The short answer is…really, really important. All businesses have a culture, whether you recognize it or not. And that culture reflects on everything from how your employees treat each other to how they treat your customers to how you treat them. A strong, positive, healthy culture can improve your company’s reputation, productivity, quality, employee and customer retention. While a negative, in-congruent, unhealthy culture can lead to your company’s eventual demise.
Culture in business can be defined in many ways. However, Josh Bersin’s definition seems the most succinct “culture is the set of behaviors, values, artifacts, reward systems, and rituals that make up your organization”. This basically means that everything that goes on in your company and between your company and your customers and vendors defines your company’s culture, and in essence makes up part of your brand. It’s what people “feel” when they interact with your company. Which supports the answer to the question about how very important culture is for your company.
Unfortunately, if you think you may have a culture that is not helping your brand or meshing with your mission or values, you need to work to change it. And changing a company’s culture is no small task. The first step is understanding and defining your company’s culture so you know where you stand, and how much work you have in front of you.
We offer a free cultural assessment to help you do just that here.
Once you have a grasp on what your culture looks like, you can take steps to begin to transform that culture into one that matches your goals, mission, and values. And in today’s highly competitive and fast-paced business environment, even small companies need to understand that “it’s not about who’s bigger, better, brighter, or faster; it’s about who is empowered to leverage the power of culture to optimize an organization’s bottom line” (Denise Pirrotti Hummel, Oracle). In other words, you need to care about your culture, and take care to groom your culture to keep your company competitive, locally or globally.
Mahalo and much success,
Bersin, J. (2015, March 13). Culture: Why It’s the Hottest Topic in Business Today. Retrieved from Forbes.com: http://www.forbes.com/sites/joshbersin/2015/03/13/culture-why-its-the-hottest-topic-in-business-today/
Groth, A. (2013, January 22). Workplace Culture Is More Important Than Anything Else. Retrieved from Business Insider: http://www.businessinsider.com/workplace-culture-is-important-2013-1
Hummel, D. P. (2012, May). Understanding the Importance of Culture in Global Business. Retrieved from Oracle.com: http://www.oracle.com/us/corporate/profit/archives/opinion/050312-dhummel-1614961.html
Luanne Kelchner, Demand Media. (2015). Importance of a Healthy Corporate Culture. Retrieved from SmallBusiness.Chron.com: http://smallbusiness.chron.com/importance-healthy-corporate-culture-20899.html
Morgan, J. (2015, January 23). The Importance of Corporate Culture. Retrieved from Forbes.com: http://www.forbes.com/sites/jacobmorgan/2015/01/23/the-importance-of-corporate-culture/
Vaishnavi, V. (2012, September 26). The Importance Of Maintaining Company Culture As Your Business Scales. Retrieved from Forbes.com: http://www.forbes.com/sites/vickvaishnavi/2013/09/26/maintaining-company-culture-as-the-business-scales/
According to the US Census Bureau in 2013 there were 400,000 new businesses created and 470,000 existing businesses were closed. That’s approximately 117% termination rate! In today’s connected and technologically advanced world, where the tools are so readily available to start, run, and be successful at business, I’m astounded to hear those facts. I bet you are too.
Of course you and I as business owners are thinking “well that’s not me, those businesses must have made huge mistakes”. Right? But when you look into the research, here are some common causes. See if you can relate to any of these.
- Lack of funds
There are numerous reasons your business could fall short on funds. The annual report by the Corporation for Enterprise Development indicates that 37% of experienced business owners fall short of the cash they need to cover their expenses. That could be you if you don’t see the warning signs.
Consider these potential warning signs for your business:
- Over-extending or growing too fast.
- Not starting with a minimally viable product or service (MVP or MVS).
- Expenses becoming too costly such as labor, marketing, supplies, office space, and equipment.
- Unprofitable business model and revenue streams.
- Inability to attain additional funding from outside sources (such as loans, venture capitalists, angel investors, or personal funding).
- Competition and customers
Both underestimating the competition and not understanding your customers can be a large factors in the ultimate demise of your business. A 2014 study by Accenture revealed that 66% of consumers in 1 out of 10 industries changed to a different company due to customer service issues. And 82% of consumers felt that the company they left could have done more to prevent them from switching companies.
This could be you, especially if you don’t ask yourself the following questions.
- Do you know who your competition is and what differentiates your products and services from theirs?
- Do you know how your customers feel about your products and services?
- Do you have your feelers out for new technologies or advancements in your industry that are attracting consumers?
- Are your competitors implementing changes or technologies that you have overlooked?
Another aspect is the overreliance on too few customers. Some small businesses are completely reliant on one or two large customers. If you have all your eggs in one basket and the basket decides to get up and go somewhere else that could be the end of your business. Yikes!
It’s critical in today’s hyper-fast-paced business world to not only research and understand your competition, customers, and your market, but to quickly react to changes that move your business to the front lines. Even if you think you’re in a very steady and reliable market with plenty of customers and very little competition, it only takes one competitor with one great product or service that resonates with your customers to rock your boat.
- Operational inefficiencies
Now is the time to flush out operational inefficiencies and focus on a lean, mean business machine. But what exactly are operational efficiencies? Operational inefficiencies can be broken down into a number of more specific areas such as:
- Wasting money, time, supplies, inventory, and products.
- Repetition and/or replication of tasks, duties, services, and paperwork (duplication of effort).
- Paper vs online everything.
- Inefficient or ineffective communications…this is a huge waste of time and money!
- Imbalanced workload. Too many employees doing too little, or some employees doing too much and others not enough.
- Owner and/or managers having to redo the work of employees not performing properly.
- Inadequate or unorganized inventory management system.
