Corporate Culture is Most Powerful Influence on Financial Performance

The Denver Post

Business

True servant leadership can lead to a good company culture and make the difference between success and failure

Gary Miller By Gary Miller – Managing Director, Consulting Division, SDR Ventures

If you accidentally try to order the same song twice from iTunes, you’ll be warned that you already own it — and not because it would be illegal for Apple to profit from your forgetfulness. There’s a clear business reason: Apple realizes that there’s no better way to build trust than being totally honest when the customer least expects it. It’s part of the company’s culture.

In the age of the Web, smartphones and social networks, every action that an organization takes can be exposed and critiqued in real time. The bar for trustworthiness is higher than ever and is continuing to rise.

During my career, I have met with many CEOs of small privately held companies and of publicly traded companies. The thoughtful CEOs have concerns, of one kind or another, about their own company’s culture and its impact on shareholders, employees, customers and other stakeholders.

From those discussions, I have concluded that corporate culture — as hard as it is to define — is the most important asset that a company has to drive financial performance and overall success.

That culture always flows from the top and there are visible signs of both good and bad cultural environments.

From my observations of management’s behavior, I have defined six major signs of a bad company culture.

  • If only the leaders have offices, it implies a rigid, top-down hierarchical structure. Other signs of this type of hierarchical leadership include planning conducted only by senior management, with little or no involvement from line or staff employees.
  • If senior management constantly hovers over each employee’s work, no matter how big or small the project is, that signals a lack of trust. Often, senior management finds fault with their employees’ work and corrects them on the spot in front of others — embarrassing all.
  • If management is arrogant, condescending and volatile, allowing confrontations to take place in front of others, employees “walk on eggs” around their bosses. They fear for their jobs and dread interaction with management.
  • If management focuses only on short-term financial performance, using only cost-benefit analysis as the decisionmaking paradigm, this often stifles creativity and critical thinking.
  • If employee turnover is high, it affects morale negatively, increases workloads, results in loss of skill sets, piles on additional recruiting costs and slows job performance.
  • If companies attempt to create the illusion of positive culture, using feel-good terms such as respect, integrity and values without walking the talk, this is a “false positive” culture that the best employees quickly recognize and quietly prepare to leave. The problem is a lack of sincerity and authentic leadership.

One question I always ask a client when performing a cultural assessment is “How much time do you spend with your employees after 5 p.m.?” Having a beer, playing a round of golf or playing softball shows a human face and empathy that build good relationships and demonstrate both individual concern and trust.

Now that I’ve discussed the bad, what does a good corporate culture look like? More often than not, good culture environments are led by “servant leaders” who provide a clear set of sincerely held values, expectations, norms and guidelines that determine how employees behave and decisions are made.

Here are five signs that signal true servant leadership that can lead to a good company culture and, perhaps, make the difference between success and failure.

  • Servant leaders put shareholders, customers and employees ahead of themselves.
  • Servant leaders are trustworthy. A strong example is how insurance giant USAA acted after the first Gulf War. USAA suspended the auto insurance premiums of several thousand soldiers while they were overseas and sent them unsolicited refunds when they returned home. The employee culture at USAA is based on a simple, clear expectation: Treat each customer the way you’d want to be treated. The acid test of a company’s culture is its willingness to make financial sacrifices to uphold its stated values. (For the record, nearly 2,500 people sent back the refund checks, some telling USAA to keep the money and just be there “when we need you.”)
  • Servant leaders create a culture of free-flowing ideas and individualism. Employees are assured that management is always listening.
  • Servant leaders back up words with actions. Open communication and tolerance of dissent are hallmarks of strong cultures. Employees are valued and rewarded with autonomy and leadership opportunities, not just pay raises and bonuses.
  • Servant leadership is transparent. It openly addresses bad news early. If employees make mistakes, corrections are made and lessons are learned, but management stands firmly behind them.

Transparency is like a disinfectant for business. It will purify things and help start the healing process, but sometimes it’s going to sting.

A truly good company culture and authentic servant leadership increase customer loyalty, repeat business, employee retention, top- and bottom-line performance, and shareholder value.

Gary Miller is managing director of SDR Ventures Inc.’s consulting division, where he helps middle-market business owners prepare to raise capital, sell their businesses or buy companies, and develop strategic business plans. He can be reached at 720-221-9220 or gmiller@sdrventures.com.

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2018-02-12T17:44:22+00:00Business Consulting, Press|