MBA 101: The Importance of Building Company Culture

by davidgebler on August 7, 2012

Julianna Davies, a writer for the MBA resource website, http://www.mbaonline.com, argues today about the fundamental importance of building company culture. If not always an actual MBA 101 class, company culture remains one of the basic building blocks in a solid corporate structure. Here, Julianna looks at several companies, including Apple, and at how their cultures and leaders fostered productivity and innovation, a topic discussed on a Skout Group blog about culture and leadership in the automotive industry.

Company culture is a difficult concept for many entrepreneurs to grasp, yet it is one of the most important factors in creating a company that thrives. Despite overwhelming evidence that company culture can mean the difference between industry dominance and failure to turn a profit, many business leaders still neglect to ensure that a positive culture is properly built. While there is not necessarily one right way or wrong way to build an effective company culture, there are behaviors and principles that are continually illustrated by the world’s most admired companies.

In most cases, a successful company culture is built on common values and purpose that define a business and its mission. Apple is perhaps the most obvious example of a company with a strong and immediately apparent culture. When founding Apple, Steve Jobs had a goal of developing products that were simple, elegant and innovative, and as most people would attest today, those ideals remain the focus throughout the company’s products, their store, or even their technical support. Apple’s simple, easily communicated cultural identity has allowed it to evolve and innovate, remaining a leader in technology for decades.

The culture at Blockbuster, however, a company founded nine years after Apple, contributed to its bankruptcy in 2010. Once a leader in its field with reliable product and and a ubiquitous presence, Blockbuster’s culture shied away from innovation and embraced the comfort of methods that had worked for years. When Netflix premiered and quickly gained popularity, Blockbuster was too comfortable with its business model and corporate culture to adapt and offer adequately competitive measures.

Since their success, Netflix has raised eyebrows with their own unique company culture. Measures such as a vacation policy that allows employees who are covering their responsibilities to take as much time off as they like and a policy of only keeping “outstanding” employees on the payroll while offering severance to “adequate” employees have sparked a great deal of debate. However, unlike Blockbuster, Netflix has quickly modified its model, taking into account feedback it had received from its prior policy, impressing many business leaders with their ability to handle criticism in an active and logical way.

Building a great company culture does not necessarily require extra work, but it does take focus on the part of an entrepreneur. Deidre H. Campbell, board member of the Council for Economic Education writes in Harvard Business Review of the importance to invest in employees and recognize their talents. Companies that offer generous benefits often attract the most skilled employees, and companies with consistent vision and mission are more likely to retain their talent. In his VentureBlog, David Hornik of August Capital suggests business leaders “roll out the values, strategy, and history of the company during a comprehensive employee orientation within the first 90 days,” ensuring employees are aligned in their understanding of the companies mission early on.

By focusing on employee engagement and communicating a mission statement to employees, clients and customers, entrepreneurs can lead with confidence that they are building a strong company culture and greatly increasing their chance of success.

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