The right culture makes or breaks an organization’s success. It’s as critical as business, operational, or financial strategy. So why do organization leaders and senior executives ignore the signs of culture erosion? We can assume that they do because (according to Dynamic Signal, an employee communication and engagement company), 51 percent of the US workforce is disengaged, causing massive losses in productivity—between $450 billion and $500 billion a year.
Juggernauts like Oracle continue to innovate and achieve stunning heights of success, while lesser companies stagnate. During my twenty years of experience working with companies ranging from startups to Fortune 100 entities, I’ve identified five challenges that cause growth to stagnate.
Businesses may be riding high, celebrating success. Perhaps they’ve developed groundbreaking, revolutionary products. But they’re resting on their laurels. They have become market leaders, and they stop innovating because they don’t think they need to. They don’t look in the rearview mirror to see who and what is closing in on them and how the world around them is changing. Think Kodak, Hostess, Blockbuster, and Sears as examples.
Kodak actually invented digital photography but ignored this technology because, as a company, it was wedded to its film-based business. Result: bankruptcy. Hostess, manufacturer of the iconic junk food Twinkie, failed to keep up with changing consumer tastes. Result: bankruptcy. Blockbuster, the nation’s largest video rental chain (which itself was once a disruptive upstart), was steamrolled by Netflix. Result: bankruptcy. Sears, formerly America’s top retailer, couldn’t keep up with the low-price competition of supply-chain savvy Walmart and then the rise of online, one-stop shopping. Result: Experts say the company is on the verge of bankruptcy.
Don’t take your success for granted. Instead of a complacent culture, seek to foster a courageous culture. Encourage executives to go against the grain and push back when something doesn’t feel right, even if it is wildly popular within your organization. Companies begin to fail when employees or leaders stop asking questions and become content.
Many organizations sculpt mission and corporate values statements. Sadly, not too many of these companies make these values come alive. The words end up as posters on a wall or slogans on employee badges. While values are the foundation on which every successful culture is built, these companies fail to use them to guide decision-making, talent selection, or leadership development.
Success can create egos, and egos breed power struggles. This is a major problem for many reasons, but mainly in the way egos can change the landscape of a company’s culture. Egos quickly create an “us versus them” mentality, leaving little room for alternative thoughts and opinions. Ultimately, this causes a breakdown in trust, communication, and creativity, because other employees feel unappreciated or undervalued. Inevitably, dysfunction and contention permeate the entire company.
Leaders who have enjoyed long-term success often convince themselves that they have the Midas touch and become arrogant. They ask for input, but in reality, they just want to keep doing it their way. The best and brightest leave in frustration, seeking an environment where their voices are heard and where there is a greater sense of camaraderie.
As organizations grow and evolve, they often wisely create systems and processes aimed at establishing consistency and efficiency. There’s no arguing that policies and protocols are necessary to keep a steady hand on the steering wheel of growth. But companies often fall into the trap of initiating a procedure to handle every step of the business or to solve every issue that might arise.
Even more insidious is when a company develops policies that are not aligned with core values—policies that might negatively impact its lifeblood of customers or demonstrate a lack of trust in its essential frontline employees. The customer has to wait, and the employee feels a definite lack of trust. Processes can quickly become barriers to innovation; sometimes less is more. Fewer, more streamlined processes can translate to better ease of understanding and implementation for employees. Greater innovation is also enabled, and that makes for a more engaged workforce, which is vital for growth.
Surveyed employees often list micromanagement as a top complaint. It kills motivation, creativity, engagement, and job satisfaction. Employers need team members who will do more than what they are told, employees who will be creative and willing to try new approaches and solutions. Many of today’s employees crave autonomy, so if you’re running your department or division (or even company) with a “command and control, looking over their shoulder, second-guessing” style, you will ramp up employee turnover. The first to go will be your top performers, as they’ll find it easiest to snag positions at more openminded, collaborative organizations.
The Result is Disengagement
These five issues lead to the creation of the big one: a company culture teeming with disengaged employees.
When it comes to growing a small-to-medium business (SMB), the saying “Starting is easy, finishing is hard” has never rung truer. Automated marketing, crowdfunding, and other tools make it easier than ever to find customers and obtain enough financial backing to get a small business off the ground and continue to expand. However, I’ve found that organizations that have achieved exceptional success—reaching revenues between $100 million and $500 million— often hit a brick wall. Getting to the next level is more difficult than anticipated. Indeed, it takes something special to continue to knock through that wall. I’d argue that the “something special” is your culture. Here’s why.
According to the Small Business Administration (SBA), small businesses (classified as those with less than five hundred employees) make up 99.7 percent of all US firms, which, in turn, accounts for more than 64 percent of net new jobs. Wow! Small businesses are adding new jobs faster than their larger competitors, but their share of total employment remains steady. While they are a huge engine of growth, most will never make it out of the small business category. Why is it so hard for a small business to grow beyond the initial startup phase? Sometimes the market just isn’t there for their product or service, but more often, it’s a problem with their culture.
In my next post I’ll reveal why culture is the key to avoiding stagnation.
Jason’s book “Culture Spark: 5 Steps to Ignite and Sustain Organizational Growth” will be published in April. It’s an enlightening and entertaining take on what it takes to build the right kind of corporate culture to rise above the plateau that stifles growth. Powerful advice for both startups and seasoned company executives. This post is adapted from the book.