I believe that a company’s culture has a direct impact on their ability to generate revenue and their profit margins.
Definition of culture from Wikipedia
“Culture is an umbrella term which encompasses the social behaviour and norms found in human societies, as well as the knowledge, beliefs, arts, laws, customs, capabilities and habits of the individuals in these groups”
The challenge I face when talking about how and why culture is so important is that I am explaining this idea to people who have only known or remember one company culture. As they have either just entered the world of work so are working at their first company or they have been working in the same company for 10 to 20 years.
To help illustrate the importance of culture I have created the following example of two companies that operate in the same market and sell the same products.
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Company A | Company B | ||||||||||||
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Employees |
5000 |
5000 |
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Revenue |
$100 million |
$1 billion ($1000 million) |
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Profit |
$10 million |
$400 million |
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Revenue per Employee |
$20,000 |
$200,000 |
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| Profit per Employee | $2,000 |
$80,000 |
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Description |
Highly resistant to change | Employees work in the same way as they always have done | Majority of employees and leadership have been in the company for 10 years+ | Employees either last 3 years in the company and then leave for career advancement or stay for 10 to 20 years
No standardisation No knowledge sharing All implementations of their products are treated as like they are being implemented for the first time 90% of projects have their go live delayed No sense of ownership or responsibility as it is OK for projects to be delayed |
Willingness to change when the change will add value | Employees can share new ways of working and change the old ways if they are no longer effective | A balance between lifers and new starters | Employees can move about the company so to apply their skills to different areas and learn new ways of working
The company understands that they sell a standard product so everything is standardised so employees can focus on the client’s uniqueness not how to implement the product Knowledge sharing – internal Wikipedia etc Projects are implemented as per a production line model so the 70 to 80% of the project that is the same for all clients is automated and the 20 to 30% that is unique to the client has all the focus Only 5% of projects are delayed due to the high level of standardisation there is a low likelihood of delay. |
These two companies sell the same product in the same market and have the same number of employees. In my view it is the culture of Company B that results in it greatly outperforming Company A.
In conclusion, culture can have a positive or negative impact on the effectiveness and profitability of a company.
Successful International Project Management 