Have you ever purchased a plane ticket, then needed to change something like your departure time or seat number?
You go to the airline’s website… and it doesn’t work.
You look for a phone number… and it’s impossible to find.
After some Googling, you locate the number and then have to navigate through 10 minutes worth of menus and AI voice-prompts before you can talk to someone.
Then when you finally get a “customer service agent” on the phone, you find out that it can’t be done.
“Sorry sir, we can’t do that.”
“Sure, there will be a penalty fee of $150 for that change.”
“Yes, you can speak with my manager. Oh wait, they’re busy right now… but we can call you back tomorrow if you like.”1And of course, they never call you back.
Why does this happen?
You would think with the number of daily flights, and the size and scale of these companies, it would be simple to streamline something like customer service… right?
This happens because of bad company culture.
It happens because somewhere at the top, the company culture is rotten.
The managers, the boss, or the board, have subconsciously let people know that it’s OK to behave like this 🤫. And that’s what you, as the customer, experiences.
Now for something like changing an air ticket, this is a minor inconvenience.
The fact is once your flight is done, you forget all about it and continue on with your life.
But, what about if it’s for a business that’s more critical, like ongoing medical care.
Or, what if it was for the CRM app that your company depends on for sales and has to use daily?
And more importantly, what if your staff are acting the same way towards clients, and you aren’t even aware of it?
Recap: What is Company Culture?
If a company was a person, its culture would be their personality.
This is separate from the actual product and service, or even the value offered.
In the systems world we tactically break down culture into:
And this in turn outputs as company behaviour, which is what your team and customers experience.
Why Culture Matters To Your Customers
If we think back to our plane tickets, we may realise that our businesses are not performing as well as they could be because of culture.
Or worse, we could potentially be losing business and profits because of bad culture.
Good culture gives customers a pleasant experience in dealing with the company, which leads to repeat business, referrals, testimonials and raving fans. It gives customers a rationalisation to come back and buy from you again, even if there are minor inconveniences or additional costs.
Bad culture costs business, and for customers creates an acrimonious experience in dealing with the company, guaranteeing low rates of repeat business and negative word of mouth.
Culture can be thought of as the “good will” which explains why we like some brands and companies more than others. It is a hidden part of your USP.
A strong company culture can also polarise your customers.
Those who like you are evangelical raving fans.
Those who don’t like you stay away — and keep their problems away as well.
Why Culture Matters Internally
The impact of company culture on your customers is obvious.
But what about internally?
Have a strong company culture is having strong agreed-upon standards of behaviour at work.
This means that the team can operate at and above expected customer needs, which is good for business.
A really bad metaphor is that having employees is like having children.
You have to tell them the same things over and over again and keep them in line, lest they run amok.
And that’s where culture comes in — it keeps the kids disciplined and the adults responsible.
When culture is done right, business teams run smoothly and productively.
What this means is that there is little in-team drama, and ideas are shared comfortably and openly, which is good for creativity, innovation and motivation.
In turn, this means that work flows faster and more efficiently, and everyone does a better job because there is less friction in the workplace.
All this translates into more clients, better clients, more profit per client, and faster and better work delivered.
When you improve company culture, you improve every aspect of the business without directly improving any of it.
It’s a qualitative form of innovation that results in quantitative effects in increased revenue, profits, productivity and efficiency.
How do you measure the impact of a changed company culture?
You take your P&L from a year before the culture was changed.
Then you take your P&L from the year after.
The difference will be obvious, and you will usually see more profits 😉.
Ok, I kid.
You can also measure the impact of cultural changes by using leading indicators like:
- Reduced staff turnover.
- Reduced client turnover due to more satisfied clients and more repeat business.
- More profit per X (client, product, team member).
Other benefits of culture
As the business owner you also reap the benefits of a better company culture.
It generally means less time spent managing the company, a reduction in overhead across the company, and more overall efficiency.
It also helps you alleviate business risks around team members, as more of the team are willing to jump in if a team member suddenly departs.
It also allows you to form a strong leadership team, which is essential for business growth and scaling.
Case Studies of Company Culture
What follows are three case studies of bad, “average” and good company culture.
These are all real companies that I have either worked with or have detailed knowledge of.
Some details have been changed to protect the less-than-innocent.
Culture example 1: How not to do culture
This is a $2m/year professional services firm headed by a narcissistic founder.
They have a mission and values established, but this is just for show.
