How Workplace Culture Affects the Bottom Line

Corporate culture is built over time and defines the unique business values, traditions, beliefs and attitudes of a company. In fact, according to new research from the National Center for the Middle Market (NCMM), nearly three-quarters (73 percent) of middle market business leaders say culture is a top priority for their firm. The NCMM study shows that a defined and established corporate culture is associated with much faster rates of revenue growth than an unclear sense of culture. In fact, the research revealed that companies whose leaders described their corporate culture as deeply ingrained grew at a rate of 10.8 percent over the past year, while companies whose culture was “a muddle” saw a revenue growth decline (-2.7 percent).High-Performance Culture, a special report by the NCMM, is an analysis of data gathered from online interviews with 400 middle market executives. This study set out to understand middle market executives’ viewpoints on culture, highlight the dimensions that define a successful corporate culture, and uncover how culture can improve company performance by helping companies attract and retain high-value customers and employees. “A strong, vibrant company culture can be a real source of competitive advantage for middle market companies — indeed, a way in which they can distinguish themselves from bigger rivals both in the talent market and in how they serve customers,” said NCMM Executive Director Thomas A. Stewart. “When a culture is strong, a company punches above its weight.”

According to the research, middle market executives identify with one of seven different culture types, including:

1. Customer-Centric: Define themselves by emphasizing a customer-first approach to business
2. Innovative and Creative: Encourage finding new ways to create value through new channels
3. Risk-Averse: Focus on minimizing risk and avoiding situations that appear to be risky
4. Great Place to Work: Foster an employee-centric mentality to create a stimulating environment for workers
5. Continuous Improvement: Emphasize achieving steady gains in customer offerings and company processes
6. Technically Oriented: Focus on developing highest-quality products and services through engineering of all kinds
7. Highly Efficient: Dedicated to eliminating inefficiencies and becoming and staying lean

The research showed that companies with cultures that encourage innovation and creativity grew at 9.4 percent in the last year while companies with risk-averse cultures saw revenue growth of 4 percent. Customer-centric cultures — the most common type — were rewarded with a growth rate of 5.9 percent. Culture plays a critical role in recruiting and retaining talent. Companies with employee-focused, great-place-to-work cultures reported the strongest link between culture and talent management, but innovative and technically oriented cultures are almost as powerful in their impact on employees. Being a great place to work appeals not only to potential employees, it also brings in customers. According to the research, putting employees first has a greater positive impact on customer retention than being customer-centric does (80 percent vs. 71 percent positive impact on retention).

Middle market companies that have made efforts to change culture have also encountered challenges as people, by nature, resist change. But, as competitive landscapes or businesses evolve, cultural change is inevitable. However, the report reveals that among companies that have made direct attempts to change or alter culture, only about one-third stated that they were successful. “Moving the needle on corporate culture can be difficult in any company,” said NCMM’s Managing Director Doug Farren. “Business leaders, especially those in the middle market, need to properly communicate to all employees the rationale for any change to the corporate culture so they can successfully implement the vision, values and expectations for the change that will tie back to the company’s overall business goals.”

The research found that executives can have a positive effect on a successful corporate culture through the following efforts: model culture from the top down; set clear expectations for employees; measure impact; and reward behavior that is consistent with the culture the company desires. Middle market companies stand to benefit from investing in their corporate culture and focus on creating an environment that motivates people to move the business forward.

For more information, visit https://www.middlemarketcenter.org.