Companies that have a culture that focuses equally on employees, shareholders, and customers outperform their competitors by 756%!
These results were published in John Kotter’s book, Corporate Culture and Performance, where he reported on the results of his research on over 200 companies for more than 10 years.
Companies that focused equally on employees, shareholders, and customers outperformed those companies that positioned one of these over another. The performing companies didn’t just marginally outperform these unbalanced companies . . . they reported income growth of 756% compared to 1% growth over the same period (page 11 of Corporate Culture and Performance)!
Corporate Culture in Action
I know this seems like an outlandish claim but I have seen this strategy work!
A number of years ago I took over the leadership of a company in Calgary that was being hammered by the 2008-2009 recession. Profitability was abysmal, employee morale had bottomed out, and our remaining customers were wondering how we would perform amongst all the turmoil!
Shortly after taking over as the new business leader, I gathered the leadership team together and we determined that going forward Financial Health (i.e., shareholders), Customer Satisfaction, and Employee Satisfaction would be our top values and top priorities. In order to be successful, these values had to be balanced.
Although we had some hiccups along the way, we were able to stay focused on these three priorities. When I left the business four years later we had the highest:
- profitability that the firm had ever seen
- customer satisfaction survey scores recorded to date
- employee satisfaction scores in the company’s history.
We proved that this concept works!
So, what does this really look like?
Culture Balance is the Key
Focusing on one of the values over the other always results in an imbalance within the business that impacts overall performance. For example:
- Putting shareholders or financial health consistently ahead of customers or employees can lead down a dangerous path. Although financial health is critical to an organization, it is not just about short term profitability. A business must understand that investing in employees will reap long term benefits. Likewise, treating customers properly may cost some money in the short term but will pay off in so many ways in the future!
- Putting customers consistently ahead of shareholders or employees can seem like a great concept but it doesn’t work long term. It may be the correct decision to give a customer a deep discount or a special deal in some situations but doing this consistently can bankrupt the business. Similarly, treating the customer like they are “always right” is a poor policy. Customers are not always right and treating them as if they are is demoralizing for employees and can be financially devastating for the business.
- Finally, putting employees on a pedestal above customers and shareholders will always end poorly. Employees are critical to an organization. However, without customers a business does not need employees! Similarly, without financial health, a business cannot sustain itself or employees.
So it really comes down to a “common-sense” balance.
Leading your business in a way that balances shareholders, employees, and customers will result in long term and sustainable business growth. Getting out of balance with any of these will always have a short term and a long term impact. A business leader must understand what these impacts are and confidently lead their business into the future.
Take some time this week and do a quick values survey. Determine where your business is at and then adjust as required. Make sure that you have a proper balance between shareholders, employees and customers.
Finally, review these related posts:
- Organizational Value Alignment
- How Strong Values Engage Employees and Increase Profits
- Organizational Leadership Behavior
“A visionary company almost religiously preserves its core ideology, changing it seldom, if ever. Core values in a visionary company form a rock-solid foundation and do not drift with the trends and fashions of the day.” Jim Collins
Download a free copy of my new Ebook: 12 Steps to Business Transformation. If you would like a business assessment to help kick off your business transformation, contact me at firstname.lastname@example.org or at 587-227-5179.
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