Profit or Culture First?

“A com­pa­ny is only as good as its peo­ple. The hard part is actu­al­ly build­ing the team that will embody your com­pa­ny’s cul­ture and pro­pel you for­ward.” - Kathryn Min­shew, CEO & Co-founder of The Muse career search site

I’ve had the great for­tune to work with com­pa­nies in India, Aus­tralia, the Mid­dle East, Europe, Mex­i­co, Cana­da and the US that have phe­nom­e­nal cul­tures and deeply believe in cre­at­ing a great and mean­ing­ful place to work for their people.

I’ve also worked with com­pa­nies that, once I dis­cov­ered they don’t care about their peo­ple as much as they said they did, became very short-lived.

And I’ve found that the strug­gle, with­in all com­pa­nies is the bal­ance between prof­it and cul­ture. If the focus is only on prof­it, many choic­es made may not good for peo­ple and could destroy the cul­ture, long term.

Obvi­ous­ly, the chal­lenge is to focus on both.

The ques­tion is: What’s the cor­rect ratio?

My belief is it’s some­where between ⁸⁰⁄₂₀ and ⁹⁵⁄₅: focus 80% of your efforts on cre­at­ing val­ue for your cus­tomer in a prof­itable way, and 5% to 20% on cre­at­ing a great work­ing envi­ron­ment for your people.

As you’re read­ing this, some of you may agree and cheer — and some of you may strong­ly disagree.

But let me continue…

To be clear, I am not say­ing cul­ture is not impor­tant; I’m a huge pro­po­nent of cre­at­ing a place to work that is con­nect­ed to a high­er pur­pose and val­ues. But it’s naïve to believe that if you only care about your peo­ple, prof­it will follow.

Pick your strategy

When we run strate­gic plan­ning ses­sions for com­pa­nies, we always boil things down to:

• The top three to five strate­gies to dou­ble busi­ness in five years
• Three to five goals to march ahead on, annu­al­ly; and
• What to deliv­er on each Quarter.

In a recent ses­sion with a com­pa­ny, after we picked the top five tan­gi­ble, high-impact objec­tives, the dis­cus­sion turned to peo­ple, and we decid­ed to add a sixth objec­tive to make sure we con­tin­ued to breathe life into the culture.

As Jim Collins found in his research, great com­pa­nies with endur­ing suc­cess do some­thing on a reg­u­lar basis – a few times a year — to con­tin­ue to cre­ate an alive and vibrant culture.

What­ev­er your ratio, all your strate­gic deci­sions must put com­pa­ny strength first – to make the com­pa­ny more prof­itable and dom­i­nant by tak­ing bet­ter care of the cus­tomer. That is why the busi­ness exists, and it’s our job to take care of them, to solve their prob­lems and make their worlds bet­ter. If we lose sight of that, we put our prof­its in a very pre­car­i­ous position.

The Chal­lenge

• Review your annu­al and quar­ter­ly goals: Are you in the 5 – 20% range to focus on strength­en­ing your cul­ture so that it’s a great place to work?
• If yours is a bot­tom-line, relent­less-growth orga­ni­za­tion, add a sixth objec­tive, every Quar­ter, to keep your cul­ture vibrant
• If you have a com­pa­ny that thinks only about cul­ture, make sure that four or five objec­tives, at a min­i­mum, tan­gi­bly strength­en and dri­ve profits.