Everything seems fine on the surface, but because of bad culture, they have multiple problems.
The first is a high staff turnover rate of about 25% per year. This is in spite of their compensation packages being 10-20% higher than industry average.
They have an especially high turnover of managers — people will enthusiastically join the company, rise to a managerial level, work 6-12 months, then quit, usually due to a personality conflict with the founder.
And because of the company’s geographical location in Asia, when a manager quits, they usually take all their subordinates with them.
Their second problem is that client problems are often buried and ignored, until they explode and end up costing company money to fix.
This results in a very polarised response from clients — some people love them, others hate them.
The final problem is that there is no sense of future career advancement in the company. People are promoted based on political or personal favours and at a whim, rather than on talents and results.
For the team, this means:
- No reliable directions from leadership.
- Different directions from managers, often contradicted by the founder.
- Everything is personal rather than professional. e.g., criticisms are based on character, not work completed.
- Being yelled at in the office, then subsequently love-bombed.2Neither of these is acceptable in a professional environment.
- Jobs and positions never feel “secure”, which does not promote any sense of loyalty towards the business.
The end result?
They aren’t able to figure out how to do middle management.
They have to pay above-market salaries just to keep staff, which eats into profits.
The team is generally in chaos on a daily basis and they are unable to systemic.
Today, the founder still runs the company, despite having wanted to exit by management team over 10 years ago.
Culture example 2: The ticking culture time bomb
Company #2 is what I would call the “ticking culture time bomb”.
I’d rate them as “average” or just-below in terms of culture.
They’re a $3m/year coaching/services business with two founders.
They have a strong mission and values which are loudly broadcast in their marketing materials, and are generally respected by their fans and customers.
But internally they are disorganised, a bit chaotic, and often launch products and services only to shelve them 6-12 months later.
Their clients and customers generally tolerate them because there are few good alternatives in their industry. But make no mistake — everyone knows that something is “a little off” and many of their customers would jump ship if they were given the chance.
Their cultural problems come from the top.
Something between the two founders is rotten.
This shows in staff being underpaid, and not treated quite right.
Their industry partners are undervalued, and treated condescendingly.
They have a slight-monopoly position and they know it and abuse it.3They consistently break the fundamental rule of “always leave something on the table so you can do repeat business.”
In other words, the partners running the business are arseholes and have adopted it as part of their identity, and this has flowed down to their managers and lead people.
The end result for the company is that they go through periods of great success, followed by periods of failure.
Industry partners who work with them once tend to never want to do repeat business with them again.
And if a better alternative came along, many of their long-term customers would pack up and leave.
They are culturally a ticking time bomb waiting to explode.
Culture example 3: Great culture from the top
Company #3 is a $5m/year professional services firm.
They have one founder, who is also the CEO.
They have a good and strong leadership team.
The founder is hard working, ethical, rational and not afraid to get his hands dirty and dive in with the team to do the work when needed.
The leadership team follows his example, and the team follows their example.
They have company culture set up right — a well-defined mission, values and vision.
In fact, they hired a professional human capital firm to help them with this, and guide them through the process. Their formalised culture was developed in consultation with the entire team.
They also have a long-term plan for growth, and a high rate of employee satisfaction.
Their salaries are competitive but still average for their industry.4This is a good thing.
The end result is that they have reliable, year-on-year growth at an above-average rate for their industry.
Their client quality (and profits) continue improving year-on-year.
And they have a very high rate of repeat business.
They also have plenty of long-term (5+ year) team members and things just get done. The team is highly productive, highly intelligent and very efficient.
Culture is not a barrier to their business objectives, and in fact, helps them achieve business objectives that would not otherwise be possible.
Company Culture Cheatsheet
Want a cheatsheet to developing your company culture (mission, values, leadership team, goals)?
Just enter your name and email address below:
What To Do Next
Grab the Company Culture Cheatsheet from above.
And implement it, thinking long and hard about if your company has the right culture to help it succeed, or if culture is holding you back.
If you’re at the stage where you want to reduce management overhead, increase team performance, alleviate business risks around the unpredictability of the team or just develop your leadership team, let’s talk.
- And of course, they never call you back.
- Neither of these is acceptable in a professional environment.
- They consistently break the fundamental rule of “always leave something on the table so you can do repeat business.”
- This is a good thing.
- Yes, a strong culture can be implemented remotely.