The Non-Fuzzy Reason You Need A Positive Corporate Culture
Over the years, I have heard one story after another about how horrible the working environment is at company XYZ. Friends, relatives, and infrequent acquaintances have all shared their experiences. The stress and dread of going to the office every day, the lack of motivation, and productivity. The cliques and in-fighting that eventually led to “I quit”, or ”thanks, but I found an opportunity that I can’t pass up”.
Unfortunately, I have lived through the dreaded “negative corporate culture” myself. It is mentally and physically draining. It not only brings down employee morale, but it can also substantially bring down the value of your company!
On a positive note, I have also experienced and benefited from working in a strong company with a positive corporate culture. As a former Controller, CFO, and business owner, I can say with 100% certainty that working at a company that values its employees and customers is a much better experience. Those experiences have created partnerships that have survived many years and many organizations.
What is Corporate Culture?
It’s the shared values, beliefs, attitudes, and practices that characterize an organization. Culture influences how employees interact and how work gets done, both internally and externally. It sets expectations. It lays out clearly who your company is and what it stands for.
Positive culture can uplift an organization, while a dark, negative culture can tear an organization apart.
So, where does a company start if they are going to build a lasting culture that survives beyond the current ownership and management? One of the first areas to explore is the core values. (Stick with me. It isn’t just jargon; I promise it has to do with your bottom line.)
What Are Core Values?
Core values are the guiding principles that shape how a company operates. They set the tone for behavior, decision-making, and interactions both internally and externally. A company’s core values should be clearly defined, consistently communicated, and authentically practiced.
Building core values is a foundational must and will provide “the organizational glue,” so to speak. It keeps the team together and helps build strong bonds within the organization.
Here are some examples of the core values that help build a better foundation:
A strong foundation takes longer to build than the rest of the home or building, but is essential to a long-lasting structure. The same applies to any company.
Integrity: Acting ethically and transparently in all aspects of business.
Respect: Treating everyone with dignity and valuing diverse perspectives.
Communication: Open and transparent communication at all levels.
Leadership: Leaders who lead by example and foster a culture of trust.
These sorts of values help shape a company’s culture and the daily working environment. They help set the vision, the tone at the top, and that eventually makes its way through all aspects of the organization.
Core Values can’t just be words written on a whiteboard or inspirational posters strewn about the workplace. They need to be practiced, consistent, and reinforced from the top down throughout the organization.
How To Set Your Corporate Culture
Lead by example: The leadership team must embrace the company values and reinforce their importance.
Recognize and reinforce: Acknowledge and reward employees who exemplify the company values.
Recruit accordingly: Hire individuals who align with the company’s values.
Integrate: Make sure the values are inherent in policies, sales process, and the working environment. This can take time and is a continual process of refinement.
How to Keep Building a Positive Company Culture
Continuously updating & refining the experiences of employees as well as customers/clients is key to nurturing a strong, healthy, & long-lasting relationship.
Establishing and nurturing a strong culture rooted in core values should be clearly communicated and consistently lived by leadership and employees.
Empower employees: Create growth opportunities that allow employees to develop their skills and careers.
Prioritize corporate social responsibility: Support initiatives that give back to the community and promote sustainability. Foster a sense of belonging and purpose among employees, not only in the workplace but in the community as well.
Encourage mentorship and knowledge sharing: Encourage experienced employees to pass down wisdom and skills to newer team members. Help build a strong foundation that will pay dividends for generations to come.
Create a memorable customer experience: Build relationships that leave a lasting impression, strengthening brand loyalty. Encourage interactions based on respect, honesty, and integrity.
The financial upside of all this hard work:
Many things will begin to happen as your company transforms. The list could go on and on, but here are four Positive changes that can lead to exponential gains.
Reduced turnover: A great culture reduces turnover, saving costs associated with hiring and training new employees. Companies with strong cultures have an average turnover rate of 13.9%, compared to 48.4% in those with weaker cultures.
Increased productivity: Engaged and motivated employees work more efficiently and produce higher-quality results. Studies show that happy employees are 12% more productive.
More Innovation and Adaptability: A positive work environment encourages creativity and problem-solving, leading to continuous improvement and innovation. Positive cultures foster engaged, motivated employees, innovation, and customer satisfaction, contributing to sustained success. (Source: LinkedIn)
Customer Satisfaction: Happy employees make better products and provide better customer service. The result is higher satisfaction and stronger customer retention.
Negative culture has the exact opposite impact and can be costly.
What is the financial impact of a good corporate culture?
Is all the work worth it?
Let’s do the Math!
If onboarding a new employee costs $4,700 on the low end, and the spread is 34% between strong and weak culture, based on a company with 100 employees, the cost of onboarding 34 new employees each year is around $159k. That $159k at time of closing for a company selling at 6x EBITDA is now $958k on just the valuation, let alone all the years and the $159k that flew out the window. The rinse and repeat cycle of recruiting, onboarding, and training is both frustrating and exhausting. The same calculations can be applied to increased productivity, which can be as high as 12% of your direct labor cost. These figures could far exceed the cost of turnover.
Recommended Read: The Essential EBITDA Tutorial - What is “EBITDA” anyway?
The other two are harder to quantify, but don’t assume there is no financial impact. These are the things that make the top-performing organizations stand out. These companies bring better products to the market, and have more repeat customers, fewer quality issues, and higher referral rates.
Recommended Read: What’s Your Business Worth?
Culture… It’s not just a Buzzword
If you thought corporate “Culture” was just another buzzword or passing phase, you should think again. Putting in time and effort to build a positive work environment isn’t easy, but it can pay dividends down the road. It doesn’t matter if you’re looking to exit now, pass the company down to your children, or keep at it for another decade. The reduced cost today and the increased value in the future make financial sense.
At Doescher Group, we believe in more than just numbers. We believe that who you are and how you operate count for just as much as the P&L. If you’d like to talk about your company culture and how it could be setting you apart, or holding you back as you look to make your next moves, we are here to help.
Climbing uphill together - and with great attitudes among the team - will net positive results and progress.
