing organizational concepts such as profit sharing, shared decision making, open books, and extensive employee training. We review the company’s operating model in detail and ask: How important is culture as a determinant of economic outcomes? Are culture and incentives the same, or is culture something greater? Are some elements of culture “more important” than others? and How are the values and behaviors within an organization influenced by “tone at the top”?
Copyright held by David F. Larcker and Brian Tayan. Further inquiries about reproduction and use should be directed to the Corporate Governance Research Initiative.
