Culture Drives Financial Results

culture drives financial results

As social media and search engines become more intelligent and prevalent, companies are battling the image that others outside the organization see as well as what employees feel. Entrepreneur Magazine even said that, “Company culture is more important than ever. It’s not that company culture was ever unimportant, but it’s quickly proving to be a “must-have” rather than a “nice-to-have.”” Have you ever worked in a company that had a bad culture? I have. I counted down the minutes until I could leave the office. Work for me was not enjoyable. As the financial leader of the company, I was not focused on driving financial results. Simply put, culture drives financial results.

Culture starts with your team. Before you add anyone else into your organization, click here to access your free 5 Guiding Principles for Recruiting a Star-Quality Team.

How Company Culture Drives Financial Results

Before we get into how company culture drives financial results, what is culture? Investopedia defines culture as “the beliefs and behaviors that determine how a company’s employees and management interact and handle outside business transactions.” In other words, you cannot say and it be with culture. Culture is organically developed over months or years. It depends on how is in the organization and how the organization acts as a whole through trials and successes.

Culture is also often created by the corporate governance and leadership of the organization. The tone starts at the top. Cultural changes happen also, especially when there is a change in ownership. A change in ownership can bring a change in governance, personalities, processes, and even language. Depending on the complexity of business, it may take from one year to three years to really complete an integration of an acquisition. The leadership of the organization must know what is going on in the culture of the organization as this has a direct effect on the bottom line.

Increased Performance

If employees are happy in an organization, then they will have increased performance. Some of the causes of increased performance stems from increased flexibility, professional development, and knowing that they are making their mark on the world.

Millennials are the largest generational cohort in the workforce in today’s world. As a result, they are spreading their desires in the workplace to other generations. For example, they value flexibility – the ability to work remotely, to have a standing desk, to work in a co-working space, to have odd-hours instead of the 9-5.

Additionally, they want to be further trained and develop. I once had an employee who told me that they didn’t care about the money if they were able to get professional development. At first, I was hesitant to provide that extra training because they were just going to leave me for more money after I had invested. But that employee didn’t leave. In fact, that employee was the most loyal in my organization.

Millennials are a funny generation! They definitely think outside the box and often bring ideas that the “traditional” worker would have not thought about. A good leader needs to know what drives his employees. What I have learned is that they want to know they are making a difference in people’s lives. They want to know that they are doing more good than harm. This could be supporting the homeless community or sponsoring an orphan. Or it could be storytelling how the organization’s efforts changed a customer’s life. It’s a simply thought, but when you expand work outside of the four walls of your office, those employees have more purpose and passion about their work. Thus, increasing their performance.

culture drives financial results

Increased Productivity

Additionally, you can also expect increased productivity from good company cultures. Think about Google and their office environment. With ping pong tables, napping pods, and playful environments, employees are told that they can have fun. Many times, entrepreneurs and executives think that working hard 8-12 hours a day will result in incredible results. But the employees feel like they can’t relax. There’s increased stress, decreased productivity, and eventually high turnover.

Increased Retention

Staffing, recruiting, hiring, and talent acquisition is both costly and time consuming. When you factor in the time to review resumes, interview, hire, train, onboard, then pay and provide benefits, that individual is an expensive asset on your financial statements. A good company culture will keep and retain those talented assets.

Looking to add more people to your team? Before you start recruiting, download our free 5 Guiding Principles for Recruiting a Star-Quality Team.

Examples of Company Culture Driving Financial Results

One of our team members once helped transition a company through a merger. All hands were on deck. There was no room for mistakes. And every client of theirs seemed angry. The product was great. Clients had great success from implementing the products. But it was clear there was something severely wrong! Employees were either fired or they quit. Within several months after the merger was official, the company was in financial distress. What we found that it wasn’t pricing or the product… Instead, it was the company culture! A good culture has gone bad.

