141 — The Benefits of A Good Organization Culture

Because the company culture influences everything and everyone, a well-developed company culture creates positive changes across the organization. Managers who have developed their company’s culture report improvements in every area, including:

Financial Benefits

At the economic level, a well-developed culture brings dramatic, sustained increases in productivity and performance. This is no surprise given that psychologists estimate that the average employee contributes only 20% of their potential. A culture that deeply engages people is understandably much more productive. A 10% increase in productivity is minimal. Unit productivity often doubles in 2 years — though this depends on the unit’s size, the industry type, and the level of senior management commitment. Continuous improvement is the norm. Theoretically there is no limit to improved productivity — so long as leaders keep working on the culture. Given the mostly untapped potential of employees, these gains are not surprising.

Employees know cost control is important. As the culture builds, people take personal responsibility for costs. With such widespread focus, administrative and operating costs drop well below industry norms. The business reason for improving the company culture is profit. Because the developing culture creates across-the-board improvements, increased profits are inevitable and large.

Recruiting

A well-developed company culture, clearly stated in promotional materials, is a powerful recruiting point. Companies with an open, participative workplace, where people enjoy working, and have broad opportunities for growth and creativity, attract top candidates. One of the measures of an excellent work culture is that existing employees urge their friends to join. When employees do this, they are typically highly selective, inviting only people they know will excel.

Morale

High morale is a key to success. It is closely connected to trust, purpose, team loyalty, pride, and faith in the leadership — all qualities that improve as the culture develops. See Morale.

Supply Chain

Supply chain efficiencies depend very much on internal cooperation between multiple functions and levels and with external suppliers and customers. As the culture develops, relationships, cooperation and communications improve. The supply chain becomes more efficient, streamlined and responsive to rapidly changing markets, technology, and customer needs.

Customer Service

As the culture builds, managers learn to better manage the quality of everyone’s experience, inside the company and with outsiders such as customers, clients, suppliers, and other corporate entities. Most customers are highly attuned to their suppliers’ cultures. They can easily tell when things are working well and when they are not. We all know from personal experience as a customer that when we like doing business with a company we return more often, buy more, and recommend it to others.

Employee Motivation

Motivation blossoms in a well-developed culture that recognizes the employee’s personal  work needs and desires and allows people to fulfill these needs through the business tasks. When people are recognized and appreciated for who they are and what they can contribute, the two-way benefits are large and unending.

Responsiveness to Change

A well-developed culture brings a strikingly increased openness to change and the desire of employees to make changes work. As trust and responsibility increases, employees don’t just initiate significant improvements in ongoing operations, they actively reach out to their environment, bringing improvement ideas and initiatives that make the company more market competitive. For example, customer service representatives, through casual conversations, learn a great deal about the client’s needs and plans. In a well-developed culture this information is smoothly connected to marketing and product development. In a more conventional workplace, silos separate functions, limiting communications — in this case the potential valuable inflow of information from customers.

Involvement

People naturally want to be involved and go home knowing they were appreciated and seen as an important contributing member of the team. When the leaders show that they want everyone involved, people step forward energetically in creative and productive ways.

Leadership

Developing the culture trains managers in people leadership skills and gives them a clearer sense of their role. Many managers say that the culture development process was the most important experience in their career, though often they add that it was also the most difficult.

Meetings

With improved openness and trust, people speak up and participate more in meetings.  Meetings are more focused, creative, and productive. The right people attend, keep the meeting on track, and stop when the task is done.

Mergers and Acquisitions

Well-developed cultures bring smoother mergers and acquisitions, with higher success rates. People get more involved and make them work. When a well-developed culture acquires a less-developed culture acquiring managers know how to lead the culture merging process so that anxiety is minimized, productivity is maintained, and highly valued employees in the acquired company stay. Conversely, when a company with a well-developed culture is acquired by a company with a less-developed culture, the managers in the acquired company may reach out and help the managers in the acquiring company more successfully manage the merge process. This can be quite surprising to the acquiring company and may awaken them to the benefits of developing their own culture.

Cooperation

By definition, a developed culture increases cooperation, collaboration, and motivation. Improving cooperation between divisions and between levels profoundly improves communications, decisions, and problem-solving.

Teamwork

A well-developed culture involves the people who are affected by a decision in the decision. This is fundamental to developing teamwork, cooperation, involvement, and trust, between people, divisions, and levels.

Relationships

The culture change process improves relationships between people, levels, and departments. Improve relationships brings improve communications, decisions and overall performance.

Responsibility

As the culture develops and people take full responsibility for what happens in their work areas, problems are solved where they happen and by those affected. This frees management from the old policing and monitoring style of leadership.

Safety

The keys to safety are trusting, open relationships. In a safe work culture, people speak up about unsafe situations, they don’t stand silent when someone violates safe practices, they constantly look for ways to improve safety, and they take personal responsibility for creating and maintaining a safe workplace. Because major accidents can be staggeringly expensive, a safe workplace can be a big contributor to net incomes.

Retention

When you have a great place to work — where people can satisfy their needs — they just don’t want to leave. See Turnover and Retention.

Absenteeism

It is common sense that there will be less absenteeism when people like their jobs. They also develop a new attitude towards their fellow workers and to the problems that their absenteeism creates for them.

Union-Management Relations

A well-developed culture moves away from adversarial relationships and towards cooperation. Cooperative relationships have few grievances and low workers compensation costs. As highly adversarial labor-management situations change, grievances drop to zero and potential strike preparation costs (during contract negotiations) are eliminated.

Injuries and Claims

This is a complex area, closely related to attitudes and relationships. As people see each other in new ways, lost-time injuries and worker’s compensation claims drop. Sometimes this is quite sudden and dramatic. Event in typically dangerous areas such as manufacturing or chemical processing plants, lost time injury rates can be expected to fall well below one per million worked hours.

Insurance Rates

Along with a safer workplace, with fewer injuries and claims, come lower insurance rates.

Satisfaction and Happiness

Last but perhaps most important, there are few things more satisfying than being part of a well-developed company culture. It is a real pleasure working in an organization where people enjoy each other, where they enthusiastically cooperate around the work tasks and around problem-solving, and where people sincerely recognize each other for their special contributions to the group’s success. Satisfaction and happiness go hand-in-hand with improved performance.

The right culture is truly A Great Place to Work.

cc 141 — © Barry Phegan, Ph.D.

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Posted in: About Company Culture — Why is Culture Important?

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