Why Culture Matters Even in a Small Business

Why Culture Matters Even in a Small Business
Photo by Museums Victoria / Unsplash

In a recent blog post, we concluded that company culture is essential for happy customers and employees. Today we will unpack what that means in the context of a small business.

A Definition of Culture

What is culture, and how does it play out in a business? After a bit of researching and bits and pieces that came back from my time studying, I came across a good illustration: the cultural iceberg model by Edward T. Hall.

Source: Wiki Agile 

What you can see at the surface are behaviors and customs. Things like rules, symbols, processes, habits, and rituals. But many elements are kind of hard to see underneath the surface, like attitudes, beliefs, and core values.

Importantly, culture happens automatically when people come together and interact with each other.

Culture in a business is visible, but only the tip of the iceberg. That is why it is so hard to grasp and is left out by many managers who prefer working on strategy and execution, which is much more tangible.

Why Culture is Important and Mostly Ignored in SMEs

Now that we have established what culture is, let's look at why it is essential.

Culture and strategy levers are some of the most powerful tools in a manager's toolbox. Even if a leader has a robust and carefully thought out strategy, without a managed culture, the strategy will fail. Both culture and strategy need to be aligned to be successful. And in a small business, there is no one else than its leader responsible for that. As someone once said, “culture eats strategy for breakfast”.

But why is it mostly being ignored in small businesses?

In my experience, two things are at the root of the problem. First, it is improbable to have a dedicated role for it (because of the size of the business), so both responsibilities fall into the lap of the CEO. Second, the CEO has so many hats on (Operations, Finance, Strategy, Sales, …) that culture lives as a to-do at the bottom of the checklist.

But as research and studies show, culture is critical and needs to be managed. Changing things up, making new paths, is risky and requires courage. And especially leaders need to be role models. To reinforce desired behaviors and change unwanted behaviors. Here are some statistics to give you an overview of how culture can move the needle:

Gallup: Highly engaged teams outperform their peers by 10% in customer ratings, 21% in productivity, and 22% in profitability
Denison Consulting: Organizations with solid cultures boast 72% higher employee engagement rates than those with weak cultures
Deloitte: Companies that actively manage their culture boast 40% higher employee retention

How SMEs can Manage culture

So what do we need to do about this? What should we focus on as business leaders? First, I would argue that we need to check if the strategy we want to pursue aligns with the company culture. We live in an ever-changing world, and both our strategy and culture need continuous tweaking. And if we see that both are not aligned, we need to take bold action and lead. So how should we go about this? Here are some pointers to get you started:

For the leader:

  1. Live out yourself what you want to see in your culture.
  2. Be accountable and consistent as a leader.
  3. Communicate and discuss (over-communicate) the culture in various settings (Stand-ups, 1-on-1 meetings, after work beer, written information).

Building Company culture:

  • Establish company core values (like “we do the right thing, period” or “be bold” or “never stop learning”)
  • Set company culture goals, taken from the fundamental idea behind your company. The reason it was founded in the first place (“create a world that inspires human connection” or “live to deliver wow”)
  • Involve your entire team
  • Follow company culture best practices yourself first. To reinforce desired behaviors and change unwanted behaviors.