Another example comes from a study that focused on the financial results of companies with and without performance-enhancing cultures. Needless to say, there is a strong correlation between company culture and growth. In the book Corporate Culture and Performance, John Kotter argues “that strong corporate cultures that facilitate adaptation to a changing world are associated with strong financial results.” When we talk about company culture driving financial results, it’s impacts more than just profit – but the shareholders, employees, and economy.

It’s Start With Who You Hire

Zappos has been known for its culture and prides itself in attributing its success to its corporate culture. What they have realized is that it starts with who you hire. Instead of looking at a resume for credentials, the recruiters essentially court them in a relationship. Similarly, we frequently say to our clients that if you can’t have lunch with a potential hire, do not hire them. When you take an employee out of an office and into the real world, you see how they really perform. Are they rude to the waiter? Or are they patient and kind? Do they hold the door open for people or let it fall in their faces?

For example, the CFO position should have discretion, responsibility, and confidence. If they show up to the wrong coffee shop for a meeting due to assumptions or carelessness or if they are indecisive in choosing a meal, then you need to assess whether they are capable for the position of CFO.

Personality Over Credentials

We once had a client that emphasized that trust was by far the most important quality for their CFO to have. It didn’t matter if they had X, Y, and Z qualifications. In fact, the CEO would rather hire someone who maybe wasn’t as qualified but he could trust over someone who was both qualified and untrustworthy. Especially when considering those high level positions, chose personality over credentials. Obviously, we are not saying to hire someone that cannot do their job. But if you had to decide between two candidates with similar credentials, chose the one that will fit your culture the best.

Be Slow to Hire & Quick to Fire

Bad employees can be a huge drain on resources and can potentially cause more damage than anticipated. That’s why the best corporate cultures are slow to hire and quick to fire. Those entities are protecting their most valuable intangible assets. In order to determine which candidates are the right fit for your company, download and access your free 5 Guiding Principles For Recruiting a Star-Quality Team whitepaper.

millennial generation

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One Response to Culture Drives Financial Results

  1. Tara January 11, 2018 at 2:37 pm #

    This is a thorough and excellent summary of the importance of company culture, especially as it relates to the bottom line of any endeavor. Long live the millennials; they are having a positive impact on so many areas of American life. I love that they simply won’t stand for irrational, outdated ways of doing business, such as prioritizing the hours of 9-to-5 over genuine productivity and results. I like that they are so driven by their ethics and that they strive to continually improve themselves. There is also a value on transparency that I think is having a transformative impact on business and society at large.

    By way of personal anecdote, for the first time in my life, I am finally working in an environment that feels like it will be sustainable, for me, over the long term — and for exactly the reasons you’ve outlined. I get the flexibility that I need as a creative person and a single mother; I am constantly learning new things and challenged in new ways and have the opportunity to learn from a brilliant, caring, kind mentor; and I truly believe in the underlying mission of my company and I feel that we are making a lasting, important impact in the world. What a refreshing relief this is! Combined with the fact that I am FINALLY earning a livable wage (by the way, while our CEO doesn’t even take much of a salary for himself; he is the lowest-paid worker in this startup that he has spearheaded for several years), I have an entirely new outlook on life. It feels tenuous only because of all the trauma I’ve experienced over 20 years of poorly-run workplaces. In fact, this is the most job security I’ve ever felt, and it makes me want to sing from the rooftops. It gives me hope for the future.

    Incidentally, 2 of our 5 core, full-time employees are 23-24 years old, and while sometimes their work habits leave me a bit perplexed, ultimately I feel they are the lifeblood of our operation and have a tremendously positive impact in their own way. It takes all generations — our CEO and CFO, who each have at least 30 years of professional experience dedicated to their crafts; our project manager and myself, who in our forties with children to support are workhorses eager to demonstrate our appreciation for our jobs; and the younger generation who keep things interesting and have essential skills on the cutting edge of technology, which give us an almost indescribable competitive advantage. It takes all of us working as a team, together, to make a real difference in the world.

    I hope this is the new model of business and I hope that many, many people read this post and really absorb its lessons. This is a complete summary that is wide-ranging as well as specific in identifying the most important aspects of company culture. Ethics must guide everything. Thank you for the excellent work.

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