Why Culture is King: How 2 Businesses Increased Efficiency & Profit Through Culture Alone

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IN THIS ARTICLE

→ What is culture in a business context?
→ Why does culture matter?
→ What are the risks of not prioritising culture?
→ What benchmarks should businesses aim for in terms of culture?
→ How to influence company culture?
→ How does culture drive business success?
→ Case Study 1: How Removing 3 Toxic Employees Boosted Productivity by 14%
→ Case Study 2: How Replacing One Manager Improved GP by 3.5% in Just 3 Months
→ Brendan Mills: “Why Culture is King for Business Success”

The Impact of Culture on Business Performance

What is culture in a business context?

In short, culture in a business context refers to the shared values, beliefs, and practices that shape the work environment and behaviour of your team.

Company culture is reflected in a variety of daily interactions and situations, including how people communicate in meetings and over email, how managers treat their teams, and how feedback and recognition are handled. It shows up in problem-solving approaches, teamwork, social interactions, and the balance between work and personal life. The physical workspace, dress code, onboarding process, diversity efforts, and decision-making transparency also reveal cultural values.

By looking at these daily behaviours and practices, you can get a good sense of what a company truly values and prioritises.

Why does culture matter?

Culture matters because it directly affects employee morale, efficiency, and productivity. A positive culture can lead to higher engagement, better teamwork and improved financial outcomes, while a negative culture can harm performance and profitability.

What are the risks of not prioritising culture?

Ignoring the importance of culture can result in your business being less efficient, having high employee turnover, low morale, and poorer financial performance. It can also be a greater burden on management, and lead to operational challenges.

What benchmarks should businesses aim for in terms of culture?

Businesses should aim for high employee engagement scores, low turnover rates, increased productivity, and improved profit margins. Regular feedback and cultural assessments can help track these KPIs.

How to influence company culture?

Business owners can influence culture by setting clear values, leading by example, and fostering a supportive environment. Implementing regular team-building activities and leadership development programs can strengthen culture.

RELATED: The Ultimate Guide to Company Culture: Examples, Influences & Benchmarks

How Culture Drives Business Success

In the past six months, two manufacturing businesses we worked with were concerned about their culture and team environment.

(That may not sound very accountant-y, but remember – we don’t just talk about numbers; we talk about how to influence numbers too.)

The following two examples highlight why culture is crucial to the overall performance and financial success of your business, and why you and your accountant need to be as concerned about culture as you are with your numbers.

A quick note: If you benchmark the businesses we work with and compare their culture and performance, there would be a close correlation between the best-performing businesses and those with the best cultures.

CASE STUDY 1:

How Removing 3 Toxic Employees Boosted Productivity by 14%

The first manufacturing operation, based on Australia’s east coast, exemplifies the power of culture. They had around 21 people on the tools, and told us: “18 of our employees are great – they’re awesome, they’re brilliant. But three are not a good fit for our culture; they impact the team negatively, and are a drain on management.”

They decided to remove the three people without replacing them, and the results were astounding. Output and efficiency increased by 14% and 18% respectively.

With three fewer people, which is about 15% of their workforce, they gained 14% in output. This improvement came solely from eliminating those three individuals. By their own admission, management did nothing different.

Key Takeaway: Removing toxic employees can lead to significant gains in productivity.

CASE STUDY 2:

How Replacing One Manager Improved GP by 3.5% In Just 3 Months

The previous example focused on your team members. Now, let’s look at leadership and management.

The second manufacturing business we worked with had challenges with their operations manager. The team was solid, but they felt their leader wasn’t providing the direction needed. After hiring a new ops manager, their gross profit improved by 3.5% in the first three months.

Consider your own numbers. If you’re generating $1M a month, a 3.5% improvement in revenue equals an extra $35K at no additional cost – simply through effective leadership. Great leadership and great team members produce excellent results, leading to impressive numbers.

Key Takeaway: Effective leadership can make a substantial difference in financial performance.

“Why Culture is King for Business Success”

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“As an accountant, you’d imagine I’m very numbers-driven. But to go one step further, what is influencing those numbers? If something’s good, what created it? If something’s bad, what’s causing it? How do I remedy things, or how do I take advantage of things as they occur?

Two manufacturing businesses that we’ve spoken to in the last six months... and we were talking about culture, team, environment. You might go, “That doesn’t sound very accountant-y.” But remember what I said a moment ago: We’re talking about influence and how to change things.

I want to give you two examples of why culture is so crucial to the overall performance and financial success of your business, and why you and your accountant need to be just as concerned about culture as you are with your numbers.

Firstly, a personal belief I have is if you were to benchmark our businesses we work with, and compare culture and performance, there would be a very close correlation between the best-performing businesses also having the best cultures.

The first of these examples is a business we work with on the east coast of Australia, and they run a manufacturing operation. Their operation employs around 21 or 22 people actually on the job, on the tools. And they said, “18, we love... they’re great, they’re awesome, they’re brilliant; 3, they’re not a good fit for culture, impact on the team - all those things you can imagine - a drain on management, et cetera, et cetera.”

They were able to remove those three people from the business, but keep the other 18. Do you know what happened? Efficiency went up 18%! So three less people... they didn’t replace the people... they kept what they had, but did not replace the people who left – the cancerous people. Their efficiency went up, and their output went up 14%! So you’ve lost three people out of 20, you’ve lost around 15% of your capacity, but you’ve gained 14% output. All by eliminating those three people. They did nothing different by their own admission.

That’s at the granular level of your team members. Then you look at leadership and management of your team. Another manufacturing business had been having challenges with their operational manager. The team was happy, but the leader of that team they felt was not giving the direction that they needed for their business. We worked out that from when they employed the operating manager that they wanted to have and that they trusted, they improved their gross profit performance – just in the first three months by 3.5% just by getting good leadership.

Now, you can insert your numbers here... If you’re looking at a million dollars a month, $2M a month, $3M a month... $1M a month in revenue at 3.5% improvement, that’s $35,000 that you’ve just got from nowhere – you’re not outlaying any more costs – just by how your team is led by your operations manager. So great leadership, great team members, produced great results, which give me great numbers, which makes me very happy.”

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