Translating Culture Into Cash

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Let’s be frank: cash is king, and all of us are in business because our customers keep buying what we’re selling. Our future depends on growing sales and margin. And we win every day in part because our employees work diligently to help us succeed in the market.

People are the lifeblood of any successful enterprise, and your business is no exception. Comprised of many individuals, each organization manifests its own unique culture. Company culture is defined as the shared beliefs and behaviors that come together to drive employee’s work habits.  Successful organizations realize there is dollar-value behind embracing their culture and leveraging how their team’s social interactions and emotional behaviors impact the business.

When the culture is healthy and in shape, chances are the bottom line is as well.

If you want to upgrade your operational excellence and get a leg up on your competition, take the time to configure your culture.  Does your company emphasize work-life balance?  When making strategic decisions, does your team expect formal, structured process or prefer a free-form brainstorming session?  Does tenure or title come with privileges?  And when it comes to deliverables, how spontaneous are your actions?

If you’re in the business of acquiring or merging with other companies, managing culture becomes absolutely essential.  Most people recognize that bringing two separate entities together requires navigating a course of complex legal and financial hurdles.  But most fail to recognize the importance of corporate cultures as being every bit as impactful as any legal document or financial report.

Combining separate groups of high-performing employees to form a “new” organization has a profound, lasting effect on the long-term value of the newly created entity.  More importantly, how adept leadership is at combining the behavioral aspects of both cultures is integral toward the long-term valuation of any merger.

The Math May Work, But The People Don’t

According to the Wharton School of Management, nearly two-thirds of all corporate mergers ultimately fail at creating sustainable value.  That’s a sobering stat.  Traditional components are dutifully vetted – financial statements, customer lists, real property, balance sheet, IP, etc. -- while the “softer” side of business (branding and culture) is largely ignored.  Studies have shown that culture has just as significant an impact on a merger’s chance of success as does cash flow, top-line sales, service levels, etc.

When it comes to redefining the combined culture, many facets matter.  Communication style is important.  Work ethic is important.  Family values are important.  Companies merge to capture synergies; economies of scale, process consolidation, customer or product-line expansion, real estate holdings, etc.  Realizing cultural synergy is just as important, as every merger takes on a complexion all its own, creating new processes and ways of doing things.

Most companies don’t consider the differences in corporate cultures when analyzing a potential merger, as qualitative aspects can be hard for accountants to wrap their calculators around.  But ignoring culture has very real repercussions: every year, tens of millions of dollars in shareholder value is lost as a direct result of a failed union between two, once-separate corporate cultures.

When the human side of business is strategically considered (analyzed, understood, and embraced,) the long-term vitality of the business improves.  Unfortunately, few organizations apply the same rigor to managing and steering cultural integration as they do to growing sales, streamlining operations, or controlling costs.

Here’s seven steps to help guide your process of taking your corporate culture to the next level:

  1. Conduct your due diligence and listen intently.  Learn how daily business functions are conducted at your company.  Talk to people and review all processes: planning, organizing, and leading, as well as decision-making, motivating, and negotiating.  Observe meeting styles/formats, evaluate customer-service function, and understand how internal conflicts get resolved.
  2. Complete a word-association exercise.  Have associates write down three adjectives they use to describe the current workplace culture(s), then aggregate the results into a visual representation of the top words.  The more times a word is cited, the larger the typeface used in the resulting infographic.
  3. Identify key brand advocates and get them bought in.  To succeed you must have a cross-functional team of internal “builders” that are complicit in the creation and rollout of “the new way.”  Break down any barriers between manufacturing/warehouse/operations and office personnel.
  4. Set the cultural agenda and share your vision.  If you’re assimilating an acquisition, don’t try to change everything.  Sometimes value can be squandered in a relentless pursuit of absolute alignment.  Smart companies work diligently to protect and make evergreen the valuable aspects of legacy cultures.
  5. Instill healthy competition.  Force your team to compete in challenges, and then reward the winners.  Competitive activities bring forth expanded efforts and provide better collective performance overall.  As the leader, you must strive to establish an environment that allows everyone to embrace all aspects of the culture. 
  6. Create a market culture, not a corporate culture.  Develop an environment that is optimized to get the most out of your people, and the most out of your customers.  High-performing market cultures make it difficult for customers to leave you, competitors to beat you, and investors to ignore you.
  7. Hire for cultural fit.  Once you’ve arrived at a strategic market culture, make sure all new hires fit the team.  Interview candidates and onboard them in accordance with the culture you’ve established.
Id 12731 Culture Matters

Your Culture Fuels Your Organization

Culture is influenced by many factors: strength of leadership, educational level, amount of competition, tenure, compensation, and overall organizational vitality.  Group dynamics will tend to form organically around the interplay of these components.  To truly impact and change the culture, you must successfully address all factors.

Smart companies leverage the power of their culture to their advantage.  They tap into the collaborative strength of the organization by using the establishment to address challenges, quickly build consensus, and create solutions that seize upon opportunities for improvement.

Go ahead and solicit new ideas and suggestions.  Conduct highly interactive meetings with diverse groups of associates to learn how they make decisions, work together, and solve problems.  The goal is to maintain organizational transparency that ultimately strengthens and grows team morale.

Establishing a strong corporate culture draws prospective employees to you, keeps current associates engaged, and builds on collective successes.  Peter Drucker famously said: “Culture eats strategy for lunch.”  When you implement processes and activities that promote open communication and encourage critical thinking, all levels of the organization benefit.

Your corporate culture is a cornerstone of your success.  Don’t build your business on a shaky foundation.

GuritzaGuritza

Jeff Guritza has worked with many different corporate cultures including two multi-billion-dollar entities (Applied and Timken) as well as several mid-sized firms (Osborn and Europower.)  He now works at The M. K. Morse Company, a privately-held, second-generation saw blade manufacturer with sales in 73 countries.

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