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.