The Power of a Positive Business Culture (Or the lack thereof!)

Those who have worked with me or read my writings know that I believe the culture of an organization creates the work environment that determines its potential for success or failure. It is the culture that defines the very soul of a company. More than economic climate, markets or available capital, I believe the culture of an organization is the single most important determinant of its ultimate success or failure. Smart business managers and entrepreneurs know this.

Over the years, like a broken record, I have preached that the single, most important factor in developing and maintaining a positive culture in an organization is something called “parallel interests.” Parallel interests are achieved when the interests of various stakeholders, i.e. shareholders, management, customers, employees and the distribution system, are aligned in parallel.

When a business culture is aligned in parallel what benefits one, benefits all. These benefits do not have to be equal but the do have to be equitable. A product should benefit the customer as much as it benefits the company. For example, if long-term annuities are more profitable for the company, then those who buy annuities and hold them for the long term should be rewarded with higher values. Activities that benefit the company should also benefit the employees. If the employee has the ability to add value to an organization, then the employee should be allowed to share in the value they add.

Certainly a company has the right to maximize profits, but it does not have the right to do so at the expense of employees, customers or distribution. After all, these are the stakeholders who ultimately determine the profitability of the company.

If the management philosophy of a company is to take only those actions that are in parallel with other stakeholders then a positive environment is created in which the interests of one become the interests of all. This may sound like Pollyanna to some, but it is real. The great benefit of a culture built on parallel interests is the elimination of conflicts between stakeholders, i.e. management and employees. The elimination of mistrust and conflict allows all to concentrate on building rather than fighting and destroying. Sure, companies can be profitable without a culture based on parallel interests. We see examples of that all the time, but just how much more successful could those companies be if they were to build a positive, parallel culture?

There was a time in this country – in 1920s and 30s – when the nature of business was for the companies to be in direct conflict with their employees. There was no thought of the need to be in parallel. The attitude of management was that employees were “tools” and should be happy just to have a job. This attitude led first to a negative, distrustful work environment and ultimately to actual physical confrontations between management and employees. It also resulted in the rise of unions in America.

Physical confrontations as a result of cultural conflicts within a company seldom happen in the U.S. today, but there are examples in emerging world economies of what can happen when the interests of the company and the employees are not in parallel.

If you would like to see one example of negative culture to the extreme, then click the following links:

One response to “The Power of a Positive Business Culture (Or the lack thereof!)

  1. Bob,
    I am a Civil Engineer working in the land development consulting business. I am having trouble building parallel interest with my clients, whom are developers. Banks are making it difficult for them to get loans and therefore they after a contract has been signed they try to hold off payment as long as possible, which honestly is the smartest thing for them to do. The services we perform for our clients are usually completed 6 months to a year before the developer is receiving cash flow from their tenants. In these tough economic times everyone is competing for work with a very thin operating line. We both want to provide the best project possible and maintain these key relationships that we have built over decades. We can’t afford to be paid a year after a project has been completed or put a lien on the property, which would ensure we would never work with them again. I am sure that other companies experience them same problems that we have but unfortunately we are at the front end of the housing market. Do you have any advice on how I can handle this situation? I feel that the parallel interests we once had have become more of a leverage relationship. Thanks again for insightful article.

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