The Impact of Company Culture on Productivity

Many people think that company culture only exists in larger businesses. Nothing could be further from the truth. What are the implications of company culture on business performance in smaller businesses?

Regular readers of my articles will already know that I work predominantly with small and medium companies. In my experience, company culture is as important in smaller companies as it is in much larger businesses. So what is company culture?

It is largely the ethos of the business. It reflects the norms of behaviour displayed by the vast majority of employees. It can often be seen in the informal grapevine that exists in most businesses. A positive culture will see the grapevine mirroring what goes on in the regular communication channels in the business. A negative culture will often see positive communication in formal channels and negative back-biting in the grapevine.

Business culture is something that emulates the style of leadership in the business. If the business owners manage their staff by Do-As-I-Say rather than Do-As-I-Do, then the culture can be negative. This negative culture has a profound impact on productivity. Subordinates question why they should follow an instruction from their manager and frequently deliberately frustrate what they have been asked to do. Similarly, if subordinates notice that their boss starts lots of things but finishes very little, then they will feel entitled to perform in the same way. This is very costly for the business.

Uneven treatment of employees can also be a source of negativity that spills over into the business culture. You cannot allow one employee to perform below par and get the same rewards as another employee who performs superbly well. You cannot be critical of one employee because you do not particularly like them and ignore similar behaviour in another employee because you prefer them.

If the leadership is visionary and open to ideas from all levels of the organization then this creates organizational excitement. Communication is better. Subordinates emulate the high performance and positive outlook of their bosses. Employees tend to be mutually supporting in this environment and team work is at the heart of the business. Productivity is extremely high. Reward structures are fair and reward those that make the extra effort both internally in the business as well as in their customer interactions.

So can company culture be changed? Yes, but it takes time and commitment. Those opposed to cultural change and mutually supporting teamwork may need to be fired. It starts at the top of the organization. However, a leopard may not be able to change its spots. It may require a new CEO with a more open management style and a commitment to high performance. Any focused and prosperous business needs to have a leader as opposed to a manager.
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