What is Workplace Culture and Why Every CEO Should Care

When companies hire a fractional CFO, most expect a high-level “accountant-type” who can analyze their financial situation, fix problems, and help them pursue their goals. But what many don’t realize is that a skilled CFO is much like a good doctor. They review your finances (symptoms), listen to what you say, and then read between the lines to get at the root of your problems before giving you a diagnosis and strategic recommendations. And one of the things I have noticed is that flaws in workplace culture are often at the root of financial issues. Below, I explain what this means, why every CEO should care deeply about company culture, and what you, as the leader of your business, can do about it.

What is Workplace Culture?

Workplace culture (also known as organizational culture or corporate culture) refers to the shared values, norms, beliefs, and behaviors that are acceptable within your work environment. All companies develop some sort of workplace culture—it is a normal phenomenon that occurs within every social group. For instance, if you think about your family, friend groups, and any other formal or informal organizations you associate with, you will notice that explicit or implicit expectations influence your interactions. So, you can build your workplace culture intentionally or let it happen organically; either way, it will form.

The fascinating thing about culture is that we absorb and adapt to it instinctually, without even realizing it is happening, because humans have an innate need to belong. In a healthy culture, it is reasonably easy to fit in and feel accepted by the people around us, making us feel safe and motivated to contribute to common goals. But that is why culture can become a problem in a business environment. If you don’t control it, you may unintentionally develop a chaotic or even toxic workplace culture that leaves people feeling unsafe – dampening the employee experience and inhibiting your ability to thrive.

Why Every CEO Should Care About Workplace Culture

Put simply, you need a positive work culture to attract, retain, and motivate employees to do their best work so you can achieve your short and long-term business goals. A positive culture fosters a harmonious work environment and paves the way for economic growth and success, whereas a negative culture can have the opposite effect.

Your people make your company what it is. They want to succeed and deliver value but rely on your leadership for guidance. Whenever you hold a meeting, interact with team members, or speak to customers, your employees watch and take mental notes about what is acceptable within your organization. Then, they behave accordingly, adopting the same mindset and behaviors in their quest to fit in. 

These behaviors trickle down throughout your organization, affecting job satisfaction, employee engagement, productivity, and employee retention. People don’t leave companies; they leave because they are unhappy with the relationship. So, suppose you model and reward poor conduct among your management team. Your managers will behave the same way when interacting with their staff – speaking tersely, holding back on the attaboys, micromanaging, or engaging in other habits that stifle creativity, innovation, and professional growth.

Over time, a faulty workplace culture can be very costly. It can destroy your reputation, making it hard to form relationships and hire the people you need to run your business in a financially sound manner. It can also lead to unethical or irresponsible behavior, increasing your risk of claims, lawsuits, and conflict of interest issues that are expensive and crushing to employee morale.

Therefore, as the CEO, you are responsible for establishing and upholding a strong culture by clarifying expectations and modeling the behaviors you expect to see in others. Creating a supportive, ethical culture where everyone understands what is and is not appropriate can lead to a higher ROI for stakeholders and be a natural form of risk mitigation, potentially saving the organization millions of dollars. 

How to Recognize Issues with Culture in the Workplace

The tricky thing about workplace culture is that it develops over time and continues to evolve indefinitely, so problems can form and remain invisible until performance starts to suffer. Here are a few things we have seen over the years to give you an idea of what to look for.

• A service-based company that hired dozens of consultants for similar jobs but gave them different compensation packages. That situation wasn’t good for the company because it made planning impossible and exposed them to retention problems. Nor was it good for the consultants because the path to success wasn’t clear.
  
• A CEO set up a workplace environment that left employees feeling like they did in high school, with the cool kids getting special treatment and the uncool kids feeling neglected. Aside from the personal discomfort that caused, it also affected the bottom line because those in favor didn’t always act in the company’s best interest.
  
• An insistence on changing work-from-home policies without considering the nuances of employee responsibilities, circumstances, or the need for work-life balance. Although we understand it is sometimes necessary for employees to work in a location convenient to the company, arbitrary changes typically result in losing valuable talent that is expensive to replace.
  
• One leadership team developed the terrible habit of hiring people to do one job and then insisting that they perform other jobs requiring different skill sets. That resulted in uncomfortable micromanaging, unrealistic expectations, and, again, the loss of talent and an expensive recruiting bill.

The common theme here is that unhealthy practices can lead to an erosion of trust between the firm and its employees, resulting in inefficiencies, management challenges, and employee attrition. Finding great people and bringing them up to speed is expensive. So, as the CEO, you must find ways to embrace your employees, make them feel safe, and develop a mutually beneficial relationship where everyone can succeed.

How Can CEOs Build Positive Workplace Cultures?

So, what can you do to avoid or remedy these situations? Those who wish to tackle cultural challenges head-on should consider investing in strategic human resources. For example, a fractional CHRO can work with you and your leadership team to assess your situation and develop suitable recommendations while minding your bottom line. However, as the CEO, you can also take several actions today to get things moving in the right direction. 

1. Read!

The following books and articles will help you better understand how people should interact in organizations. That will help you clarify the type of company you want to run and how to get the most out of it.

• Jim Collins’ book “Good to Great: Why Some Companies Make the Leap . . . And Others Don’t” tells the story of two companies that started the same but evolved in very different ways due to differences in their cultures. Here is a complementary article Jim wrote on the topic so you can get the general idea.
  
• Mastering the Rockefeller Habits, by Verne Harnish—In his book, Verne provides eight actionable suggestions for strengthening your culture (and the value of your firm). He then presents several case studies showing his recommendations in action.

2. Build Proper Accountability Channels

Once you know what type of workplace culture you want, build the structures necessary to support it. In other words, collaborate with your team to develop solutions and ensure buy-in. That typically involves crafting a mission and value statement and establishing transparent processes and procedures—specifying roles, responsibilities, and desirable behaviors. The goal is to set people up for success and create a positive environment, so leave nothing to the imagination, including the consequences of actions outside your guidelines.

Then, implement a communication plan and build appropriate tracking mechanisms to hold yourself and your team accountable. But don’t get me wrong, I’m not suggesting you rule with an iron fist or assign blame when things don’t work out. Instead, nurture your staff and work with them to troubleshoot issues as they arise, tweaking things as you go.

3. Walk the Walk and Talk the Talk

Of course, once you have handled items one and two, you must show your team that you mean it by conducting yourself appropriately. Share this new messaging with every employee and consider meeting with people one-on-one (in their offices, not yours) to get their feedback and ensure they feel comfortable. Be approachable and get to know your employees by asking about their thoughts, concerns, and desires within and outside the workplace. In doing so, you will help them feel safe and supported in their pursuits so they can do their best work.

The Bottom Line

Your workplace culture impacts your ability to attract, retain, and motivate the people you need to achieve your business goals and vision. Therefore, as the CEO, you must acknowledge its importance and take the appropriate steps to ensure a healthy and productive environment. If you built your business without intentionally crafting a good company culture, you likely have some issues that will eventually become problems. Reach out today to discuss how we can help.