Shareholder Value, It’s About People
A Tacticware Resource Group White Paper
In this white paper, we discuss three cultural types often found in business: Price-Based, Production, and Customer-Centric cultures. Each environment affects revenue, client retention, and shareholder value. Additionally, we discuss how to analyze your company culture and begin to embrace cultural change.
White Paper Introduction
Is there a magic strategy for increasing shareholder value?
From our perspective, quality and self-managed people are the magic. It’s a blend of positive culture and effective strategy, achieved by skilled people.
Companies with keen innovation and a growing customer base demonstrate a successful culture. They retain productive, self-managed leaders and employees. The result is achievement of plans, and, of course, shareholder value.
Self-managed leaders and employees generate their own success. They are productive, profitable, and effective. Given a goal they achieve it with little fanfare. Self-management means the ability to plan, schedule, execute, and report achievement with little supervision.
Collaboration and enthusiasm both become contagious. They spill over into customers and community.
“Positive culture creates an environment of achievement. Employees and customers are beneficiaries of best practices. Shareholders are recipients of increased earnings.”
Strategy execution is influenced by company culture. The failure to consistently execute strategies and objectives is a result of flawed company culture. Culture is derived from the company vision, mission, and core values. It’s the foundation of productivity, retention, and growth.
Consider this: culture allows the enterprise to achieve its potential.
It is a choice as to which customers and revenue sources we pursue. Customer choice is a result of culture. Quality customers have behaviors and expectations regarding products, service, and business practices. Good customers embrace collaboration and innovation. Less-than-stellar customers have the opposite effect.
We generally find three cultural types in industry: Price-Based, Production, and Customer-Centric. Each environment is unique, but can be changed if necessary. Let us begin first with Price-Based Cultures.
Companies that are focused on price have a corresponding culture. It creates a commodity mentality; it’s a constant race to the pricing floor.
The commodity mentality infects management and employees. Since low price customers are the easiest to sell, entire companies develop a level of comfort with the price-conscious customer. Over time, the vast majority of customers become commodity purchasers and revenue is stagnant.
Price-based cultures occur when management, sales, and operational teams limit the value that they bring to the customer. They fail to effectively manage customer relationships, service, and business practices.
Quality customers expect quality, service, and business practices to meet specific expectations. Many times companies lose business with great customers not because of price, but because of business practices.
Companies with large volume customers purchasing at low margins complicate the challenge. Customers leverage the manufacturer over price. Customer loyalty is dictated by price rather than quality. The company is trapped in a vicious circle.
Companies focused on quality products generally create loyal customers. Equipment, manufacturing processes, and supply chain are top-notch. Legacy customers receive quality products at a fair price. The challenge is new customers become more difficult to secure because the market has evolved.
Often times, company culture is centered on production because it’s tangible and logical. Margins, capacity, and purchases are highly managed. The conundrum is to eliminate less profitable business from the portfolio rather than expand production. It’s a sound business model until the enterprise begins to turn quality customers away.
Some companies find the transition to finding new growth daunting. Growth strategies are challenging because people, communication, and relationships are intangible and fall outside the production comfort zone. Sometimes sales teams lose their edge and relationships from years of saying no. Failure to achieve growth happens when the company fails to modify its approach to its people and customer relationships.
Often we find innovation is limited by the capacity of the management team. Market intelligence isn’t valued or used wisely. Growth strategies are a broad brush stroke rather than specific and calculating. Competitors with greater emphasis on quality people and customer collaboration tend to gain market share.
Quality customers are managing risk better today than ever. They want it all. They trust and are loyal to suppliers with superior quality, people, service, and business practices. It’s simply more profitable.
Companies embracing a “Customer-Centric Culture” live differently. They have a collaborative relationship with customers, management, and employees. The difference is communication, accountability, and achievement. All parties are striving for achievement.
Interestingly, a customer-centric culture eventually broadens from simply sales to include operations, R/D, administration, and production. The fact is that customers establish perception about the company from its total picture rather than just sales. This perception establishes trust and customer satisfaction when all pieces are working together in a positive way.
Customer-centric enterprises create positive employee perception. Employee perception is an indicator of customer perception. It’s transmitted in every communication and delivery. Oftentimes customer and employee retention aligns with perception. Create a positive employee environment and it will influence customer purchases.
Organizations with superior product quality, people, service, and business practices seek out the greater opportunities. Growth strategies are more effective because objectives are achieved rather than tasks.
Ultimately, this culture becomes a “Field of Dreams” when customers seek out the best in all categories.
Quality customers understand the value of culture and quality. Ask them. In fact, quality customers measure key components of supplier quality. They set expectations and boundaries for trust. Why purchase from or collaborate with a supplier who fails expectations? They want to collaborate and purchase from leaders and innovators.
We sometimes learn from a company that they lost a customer due to price. Further investigation often reveals price was not the culprit. Many times the challenge is a result of the company failing to communicate value or effectively manage a relationship.
Quality customers are focused on risk management. Purchasing from companies with flawed cultures and less-than-stellar performance is a risk. Poor quality and service are a liability.
Tip: Measuring customer satisfaction provides great insight into better understanding company culture.
What’s My Culture?
Benchmarking your company culture is the first step to increasing shareholder value. The 360 Organizational Assessment identifies areas of opportunity. An assessment is an excellent indicator of why enterprise growth and attrition could be challenged in your organization.
After one understands the cultural key indicators, plans can be made for improvement. That said, cultural change is not a quick fix. It requires commitment, engagement, and accountability.
You may have noticed that in several of our cultural examples that there are overarching approaches to solve each need. Some may be solved internally – with focus groups or by management actions. The other approach recommends bringing in an unbiased, outside source for knowledge transfer or analysis. Both have their merits.
You know your business. Consider whether you need to redirect your efforts to a new approach, or if what you’re doing now is bringing you success and staying true to your company culture.
White Paper Author
Paul Fournier is President of Tacticware Resource Group. Tacticware is a business management consultancy firm offering solutions to critical challenges. Services include consulting, training seminars, strategic development, critical thinking, and 360 Enterprise Assessments.
Tacticware Resource Group, LLC