7 Ways Company Culture Is Killing Your Profits

Culture is kind of a fad or a gimmick right now in startups. I've been spending some time over the last two years doing some consulting with small businesses and it seems like all of them that have been born in the last ten years have a foozball table. Now if I ask why they have a foozball table, the CEO will give me some kind of rambling response about employee satisfaction and culture, which is a pretty clear indicator that they don't understand what company culture is and what company culture is for.

Don't misunderstand! Culture is is important, just like workplace diversity is important. But just like workplace diversity, it is in the understanding of why culture is important that makes the difference on an institutional level. You see, diversity isn't important because of some vague social justice responsibility a company has to society, and culture isn't important because of some vague labor relations responsibility. Of course we hope that businesses will be inclusive and socially responsible and treat workers fairly! But if that is the only reason you're instituting diversity initiatives and installing a foozball table, you're missing the larger picture.

Diversity is important to your business because different backgrounds and experiences generate better ideas. The intellectual capital of any organization is its best and most underutilized resource. Poor diversity leads to group think, and collaborations become echo chambers rather than sounding boards.

Likewise, culture is important because, as science is beginning to discover, people are better motivated by intrinsic motivators such as self-respect, appreciation and validation, and significance. There is a cap on how much you can incentive performance with pay or punishment. If you want to motivate performance and cultivate loyalty, the culture of your organization can do more than your compensation package. Poor culture can lead to low morale, poor performance, and institutional dishonesty.

Now none of this is new information. If you've had any level of business success at all, I expect you read regularly, which means most of what I've said so far isn't news to you. So in this article I'd like to focus on some key areas where traditional corporate culture is robbing you of your team's best work, and provide some practical wisdom on how to implement changes to improve performance and discourage turnover. Here are seven ways that company culture is stifling performance and stealing your profits.

Attendance Policy

One principle of healthy culture and leadership is that people will fall or rise to your level of expectations. If you treat people like children, they will act like children. And most people like to be treated like adults, and you don't have the time or energy to babysit anyway. In no place is this more apparent than in your attendance policy.

I had a high school friend who worked for a company that offered $40k a year and full time benefits for part time employees if they stayed on more than a month. That might as well be the powerball jackpot to a 17 year old who just quit their job at the go-cart track. Why such a generous compensation package? Because nobody stayed on that long. No matter how much they sweetened the pot, they could not keep people for a full month on that team. That company is gone now -- turnover costs drove them into the floor, and their primary competitor now owns their old facilities. What was the employee repellent they used at that office? The automated attendance policy.

The policy was simple: clock in on your phone at the start time of your shift. If you miss the clock-in time by less than five minutes, a point was deducted. If you missed it by less than 30, five points were deducted. If an employee ran out of points during the month, they were terminated.


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