- Inadequate or unorganized bookkeeping system (tracking expenses, receipts, usage, inventory, etc.).
- Owners and/or managers doing the majority of the work, and not training and delegating to their employees.
- Paying for marketing that is not generating a sufficient return on investment (ROI).
- Inability to negotiate terms for rent, labor, and materials leaving with higher costs.
These are just a few areas to address, but major players in becoming an efficient, lean business and increasing your bottom-line.
- Dysfunctional management/leadership
While leadership and management are not technically the same, both play a huge role in a company’s performance and ability to succeed. Especially in today’s economy and employee landscape, it’s essential for management and company leadership to not only present a united front, but provide a model for the company culture, focus, and vision. The following list represents some areas where management and leadership need to concentrate to provide a solid foundation for company success.
- Owners and/or managers with lack of focus, vision, planning, communication skills, and motivational techniques (all stick, no carrot).
- Owners and/or managers lacking standards and values, consistency, non-partiality, inter-personal skills, foresight, and conflict resolution skills.
- Lack of succession plan: nepotism, power struggles, poorly qualified replacements.
- Owners and/or managers using conflicting messages and communications (for example: lecturing employees about cutting costs, then bragging about their new expensive vacation or house).
- Owners and/or managers without management skills or training. This is true for many entrepreneurs. Entrepreneurs aren’t always great managers of people, they can be, but not always. They are often better leaders than managers.
- Owners and/or managers that can’t get out of their own way. They are stubborn, risk averse, conflict averse (need to be liked by everyone), perfectionists, greedy, self-righteous, paranoid, indignant, insecure, etc.
- Owners and/or managers not taking enough participation in the accounting/bookkeeping side of the business. It’s critical that the owners and managers are very involved in the pulse of the business including the income, expenses, profit, and loss.
- Owners and/or managers more closely involved with front-of-house or back-of-house versus overall focus. This can be seen as favoritism, or worse lack of knowledge in that particular area. A manager that is perceived to lack knowledge in the area he manages (which would be all areas if you’re the owner) can be huge cause of disengagement in employees.
Changing your own behaviors and that of your managers can be one of the most difficult aspects of owning a business. Start by recognizing the behaviors or actions and work from there.
- Disgruntled employees
Herein lies one of the most elusive aspects of business. And it’s not just disgruntled employees, but all variety employee issues. And if you fall into the dysfunctional management category above you might not even realize you have disgruntled employees.
- Disgruntled employees
- Unengaged or dispassionate employees
- Untrained or insufficiently trained employees
- Unchallenged and/or over-challenged employees
- Under-utilized and/or over-utilized employees
- Inability to hire or attract qualified employees (and in some cases any potential employees at all)
So there you are. Based on these five categories of potential reasons, even if your business is doing great, you may need to reflect potential areas of concern. It doesn’t hurt to consider the potential hazards presented here and do some analysis and planning to make sure you are ready when and if these issues pop up. Feel free to use our EDITOR process model to assist you in determining if you have any of these potential problems and developing a plan of attack to stop “failure” from happening to you and your business.
Mahalo and much success,
Goltz, J. (2011, 1 5). Top 10 Reasons Small Businesses Fail. Retrieved from New York Times.
Pofeldt, E. (2015, 10 13). 11 Common Reasons Small Businesses Fail. Retrieved from CNBC.
Thorpe, T. (2014, 7 17). The Top 5 Reasons Small Businesses Fail. Retrieved from Inc.
Wagner, E. T. (2013, 9 12). Five Reasons 8 Out of 10 Businesses Fail. Retrieved from Forbes.
Zimmerman, E. (2011, 1 5). How Six Companies Failed to Survive 2010. Retrieved from New York Times.
Let me give you an example to illustrate how this works. But keep in mind that this works in any industry where you have direct communication with your customers.
When I started my dressage training business in 1989 (horse ballet), I had two clients and they were both friends that I knew from the stable and they weren’t even paying me. Well, not money. I told them I would help them if they could help me start my business. So I started helping them.
I quickly realized that I could see a lot of things I needed to teach them and their horses, but that we weren’t on the same page when they came for their lessons. The stables was a very busy place with crowded arenas and many trainers in many disciplines. My students would come to their lesson and want to chit chat first. I was an engineer on a tight time schedule after work and chatting was farthest from my mind if I wanted to turn them into award-winning dressage competitors.
At the same time, I was always participating in clinics and lessons with well-known and Olympic long-listed trainers. And when I’d go to my lesson, I realized that my trainers didn’t want to talk either. But I did. That’s when it occurred to me. I wanted to talk to my trainer because what they had tried to teach me wasn’t working very well and I needed help before we moved on to the next thing. So…I knew right then how important it was for me to talk to my clients and get their feedback on the previous lesson and what worked and what didn’t work or what they hadn’t understood.
Up until that point, my growth rate had been maybe 1-2 new clients in 6 months. But as soon as I started taking a few minutes before starting each lesson and chatting with my clients about what they thought worked and didn’t work, and what was hard and easy, and what their goals were, I all of sudden noticed I had a crowd on the fence listening in and asking for lessons.
So I changed my style, and my business grew super-fast. In two years, I had almost 30 clients. As a part-time trainer (training after work and on the weekends) that was insane. I even had to hire an assistant. I also discovered that more of my clients were interested in competing than I had originally thought, just not at the level I wanted to compete at. Plus, my clients spread the word so well and so fast, I was being asked to teach clinics at other stables that didn’t have dressage trainers.
This very useful lesson in communication made me realize how to really listen to what my clients wanted and even improved my aerospace career. This lesson became a cornerstone of my success in my many different ventures over the next 25 years.