Steven L. Blue, President & CEO of Miller Ingenuity

What is a business? This might seem straightforward, but consider it more deeply; what truly is a business? I’m talking about the values, identity and culture that make a particular business what it is.

This word – culture – is key. The atmosphere internal to an organization, the image it projects, the way in which it pursues its objectives; all of this is what provides a business with its personality, the unique element which sets it apart from the rest. This is all intrinsic to culture, and culture is intrinsic to a healthy operation.

And how do we know this to be true? How do we know that culture is such a substantial part of what makes a business successful? Because culture impacts directly upon a company’s profits.

A 2015 Glassdoor survey showed that organizations who make a positive culture a priority in business perform significantly better than their competitors. Glassdoor found that companies who created a positive culture outperformed the S&P 500 by 122% on average.

With figures like this underscoring the impact of culture on profit and market performance, consider which business cultures are the best and worst for nurturing profits.

BEST

Developmental Collaboration

Companies such as Facebook and Google have been the subject of ridicule from some business commentators, irked by the prospect of track jackets in the boardroom and skateboards in the office, but it is difficult to deny two key points: both generate profits, and both are big on positive culture.

One of the driving forces behind this is the atmosphere of developmental collaboration that upper management have nurtured within these organizations. Speaking to Forbes’ Laura He, Google senior executive Laszlo Bock described how the company is designed to be an open arena, facilitating collaboration across every tier and department of the organization.

"We try to have as many channels for expression as we can, recognizing that different people, and different ideas, will percolate up in different ways," Bock explained.

Inter-team Harmony

A business culture is expansive and comprehensive. It does not encompass only one aspect of your business but rather all of them, together.

This means developing widespread understanding among all teams, ensuring that each employee recognizes their rights and responsibilities within the organization. When a team member carries out an action, this action will impact directly on fellow teammates and other employees and vice versa. Incubating this sense of organization-wide value – in which every individual employee knows that their true worth is appreciated – leads to a harmonious culture within business.

To see the impact of this on profit we look to PricewaterhouseCoopers. The professional service providers divide their operations into several departments. However, all of these departments are designed to work together to meet the diverse needs of a client. This does not mean simply referring the client to other departments, but directly integrating strategic planning meetings to ensure seamless service across the board.

In June 2016, PwC posted gross revenue growth of 7% for the previous 12 months; a pleasant vindication of their commitment to positive culture.

Local Connection and Responsibility

Connecting with the local area and giving back to the wider community boosts profits. This was the conclusion of a 2013 Cone Communications and Echo Research study. The study showed that 82% of U.S. consumers consider an organization’s corporate social responsibility – or CSR – when deciding where to shop.

In building CSR, companies also foster a culture of goodwill, positivity and community within their organizations. This culture permeates the entire structure of the organization, bringing with it wide-ranging, long-lasting benefit.

WORST

Opaque Structure

Development – both personal and professional -- is prized by employees at any level. Staff members want to see their efforts are recognized and they want a clear and well-defined structure of benefit, development and promotion.

However, when such a structure is opaque and impenetrable, with promotions and rewards handed out in a haphazard or – even worse – in a corrupt fashion, the culture of an organization suffers.

This is devastating for morale, for productivity, and – ultimately – for profits.

Irrational Management Protocol

Success in business hinges on strategy, planning and the implementation of robust management protocols and procedures. If these protocols are not fit for purpose, the culture of an organization suffers, as does its bottom line.

A 2016 study by Glassdoor found that the Dillard department store chain had only a 2.6/5 job satisfaction rating among its employees; the second lowest rating scored by any company that year and the fifth year running that Dillard’s had received this same rating.

Qualitative data showed that “unrealistic quotas” and “poor management practices” were cited for the low level of employee approval. This represents an institutional failure on the part of the company, leading to the growth of a particularly malignant culture within the organization.

And, as you might expect, this impacted profits. In 2015, Dillard’s posted a net income $62.5m lower than the previous year. We are witnessing hard times for department stores, undoubtedly, but this sort of culture is doing little to turn that around.

Muddled Vision

What is your company all about? Where is it heading? What are its objectives? These are questions which all business owners should be able to answer. In fact, these answers should be galvanized into the heart of your business.

A major factor in poor corporate culture is a muddled vision. If an organization has no clear mission or vision statement, there is no central point to rally around. Instead, a company’s employees are disparate, ploughing their own furrows each and every day, with no motivation to get together and move towards a common goal.

Define and outline your mission statement; make it a core part of your business, and get your staff on board as you take steps to achieving your aims.

Many business owners are focused on profit first, culture second. However, business owners should understand that one leads directly into the other; you cannot run a successful business without a culture of success and collaboration in place.

About the Author

Steven L. Blue is the President & CEO of Miller Ingenuity, an innovative company revolutionizing traditional safety solutions for railway workers, and author of the new book, American Manufacturing 2.0: What Went Wrong and How to Make It Right. For more information, please visit www.SteveBlueCEO.com, www.milleringenuity.com and connect with Blue on Twitter, @SteveBlueCEO.