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Company Culture and Why it Matters

Thursday, September 26th, 2019

 

Simon Sinek, author of Start With Why, said, “Customers will never love a company until the employees love it first.” Like Sinek, smart companies understand the importance of culture on all aspects of an organization. Dissatisfaction and discontent tend to be contagious, and while some companies survive without a focus on culture, they will have to make sacrifices in other areas in order to do so. As much as culture strategy has a positive impact on business, a company who ignores it will see many negative repercussions.

The Negative Impact of Ignoring Company Culture

A good example of bad company culture is Walmart. Walmart has received heavy criticism for their authoritarian culture, not increasing their minimum wage, and gender discrimination. Because of this publicity relating to Walmart’s poor company culture, many people have chosen to boycott Walmart and Sam’s Club, decreasing revenue. The compromise that is made is the prices. Target is known for treating its employees better and gets away with, in some cases, much higher prices. While Walmart’s overall revenue is hard to argue with, low prices and razor thin margins are their entire business model, leaving little room for anything else.

Gone are the days of purely “word of mouth” reviews of any company. Everything is online. Rapid feedback and retrieval of that feedback makes it hard for a company to hide from their bad business decisions. Also, news circulates more quickly on Facebook and Twitter. When a company misbehaves enough to get the attention of the press, everyone will know about it. Customers dislike hearing about unfair treatment of employees, inequality, dishonesty, low compensation, and questionable ethics, and many are selective about where they shop based on those factors, even without a formal boycott.

And obviously job seekers who do their homework will see bad reviews, not only on consumer-facing applications, but in candidate-facing programs like Glassdoor and LinkedIn. If a company struggles to hire, eventually they will have to settle for lower quality employees and suffer the consequences.

Five Major Impacts of Bad Culture

Poor recruiting, resulting less-than-ideal hiring. When you are scraping the bottom of the barrel, you get the people that no one else wanted because of their lack of experience, their difficult personalities, or even malfeasance. This will have long reaching effects on your company.

Employee turnover and low morale. These days, people typically change jobs multiple times throughout their careers. With job change being so normal, a company with a poor culture is going to have an even harder time holding on to their employees. Startup consultant Adam Torkildson said, “When employees feel as though they aren’t in control of their own work environment, they’re less likely to produce and more likely to seek work elsewhere.” High turnover can be straining on the employees left behind and is a costly consequence of bad company culture.

Poor engagement. Engagement is the key to keeping your employees happy. People work harder and better when they buy in to their work, when they catch the vision. When you have your employee’s hearts, you will have a better chance at making them happy AND improving productivity.

Lower productivity. If you employees are unhappy, but they don’t quit, they may resort to just missing a lot of work. Absenteeism, combined with the effects of employees becoming disengaged, leads to overall decreased productivity and efficiency.

Loss of customers. Like the Walmart boycotters, bad PR will lead to loss of current customers and less new customers. And of course, less customers = less revenue.

The Solution

Your human resources department should be playing a major role in creating and encouraging company culture. The HR department has ears on the ground; they live in the same world as your employees. Having a strategy for company culture requires real feedback, discipline in execution, and a positive attitude about the benefits of it. Do some research on other companies that you admire, find a culture you want to emulate, get HR on board, and make this important change.

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