Culture Clash – Are SMEs Storing Up Trouble By Failing To Address Workplace Problems?

How do I maintain my company culture as the business grows? It’s one of the questions that entrepreneurs often ask themselves. It’s also a good question. The culture of a startup company tends to be defined by the founder who takes the lead in terms of hiring decisions and day-to-day people management. 

The influence of the founder is generally seen to be a good thing. For instance, an individual who is honest, open and fair with employees while also encouraging them to take ownership and responsibility for their work is likely to create an environment where productivity and morale, for the most part, run high. 

But there is a shadow side to the culture issue. Founders – or indeed managers – can also play an instrumental role in creating a culture that falls well short of happy and productive. This might be because they fail to hire the right people and subsequently don’t do a good job of managing the problems that then arise. Or a founder’s lack of leadership experience could be the source of friction and poor working practices. Just as some founders create great working cultures, others inadvertently take their businesses in the opposite direction. 

The Importance of Culture

According to Jonathan Richards, CEO and founder of U.K. human resources software provider, Breathe HR, even relatively small employers should be paying attention to cultural issues, particularly as they prepare to scale up. “My own view is that culture tends to get baked in once a company has reached the level of about twenty employees,” he says. That’s great if the culture is productive. Not so good, if cultural problems become embedded in the growing venture’s DNA.

A Lack of Understanding

Breathe has just published a new report – Culture Economy 2020 – drawing on the experiences and insights of employees and managers working for more than 2000 SME businesses in Britain. As Richards explains, the study forms part of an ongoing commitment to highlighting the importance of culture within small companies. But as he acknowledges, the concept of culture is often “not understood.”

That’s very possibly because there is no single template for a “good” culture. “I used to work for a big American financial services firm,” says Richards. “It had a great culture, but not necessarily the culture I would want here at Breathe or at, say, a social enterprise.” 

In other words, one company’s culture might be intense, performance-driven, based on encouraging individual members of staff to compete with each other. Another business could be more team focused and apparently relaxed. Neither way is wrong. But that raises a question, namely how do you identify a healthy culture?

In Richards’ view, you know it when you see it. “You walk into some businesses and there is a kind of buzz – a feeling that everyone knows which way the company is going,” That, he adds, is down to communication.   

But what about bad or unhealthy culture? Richards says things begin to get a bit more difficult when there is a disconnect between the perceptions of the employees and those of the founders and managers. This often happens when the vision is not communicated effectively.  

Emerging Problems

And as the report’s findings illustrate, without good leadership, some very real issues may emerge.

For instance, in London, 48 percent of employees said they had been the victim of harassment while 36 per said they had gone so far as to leave their place of work because of the culture. 

Overall, 21 percent of participants in the survey said they had witnessed bullying. Again the figures in London were higher, with 39 reporting bullying as a problem. 

Low Faith in Management

Against this backdrop, faith in management to sort out the problem was low, with 56 percent saying they were not adequately supported by managers.   

Now there are a number of ways in which managers can contribute to a less than optimal culture. They can, for example, the ones doing the bullying. Or they can simply let problems fester and get worse. Of the managers questioned, a third said they had indeed witnessed incidents of harassment and bullying. Which does raises the question: why they are not doing more to stamp it out?  

Richards says the key to improvement is training. “If there is a low level of trust in managers, that doesn’t mean the managers are untrustworthy,” he says. “But it does mean they don’t have the skills they need to win the trust of staff.” 

This can be addressed. For its part, Breathe hires individual and team coaches to train its management teams. 

So why does this matter? Well first and foremost, today’s workforce – and this is particularly true of those with higher skills – is mobile. 23 percent of millennials say they have left their places of work for cultural reasons. The figure for older workers is lower, but women are much more likely to quit than men.    

Thus, a difficult or toxic culture creates more staff churn, which in turn reduces efficiency. Treatment perceived to be unfair also raises the specter of legal action. But there is an upside to all this according to the Confederation of British Industry – cited by Breathe – a positive culture can add 19 percent to productivity, figure that could well make investment in training worthwhile.