It’s well researched that culture plays an important role in attracting the right talent, distinguishing organizations from their peers, and sustaining employee engagement. What is less understood is how we make use of culture to strategically improve business outcomes. To resolve this, It can be helpful to frame culture from an asset-based perspective. Assets are both tangible and intangible organizational resources that leaders invest in to improve business outcomes. As organizations grow, it’s important to recognize how culture can operate as an asset or become a serious liability that limits potential success.
Culture may show up as a liability in the negative behaviors that are tolerated, limited trust across teams, or low employee retention. Just to name a few. This can cripple real-time performance and any future growth for organizations in their early stages. In a recent survey, six out of seven startup leaders (86%) believe a company’s culture contributes to its growth, with 85% saying it's an important factor in attracting new talent and securing investment. In the eyes of a potential investor, culture can be an important differentiating factor in ensuring ventures fit within their existing portfolio or have the organizational resilience to manage the change that comes with growth. Research into VC decision making by the National Bureau of Economic Research found that investors view the team behind the business as more important than other business related characteristics such as product or technology. They also attribute more of the likelihood of ultimate investment success or failure to the team than to the business itself.
As organizations mature, these liabilities that go unchecked may build into what some researchers call cultural debt. This debt speaks to the accumulation of unaddressed cultural issues that lead at best to questionable habits and decision making, and at worst, harmful and unethical leadership behaviors that ruin organizations. When I hear the stories of how Blackberry executives laughed people out of the room for suggesting the growing interest in touchscreen or well documented malpractices by many of once shining stars like Thanos, WeWork, Uber, and even recently SBX - it reads to me as a manifestation of cultural debt.
One area of concern where cultural debt can impact the bottom line is in negative or inconsistent customer interactions, As senior leaders and early team members become more removed from the day to day operations, the culture of the organization guides and onboards the newcomers interacting with customers on the frontline. A 2016 Accenture Report, estimates that 52 percent of consumers have switched providers due to poor customer service and that in the US the cost of customers switching due to poor service is $1.6 trillion. In a recent PwC study, 59% of all consumers feel companies have lost touch with the human element of customer experience. Past research also highlights that consumers will pay a premium for positive consumer experiences.
Within the workplace, we recognize culture as an asset in setting the expectations for how work gets done, decisions are made and teams generally engage. Through having more awareness and clarity of their culture, leaders can more intentionally build their teams and ensure stakeholder experiences that reflect the ideal values, behaviors and capabilities necessary for consistent success. Without this clarity, managing the change that comes with growth becomes an exercise of throwing darts in the dark. Even if successful in hitting the board, leadership teams often lack the shared awareness to understand what led to that success or how to repeat it consistently as new employees come onboard. It’s important then to actively acknowledge our workplace culture in its unique mix of values, mindsets and behaviors that lead to success, and to monitor how it may evolve as organizations grow to avoid this critical asset becoming a liability.