What do you think is the biggest differentiator between two companies existing in the same marketplace? There are undeniable arguments to be made for differentiators like location, quality, price, marketing, or customer service. All of these factors will have an effect in the market but one factor that often gets overlooked and affects all the potential differentiators above is company culture.
Howard Stevenson, Public Admin Professor and writer for Harvard Business Review has said: “Maintaining an effective culture is so important that it, in fact, trumps even strategy.”
Does Culture Affect Your Bottom Line?
It is no secret that a great company culture will help you to recruit and retain top level employees, but do you give culture enough credit for affecting the bottom line? Some of the best companies in the world really put their money where their mouth is when it comes to culture.
Zappos, a multi-billion dollar online retailer credits it’s culture, or as they call it, the Zappos Family Core Values, as the key to their unbelievable growth and success. The CEO, Tony Hsieh has written a book, Delivering Happiness, about the Zappos rise in the online retail world and it largely focuses on how they built their culture.
The unrelenting focus on creating a company with a positive culture allowed Zappos to do some interesting things. One example is that they offer new employees $2,000 to quit on their last day of training. Many people in the business world thought this was a mistake but Hsieh felt it provided 2 great opportunities.
If the person isn’t a fit for Zappos it is discovered early, well before the company invests any more time and energy into the hire. And those who turned down the offer and stayed are immediately “bought in” to their new job and workplace. It’s the beginning of showing the employee how committed they are to creating the right culture – they are willing to pay you to leave, if you aren’t the right fit!
Google and 3M are both famous for implementing 20% time where they let employees spend some of their time on “pet” projects. Without this progressive attitude the world would not have Gmail or Post-It notes.
SAS, the analytics firm, is actually known for its creativity. It is rumored that campuses like Google’s, with parks, hiking trails, restaurants and art, are modeled off of SAS. CEO Jim Goodnight, recognizes the importance of company culture when he states: “My chief assets drive out of the gate everyday; my job is too make sure they come back.”
Goodnight knows that developing the right culture will benefit his bottom line because he sees it in the numbers. SAS enjoys a 2% turnover rate in an industry that typically has 22% turnover. That kind of number saves a lot of money on training and recruiting.
The Most Important Part of Culture
You be thinking that the above examples are of companies much larger than yours, with more resources and a bigger team. But the truth of the matter is that once you have 2 or more people in a company, culture matters. The company culture becomes the “boss” when you aren’t in the room. It can direct employee decisions and relieve bottlenecks caused by bureaucracy.
In order to create a culture that can direct employees, even when you aren’t there, you must have open and honest communication.
Too many managers rely on tactics like fear, intimidation and top down leadership. While this type of culture will certainly produce order, it also stifles innovation – often at a loss to the company’s bottom line.
Tom Watson, the famous Chairman and CEO of IBM, and the man who built the company an international powerhouse, was once asked if he was going to fire an employee after the man made a $600,000 mistake. Watson replied, “No. I just spent $600,000 training him. Why would I want somebody to hire his experience.” That is the kind of culture that can take a company from the $4.5 million IBM did in his first year to the international icon it is today.
The companies with the best cultures do not berate or belittle employees in a futile attempt to motivate them.
As Brad Feld, the famous Colorado venture capitalist states, “You can’t motivate people, you can only create the context in which people are motivated.”
Your company culture is this context.
When you create an environment where employees are co-owners of your company processes they become more dedicated to the company’s success. Part of making them co-owners in the process requires giving the employee constant feedback. It also requires that management have the ability and the temperament to receive feedback from the employees.
Feedback as the Cornerstone of Company Culture
Another company renowned for its positive culture is CHG Healthcare Services. They constantly solicit feedback from both customers and employees. They use employee engagement studies to create and foster the culture that has lead to their incredible growth and success. At CHG, they feel: “Without feedback, we invent our own reality.”
And that is the critical issue. If employees are too scared to give their managers feedback, how is the company going to innovate and grow.
Is Your Company Culture Costing You Money?
This takes us back to the original question; does your culture cost you money? The quickest way to answer that question may be to pose a different question – How comfortable are your employees giving and receiving feedback? When employees aren’t empowered enough to give feedback they eventually end up with a CYA mindset.
In that mindset, employees make decisions in an attempt to preserve their job, not better the company.
In a culture where employees are scared to give feedback, mistakes get covered up and never fixed. Some areas of the business may not even be properly scrutinized because those in charge of that area are able to operate in the dark, where their jobs feel safe, instead of bringing it all out into the light, where the company will prosper.
We see this all the time when we talk to other businesses. We meet a CFO who would love to have the knowledge, and the savings, we can give them with a telephone audit. When presented with the idea, however, the IT department sometimes gets nervous having an outside consultant shine light on the telephone bills even though, on average, we save companies 23% off their bill which will provide resources for the IT department.
It is this CYA culture that costs you so much money. Employees are scared to give and receive feedback so innovations are never seen, or worse, passed on because the fear of change is so great.
Don’t let your company culture cost you money. Get creative and find ways to implement some of the policies above which get employee buy-in, allow employee creativity and flexibility, foster open communication, and create a culture of feedback.
With those characteristics in place your company culture won’t cost you money, it will directly lead to growth and success.
[author_bio username=”Ken” name=”yes”]
