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The Financial Impact of a Poor Culture

The Financial Impact of a Poor Culture

Material Matters Member News Industry News/Information Dena Cordova-Jack

Dena Cordova-Jack

Having the opportunity to work in Fortune 500 companies, family-owned businesses, and extensive industry operations have afforded me a unique view into various company cultures and their overall effect on profitability. The experiences have been different, with just as many lessons learned about success as failure.

Earlier in my career, I worked in a company that prided itself on touting its company values of trust, transparency, empowerment, and employees were valued for their contributions. At the time, the company was a shining beacon of the industry, but it was going to learn an expensive lesson about poor leadership.

The division leader believed that if he hired the right sales director, the market share and profitability would skyrocket. They wanted an ace, a proper sales management professional.

Enter the new sales director. He placed his desk in the middle of the trading floor, and a time limit was set on phone calls. If a trader remained too long on the phone, or the conversation didn't follow the track that the director thought was correct, you would be reprimanded, usually while you were still speaking to the customer. If you didn't meet your daily/weekly/monthly quota, you risked being excoriated in front of the team. You risked retaliation if you did not align with the sales director's beliefs.

Employees were spoken to disrespectfully, differences in opinions were not tolerated, and the employees felt they played a daily game of whack-a-mole. If you popped your head up for any time, you likely would get a strong bop on the head. Fear-based management ran rampant.

Thankfully, the division leadership saw the error of their hire after the company culture collapsed in a few short months. High-performing traders had left, morale was extremely low, and not surprisingly, market share fell along with profits, losing a stunning 15% of market share and 2.25 basis points of profitability.  The employees that were left were disconnected and demoralized. The sales director was invited to leave the organization after a short tenure, sanity returned to leadership, and the culture was regained and once again lived by its values.

What did this lesson teach me? Many great companies have mid-level leaders who are destructive. Why do otherwise great companies have these issues? It is usually due to a combination of political, and not competency-based promotions, a rushed hiring process, or placing people in leadership positions who aren’t effectively trained and developed to lead under pressure. Creating a continuous core competency improvement culture supports people in swiftly identifying and developing their gaps.

Organizational culture is the foundation for any lucrative business, and the concept of a "positive culture" is spoken of often but poorly understood. Continuous core competency improvement is vital in gaining efficiencies and improving profitability, but culture should be included in that list frequently. A company's culture is truly the "incubator" of employee productivity. If you want to retain quality workers, surveys show that the following is of the utmost importance, and in this specific order:

  • Team-based culture
  • Job security
  • Fair compensation and benefits

Consciously creating a positive workplace culture takes far less effort than fixing a poor culture created by unconscious means.

A survey from Deloitte found that companies that intentionally managed their culture significantly increased revenue and income. Specifically, the statistics showed that an analysis of 200 companies that intentionally managed their cultures was as follows:

  • Revenue increased by 682% vs. 166%
  • Net income increased by 756% vs. 1%

90% of financially successful mergers and acquisitions addressed culture within the first 30 days after the announcement, and in contrast, only 1/3 of financially "unsuccessful" mergers and acquisitions addressed culture within the first 30 days after the announcement.

Deloitte's survey also found, in companies with effective cultures, that "engaged managers and employees are much more likely to remain in the organization, leading directly to fewer hires from outside the organization. This results in lower wages for talent, lower recruiting, hiring, and training costs, and higher productivity. Higher employee continuity leads to better customer relationships that contribute to greater customer loyalty, lower marketing costs, and enhanced sales."

Here are simple ways to create a positive, supportive, and productive work environment.

  • Define your company's mission, vision, and values. This is the foundation of any company culture and is your north star to building your culture. Culture begins at the top; the leader must set the tone and own the cadence.
  • Hire for your culture. Ensuring that you hire culturally fit employees is paramount to organizational success. Hiring for different competencies and skill sets is necessary, but the underlying decision to bring an employee aboard should align with the company culture.
  • Transparency, transparency, transparency.
  • The line between life/work balance is becoming blurred today. Encouraging employees to take accrued vacation days and have flexible schedules is critical.
  • Express thanks for your employees' contributions to the company. Take notice when an employee goes over and above for a well-done job. Appreciation for their efforts ranks high in good cultures, much more than pay.

A strong company culture encourages the loyalty of your staff. Dedication drives your employees to be personally and professionally vested in your company and maximizes your ROI in your most precious asset.

Business doesn't cause cultural problems. Leadership creates cultural problems.

A positive workplace culture affects the bottom line substantially and must be your highest priority. It's time to discuss positive workplace culture and the rewards it will bring.

Transforming Companies by Empowering Leaders,


Dena Cordova-Jack is vice president of organizational development for Misura Group. To learn more about Dena or to learn how she can help your business, visit Misura Group online at

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Source : Dena Cordova-Jack

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