How the right corporate culture increases your company profits

Corporate culture is something which we can not see but we can feel.  It’s an important pillar or foundation for a company but often neglected by many CEOs and Business Owners. I will discuss how the right corporate culture increases your profits.

Company vision, mission and core value form corporate culture as a whole.  Corporate Culture is top down.  The action from the top is the most important.  The tone is set from the top so it is important to  give an example and working as a role model,  not just preaching.  The CEOs and Business Owners must walk the talk,  so day to day action is very important.

If you have not defined your company vision, mission and core value, I suggest you do it now.

Now that we understand what a corporate culture is let’s discuss what happens if it is not built or designed.

What happens if corporate culture as foundation of the company is not built? 

  • It will shape on its own, uncontrollable.

Corporate culture will be formed by accident or by design, CEOs and Business Owners have a choice.  If it is not by design then by default it will shape on its own, uncontrollable, and CEOs and Business Owners do not know which way it will go.

  • With no guidance, employees will act as it see fits

Without proper guidance, employees will act as it see fits and each employee has his/her own interpretation what is right and how they should act.  Employees are in limbo on what is expected of them.

Next, we learn how it is formed.

How is corporate culture formed?

  • Corporate culture is formed from habit and becomes culture overtime.

If corporate culture is designed correctly, it can help company increase profits.  The first step is to form a habit.  As it’s very difficult to change a habit at the beginning,  there must be guidance of measurable performance parameter, implementation of KPI can help on this.

  • One bad trait will affect other employees and will spread out quickly, the same goes true for good trait.

One bad trait from one employee can spread out to others quickly if it is not handled properly.  Inappropriate action when not corrected immediately can spread to others.  One person does it with no reprimand or not caught, another person will copy it and overtime it will spread out to the entire company and become a culture. This works the same for good trait.  A good trait will spread out quickly as well.  Once a culture is formed it’s very difficult to change.  It can be changed but it takes a lot of effort to do so.

Is your corporate culture a saver or spender?

When we do Helicopter overview in my HRS systems we access the corporate culture, we can sense and observe whether a company is a saver or spender.  The same as a person a company has a habit of a saver or a spender.  If it’s a saver, it values its resources, money in particular.  If it’s a spender, the company keeps spending regardless of revenue and profit and loss.  Most turnaround cases, company loosing money,  has spender corporate culture.  What is yours? 

When I do a helicopter overview, I also take notice whether the company’s office, factory, working space etc. is clean, neat and well maintained as this is one indication whether the company is well managed as well.  Usually a well managed company pays attention to detail and it has clean and neat environment.

After we learn what is corporate culture, how it is formed and what happens if it is not built or designed next we learn it can help you increase your company profits.

How the right corporate culture increases your company profits

  • Enforcing better Internal control.

Corporate culture is related to internal control, how?  When the top has questionable moral issue, it spreads out from the top to the bottom.  The bottom will copy the top person.  As mentioned earlier, the tone of corporate culture is set at the top.  Good internal control minimizes the possibility of collusion.

The same goes true if the top management has integrity and sense of ownership.  It will be felt and observed by the employees and they will follow the leader.

  • Use KPI to enforce habit and form culture for the better.

KPI is one way to enforce habit but there are numerous other methods to enforce habit and form corporate culture.  As KPI is tied to reward and punishment and performance review, it has more direct effect to employees.  It is one tool CEOs and Business Owners can use to direct their employees performance and corporate culture as the CEOs and Business Owners wish.  Formation of corporate culture certainly takes time as nothing is instant.

KPI is used as a tool in the maintenance stage after solutions are implemented in the company.  Successful KPI implementation forms habit and corporate culture to support the sustainable long term success of the solution and thus can help the company increase profits massively over the long term.

  • Working toward a common goal with well designed corporate culture.

CEOs and Business Owners need to direct what corporate culture they want the company to have.  Of course they need to direct corporate culture which support the growth of the business. One important part of corporate culture is integrity. 

A good corporate culture can support the business, all stakeholders can feel when the company they are dealing with are companies that have good corporate culture.  For example: if one of the corporate culture is energetic, we can feel the energy from all personnel whether they serve external customers or internal customers.  Having good corporate culture takes time, nothing is instant.  But we will reap the benefits for the long term.

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Case Study

One company I worked had a culture of spender.  When I did a helicopter overview I evaluated the culture. Since there was a change of management when I joined the company, I noticed that the previous management was lacking in internal control and the corporate culture was of spender. 

There was no sense of saving, there is so much waste and internal control is very weak. Money is not considered to be valuable as when the money run out, they would do another round of financing.  The tone is set from the top and the employees are just copying the permissive behavior. It was an impossible task to change the corporate culture to turnaround the company but I successfully did the impossible.

The corporate culture slowly changed for the better as business process was more clearly defined, internal control was tightened.  Spending habit was control with policy supporting this.  The company successfully turnaround USD29 mio in 1 year.  There were of course many other tools that I had to use, but changing the corporate culture is one of them.

Summary

Corporate culture is something we can feel but unable to see.  It is often neglected by CEOS and Business Owners.  Corporate culture can be formed by accident or by design.  It’s better that it’s by design so that you could shape the corporate culture to benefit your company.

Corporate culture in relation to money, is the company a saver or spender?  What is yours?

Corporate culture can increase your company profits by:

  • Enforcing Better internal control
  • Having KPI to support and form good habit and good corporate culture
  • Having common goal with well designed corporate culture

Good corporate culture needs to be maintained and nurtured.  If you have not defined your company culture, please do it know.  You will reap the benefits for the long term.  It will help you increase your company profits massively.

Wish you success,

Ronawati Wongso

CEO & Founder

Rantai Breakthrough Consulting

Profit Optimization | Turnaround

Corporate Culture FAQ

What is corporate culture?

Corporate culture is something which we can not see but we can feel.  It’s an important pillar or foundation for a company but often neglected by many CEOs and Business Owners.

How is corporate culture formed?

* Corporate culture is formed from habit and becomes culture overtime.
* One bad trait will affect other employees and will spread out quickly, the same goes true for good trait.

What happens if the corporate culture as foundation of the company is not built?

·       It will shape on its own, uncontrollable.
·       With no guidance, employees will act as it see fits.

How the right corporate culture increases your company profits

* Enforcing better Internal control.
* Use KPI to enforce habit and form culture for the
better.
* Working toward a common goal with well designed corporate culture.