company culture

How to Transform Company Culture

A company is more than just a vehicle for profit. Every company on the market represents a unique set of attitudes, ideals, and attributes. When an employee acts on behalf of the company, they reinforce these qualities in the minds of insiders and outsiders alike. The qualities that make a company personal and unique are best known as the company’s culture. Conversations surrounding a business often place company culture as a secondary priority, but that attitude is misguided.

72% of business executives say that culture is key to their company’s performance. Their words are backed by the data. According to a decade-long study by John Kotter, firms with a strong focus on their corporate culture showed incredible financial results. Over 10 years, their revenue increased by 685%, their stock price by 901%, and their net income by 756%. A decade may seem like a long time, but Kotter found major gains in the shorter term as well. After 5 years, a company focused on cultural transformation can see a 85% net profit increase. In only 3 years, a focus on shifting culture can generate a 25% workforce growth and a 50-point increase in employee engagement. Increasing engagement alone brings out its own special rewards. More engaged employees create noticeable improvements in customer ratings, productivity, sales, and profitability. All things a company may explicitly care about, and all things a better culture can bring forward.

Unfortunately, the events of the 2020 pandemic have made workplace culture hard to maintain. The mass shift to remote work and the danger essential workers faced in their jobs lowered incentives for engagement among employees. 85% of employees were not engaged in 2020, causing companies to forgo $7 trillion in unrealized gains from productivity. 

Another reason for companies to emphasize culture is so that they can combat lack of engagement. As the challenges of the pandemic lessen, getting employees to care again is paramount. Most workers don’t care about a company’s bottom line for its own sake. They care about the meaning and motivation they can attach to the work they do. Approximately 1 in 3 employees say that their primary reason for staying at their current job is that they find the work they do meaningful. Such motivation is especially important to the younger generations. Millennials and Gen Z expect their work to meet societal needs, not just generate profits for a distant class of owners. When work is tied to a common set of values, it sparks inspiration and innovation. It raises motivation and productivity. Meaningful work is the difference between an employee who erodes the business culture and those who are active in the betterment of an organization.

Despite the clear benefits an improved company culture can bring to all sides, most executives would agree things are not where they should be. Only 32% of those interviewed believe their company culture is aligned with its business strategies. A mismatch between culture and strategy is little more than hypocrisy. Hypocrisy actually decreases employees’ buy-in to the company culture. When the disconnect becomes visible to customers, the results are often detrimental.

Does your organization need to invest in a culture change? If worried that you might, consider the following questions. Are rewards aligned with vision fulfillment in all parts of the organization? Do you have a leadership program that cultivates the right values? A disconnect between leadership values and company culture is a major source of disconnect. How well do employees manage themselves? Are employees accountable for the results they bring to the table? Does the company’s culture unleash and encourage passion from their employees? If a company is reliant on overzealous managers to bring their employees in line, they may have the wrong incentives for engagement in place. Is communication effective at fostering collaboration on existing systems? Miscommunication is a plague on businesses of any size. Finally, how is the organization handling barriers to change that it encounters? The world is always changing. As 2020 demonstrated, it can change very quickly. Companies need to be prepared for rapid shifts affecting both internal operations and the external economy. 

If a company’s culture can’t adapt to a new era, the whole company might get left behind. While a positive outcome is expected from all digital transformation efforts, barely 1 in 8 are successful. What are the cultural transformations a company can make that show real impact? One is refining strategy: a company with fifty strategies has no strategy. Define a single strategic imperative on which to focus effort. Another is thinking actively about the future. Establish a compelling vision that external shocks can’t dislodge. Furthermore, ensure reward systems reinforce the desired culture. Incentivizing detrimental behavior in any form creates a moral hazard. When shifting to a new company culture, celebrate successful inroads and never reward counterproductive actions.

That said, bringing company policy in line with stated values is no easy task. This is especially true if said values are freshly articulated. More than hesitation, many employees resist culture change in their workplace. A previously poor corporate culture can make employees unwilling to buy into transformation efforts. Their hesitation comes from a whole list of understandable reasons. Previous efforts by the business to change may have failed or had unintended consequences, eroding employee trust that the new effort will succeed. Employees who are already overburdened have no interest in change that gives them new responsibilities, especially if they see no direct reward to taking the new tasks on. 

Beyond daily concerns, employees may fear cultural change will put their jobs at risk. New technology can expose employees who lack the necessary skills, prompting fear of job loss. Tying back to the earlier point regarding failed initiatives in the past, a history of failed projects can generate even more fear. Failed projects often lead to restructuring and job losses. Employees won’t buy into a system they believe will harm their livelihood, and it is on the company pursuing change to assure them this will not be the case. One cultural transformation that can prevent this is skill training. Equip your workforce with the skills needed to meet your company’s vision. Enable internal advancement for high performing employees. Additionally, ensure any inevitable workplace reshuffling improves job alignment. Labor distribution and job functions should correspond to the company’s vision and energize employees to exercise passion every day. A high priority mission should not rest on the shoulders of a single overworked employee but be given the personnel and resources necessary to make the vision real.

Whatever promise a company makes, they have to be ready to carry through. Being successful means understanding the difficulties ahead and having a plan to overcome them. A company’s main objective is often value creation, and culture is a vehicle in which to achieve that. Too often, culture is put on the wayside for more explicitly financial priorities to take over. A misallocation of this magnitude hurts the very objectives companies wish to achieve. 57% of private equity dealmakers say cultural issues hinder value creation. This assessment is not limited to any one industry or company size.

Modern companies make more than money. They make a whole culture for workers and customers alike. A toxic culture can poison an entire company. Restoring health is painful, but for the companies that suffer, it needs to be done.

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