How company culture impacts your bottom line

What happens to revenue when your team lacks clarity

Most of us know that workplaces with more cohesion and clarity around priorities are better places to spend 40-50 hours each week. Who wants to work for a company where the left hand never knows what the right hand is doing, and every project is urgent and needs to be completed at 7 o’clock on a Friday night? That type of work environment doesn’t create happy employees.

We know that clarity, unfortunately, is not typically common in how information flows through a business. One Harvard Business Review study indicating that up to 95% of employees in enterprises can’t name the broader strategy of where they work. 🤯

Don’t be fooled. This is most certainly indicative of an organization’s well-being and corporate culture. The question is: Does it matter?

If the rank-and-file team members don’t know the strategy, but the company is still experiencing high-growth and keeping investors happy, that’s good, right? Is there a direct impact to bottom-line or a revenue hit that stems from lack of clarity and competing priorities? Can we metricize this?

The bottom line cost of bad company culture

Research from Bravely reported that 97% of employees and executives believe that lack of alignment within a team impacts the outcome of every single project the team works on. Subsequently, team members with the highest role clarity tend to display the greatest efficacy on projects.

Numbers would vary by organization, but one attempt at putting a price on people, roles, culture, and clarity issues came in August 2016. The sample size was small (83 senior managers), but the findings in a Harvard Business Review article were astounding: people problems in organizations cost you $144,541.30 per day—$52,757,574 of lost value per year.

The broader tie between organizational culture and the bottom line has been debated for years. Many business leaders believe culture is a softer managerial concept, but we continue to see that corporate culture does impact the bottom line, with as much as “half the difference in operating profit between organizations” attributable to cultural factors. 🤑

4 ways corporate culture affects companies like yours

A strong company culture has significant impacts on a company’s performance. It can lead to improvements to producvitiy, employee happiness, churn, new skills development, and more. Here are a few benefits to consider:

  1. Drive company-wide innovation — Companies with healthy organizational cultures are often far better equipped to innovate than companies with an unrealized culture. Rajesh Chang, professor and researcher at the University of Minnesota’s Carlson School of Management, agrees. He asserts in research shared in ScienceDaily that “Corporate culture is, above all, the most important factor in driving innovation.”

  2. Increase employee engagement and productivity — Open communication increases awareness within and across teams, which increases employee engagement. And when employees are engaged they have a high sense of value. This further fuels their work and increases productivity. Additionally, happy employees take fewer sick days. This lower employee absenteeism translates to increased output for the company.

  3. Improve job satisfaction and retention — In addition to happier, more engaged employees, good company culture leads to higher rates of employee retention. When employees feel supported and aware of how their work connects to greater business goals they are less likely to entertain new job opportunities. Employee turnover and churn decrease. These improvements are also likely to be reflected in company pulse surveys.

  4. Attract top talent — Good workplace culture attracts good talent, and it can’t be faked. Before applicants even walk through the doors for an interview, they are already armed with information about a company’s culture. What is posted on platforms like Glassdoor significantly impacts an applicant’s decision to interview and accept offers. So attracting the best talent and the ideas that come with it requires a company and organizational culture that values and nurtures that talent.

Why improving company culture is critical today, not tomorrow

Here’s the good news: There are lots of business leaders interested in developing better workplace cultures, which includes improvements to communication and clarity. People inherently know this is important.

There is sometimes confusion about the immediacy of these problems, though. For example, people like our OKRs product (and agree that OKRs and agile intersect), but they tend to be most interested in OKR-related solutions at the end of a quarter, or in Q4 planning stages. The reality inside organizations can often feel like: “We know this stuff is important, but we have other, bigger fish to fry first. We’ll address it during a planning period.”

Our rebuttal is usually: “No, it’s important now.” And yes, part of that rebuttal is that we want more people to try Range and bring their teams together more effectively. Beyond our company goals, though, the fact is that these issues kill organizations from the inside.

No true “A-Player” will stay long at a business with 90-minute stand-ups and no view into what their teammates are working on.

You will never keep your top talent that way; instead, you’ll end up with Bruce Webster’s 2008 concept of “the Dead Sea effect.” What’s that?

Instead, what happens is that the more talented and effective IT engineers are the ones most likely to leave—to evaporate, if you will. They are the ones least likely to put up with the frequent stupidities and workplace problems that plague large organizations; they are also the ones most likely to have other opportunities that they can readily move to. What tends to remain behind is the ‘residue’—the least talented and effective IT engineers. They tend to be grateful they have a job and make fewer demands on management; even if they find the workplace unpleasant, they are the least likely to be able to find a job elsewhere. They tend to entrench themselves, becoming maintenance experts on critical systems, assuming responsibilities that no one else wants so that the organization can’t afford to let them go.

Don’t turn your promising business into the Dead Sea of talent. Get a hold on these clarity and communication issues—these workplace and organizational culture issues—now. It doesn’t matter whether you just lost $144,000 or have no idea what the bottom-line hit is. These are serious challenges that, however indirectly they may be tied to a balance sheet, make or break the future of your business.

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