Correlating business performance with company culture isn’t easy. For a start, workplace culture is still quite a nebulous subject, and there isn’t one definition or interpretation of exactly what good company culture is.

However, company culture is something more and more SMEs are talking about and it seems to be mostly with a positive spin. No one can argue against the idea that positive work cultures are synonymous with happier employees. It’s a fact.

Unsurprisingly, happier workers are more productive. Company culture undoubtedly has a positive effect on business performance, but that said, it can prove difficult to track. And there is, unfortunately, still a way to go to convince some leaders that company culture matters, not just to employees, but also as an imperative lever to business success.

As SMEs become more familiar with the positive impacts company culture is having, the metrics will catch up. For now, the important starting point is recognising just how company culture is having a positive effect on business performance.

If you’d like to know more about what company culture is, read our previous blog here. Otherwise, read on for more on how SMEs across the UK view company culture and the positive impact it is having on some of their businesses.

How SMEs view company culture and business performance

In our recent research on The Culture Economy we asked 500 SME senior decision makers in the UK if they believed workplace culture impacts positively on company performance. Of the 500 participants, 72 per cent believed company culture does have a positive impact on business performance; 9 per cent reported that company culture had no effect on performance and 19 per cent said they didn’t know.

Interestingly the percentage figures change as the company gets bigger. In small businesses with between 10 and 49 employees, 77 per cent agreed that culture has a positive effect on performance within the business; while 10 per cent disagreed and 13 per cent didn’t know.

For correspondents in medium sized businesses (50-249 employees), 88 per cent believed company culture has a positive effect on business outcomes, while only 7 per cent disagreed, and 6 per cent said they didn’t know.

Medium-size businesses seem to understand better than small businesses that even the best strategic plans can fall short without the right people in the right roles, and they seem more committed to the idea of improving employee engagement. That is not to say there aren’t many small businesses out there getting company culture right.

The difficulties in maintaining culture seem to hit small businesses at around the 3rd or 4th year of their growth phase. Andy Haldane, Chief Economist at the Bank of England emphasised in a speech that “Small firms (<50 employees) are on average 7% less productive than large firms and there is a larger and lower tail of small firm laggards.”

For many small businesses, so much time is spent on the immediately pressing day-to-day challenges, it can be rare for leaders to find the time to learn about best practice when it comes to growing a good company culture. Recognising the impacts company culture has on business performance is the first step to engagement. Let’s take a look at what those impacts are.

What are the positive impacts of company culture?

In the research for our report on The Culture Economy, 360 correspondents agreed company culture did have a positive impact on company performance.

The positive impacts were cited as:

  • Increased morale, atmosphere and relationships (69 per cent)
  • Employees willing to go the extra mile (61 per cent)
  • Better customer service, customer satisfaction and customer retention (60 per cent)
  • Improved individual performance and productivity (55 per cent)
  • Reduced employee turnover (49 per cent)
  • More people contribute ideas and support innovation (49 per cent)
  • Reduced absenteeism (45 per cent)

How company culture impacts business performance: case studies

On a positive note, there are many small businesses out there getting to grips with company culture and reaping the rewards. Here are excerpts from two cases studies included in our report, The Culture Economy.

Whitecross Vets, Guiseley, West Yorkshire

Since 2008, following a change in generational ownership, this small-scale, established family-owned veterinary practice has embraced company culture to drive growth. Their strategy includes building a strong employee community through weekly emails, annual events, team reward vouchers, community activities and volunteering days.

The focus at Whitecross Vets is very much on retaining quality people to provide quality care for animals and a quality experience for animal owners. The impact of growing a strong company culture has been low employee turnover and a high-quality ethos amongst staff and leadership.

Alongside investment in company culture, growth has been concentrated in the last decade and the business now has a chain of 20 veterinary practices.

Propellernet, Brighton

For this marketing agency, company culture is the business strategy. There is a defining focus on the individual. Propellernet has a positive, open external company orientation whereby community well-being frames commercial decisions.   

The defining purpose at Propellernet is ‘to make life better’ for clients, colleagues, community and industry. Everything else flows from there. There is a focus on well-being, creativity and personal development driving positive business results. Mandatory health plans, encouraging holiday take-up, and the option to take up to 12 days a year to learn something new, all support a strong culture.

The philosophy at Propellernet is based around its whole person ethos as key to building confidence, engagement, growth, sustained professional excellence and creative success. Most interesting of all, Propellernet has a cap on headcount (60 precious seats and dreams model) with a focus on growing revenue per employee. They are even willing to lose clients so as not to compromise on cultural health. That’s an impressive commitment!

Over 10 years Propellernet have tripled margin, quadrupled revenue, and make 10 times more profit. It’s a brilliant example of how company culture can drive business performance.

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