What are the Risks of Not Building a Positive Company Culture?

Some people think the term “corporate culture” is overused, yet numerous studies have proven the type of culture a company develops is crucial to business success. It is a significant factor in everything from brand reputation, the customer experience and employee engagement. It is essential in every type of business, including family-led companies, which are usually distinguished by a distinctive culture that reflects the founder’s vision and values. Sustaining an adaptive company culture requires ongoing commitment with leadership and employees to not only understand but also live out and preserve the core organizational values as they navigate evolving business landscapes.

What is a Positive Company Culture?

Defining a positive company culture means understanding that culture is the expression of values. Companies have a culture, but people have values. In a newly formed business, the founder establishes core values, beliefs, traditions and norms intended to flow through generations of leaders. The culture may adapt as the business environment changes, but ideally, the core values, traditions and norms remain the same.

Culture is based on leadership and employee behaviors that align with core values. It requires leadership direction and employee support to develop and maintain the best culture. Culture is about actions and behaviors, not a vague, esoteric concept.

A positive company culture is one which:

Employees feel included because they have a voice and are encouraged to use it for feedback.
There is clear communication between employees and leadership about company goals, challenges, and potential changes.
Understanding the culture and its core values drives work dialogue, leadership, and employee performance.
The expression of values is demonstrated by who gets hired, promoted, trained, and developed.
Everyone treats each other with respect internally and shows the same respect for external stakeholders, i.e., customers, suppliers, etc.
Core values are operationalized.
Attitudes are positive, with employees feeling engaged and believing management always has their best interests in mind.

The Wide World of the Positive Culture

Positive cultures are not identical. For example, a manufacturing company that is a Utech client has a fast-paced culture that embraces challenges, solves complex problems, and is collaborative across functions. Defining their culture this way gives leaders the language to have performance conversations that support business goals and motivate employees to do their best innovative and creative work. They understand why performance is accepted or rejected.

At an engineering firm, values are used in sales meetings. Each team leader sets expectations for the sales representatives’ behaviors and what they may expect from their team leader. It is a mutually respectful leader-employee relationship founded on core values.

Another Utech client has a methodical and systematic culture. This type of culture works best in a hierarchical business where a high level of control is needed, like a call center or technical operations. The word “control” does not mean leaders are free to treat employees poorly. Instead, close oversight of employees remains based on a positive company culture of respect.

Many different business cultures have been identified: collaborative, hierarchal, creative, competitive, customer-focused, purpose-driven, etc. A family-led business culture may be a leadership-driven culture in which the founder or generational leaders set and communicate the vision and purpose and, through role modeling, demonstrate values, ethics, and behaviors.

The point is that company culture is not identical from one business to the next, but it should always be positive, no matter what kind of culture exists. Culture should be well-defined and communicated, felt and seen throughout the organization, no matter the industry, size or location.

Culture Applies to Every Business

At a packaging company, the President said, “Our leadership team says we need to focus on culture. I don’t know what culture is and don’t have words to describe it.”

Every business has a culture, even if it is not acknowledged. In this example, the top leader who drives culture just does not know how to define it in their words, meaning it is not communicated consistently organization-wide. A CEO, Founder, or 4th generation leader who has not articulated the culture’s elements puts the company at risk of developing a misalignment between leadership and the culture.

When companies are small, they sometimes know what company culture is about by default and do not intentionally nurture it. As they grow, this approach to culture can quickly go wrong. In any business of any size, the risk of developing an undesirable or even toxic culture is elevated when leaders are not talking about the values and norms and the type of culture needed to achieve business goals. The risks include:

High employee turnover when the culture is negative, costing the company in increased recruitment and skills training costs and lower productivity
Low employee engagement, which means employees are unmotivated and feel disconnected, lowering job performance and impeding innovation
Increased employee absenteeism, which can disrupt business operations
Low-quality customer service leads to a loss of business
Legal and compliance risks when an ill-defined or toxic culture exists that fosters unethical behavior and discrimination

The risk of not building a positive company culture can easily harm your brand’s reputation. Employees turn to social media today to share how the culture is negative. They talk about bias and discrimination, unethical leadership, a culture of favoritism, lack of voice, pay inequity, violations of environmental sustainability commitments, and so much more. When customers, partners, and potential job candidates read these kinds of comments, they avoid the business.

Another risk is that employees in a negative culture are less likely to innovate or utilize autonomy out of fear of consequences. A negative company culture suppresses your best talent from excelling individually and growing the organization.

Everyone is Responsible for Organizational Culture

Everyone from top to bottom is responsible for the company culture, but do all your leaders and employees know this? Culture needs ongoing attention, or it risks changing in undesirable ways.

When The Utech Group consultants work with leaders to develop their culture-building skills, they assist them in articulating the story of their company values, beliefs, and purpose. Company leaders learn how to easily share their story with employees to develop a sense of pride among all workforce members. This includes every level of the organization, from the CEO down, regardless of their role in your business success. That pride is showcased in how your workforce members interact with people and businesses externally. Remember, culture is really about actions based on core values and beliefs.

Family-led businesses may have some unique issues concerning culture. For example, a 4th generation business has no documentation on culture. Long-time employees can describe the culture as the business grows, but new employees cannot. The culture is at serious risk of misalignment with the founder’s values and beliefs.

Everyone in your organization is responsible for the business culture: CEO, senior executives, managers, team leaders, and employees. Since culture is genuinely about action and not just feelings, the description of the culture and any performance reviews and dialogue must go beyond using words like “integrity” and “trust.”

When leaders should discuss culture in terms of how people treat each other and how each person is accountable for upholding the core values, the pride in company values and how that is translated into results, like excellent customer service or innovative products that support competitiveness increases exponentially. At The Utech Group, leadership development includes discussions on identifying values and how to support and communicate those values to employees in concrete ways.

Does the Employee Experience Match the Defined Culture?

During COVID, employee expectations about work and workplace culture changed. The younger generations, in particular, made it clear they want to work for companies that genuinely care about their employees. A CEO can tout a culture that does not match the employee experience. For example, the founder or other leaders say one thing, but actions say the opposite. The following are a few examples of a misfit in culture and employee experience.

Your leaders say:

There is a culture of authenticity, but the actual employee experience is that diverse employees believe they must hide their authentic selves.
Employees have autonomy, but leaders use a controlling leadership style and make all decisions.
Employees have a voice, but management usually ignores employee ideas and seldom offers feedback.
The organization is inclusive and treats everyone equitably, but qualified women are never selected for promotions.
The company believes in work-life balance, but supervisors text, email, and call employees on their off-time.

In a family-led business, a glaring mismatch occurs when the 4th generation leader talks about the founder’s values, but the company has veered away from adhering to them, usually unintentionally. As discussed, a business culture must adapt to market dynamics, and it takes focused leadership to ensure the underlying values remain intact.

Building a Positive Culture Starts with Leadership Development

For more than three decades, The Utech Group has offered leadership development opportunities to family-led companies striving to strengthen the company culture or adapt to culture changes, focusing on preserving Founder values. Our consultants also work with leaders in non-family-led companies. Contact us online or give us a call to learn more about our structured process of culture development and the illumyx behavioral inventory tool.

With 30+ years of experience, our team of experts is here to help you grow and develop as a leader. If you’re interested in learning more about what we offer, CONNECT WITH THE UTECH TEAM TODAY!