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The Correlation Between Company Culture and Productivity

The term “company culture” is a wide umbrella that encompasses several elements of business. As Tech Target defines it, “Company culture is the pervasive values, beliefs, and attitudes that characterize a company and guide its practices.” In other words, it’s the overarching personality of a company.

The interesting thing is that culture is much more than a buzzword that defines a business’s style. It has a profound impact on productivity and can often make or break your bottom line.


Different Types of Culture

To understand the correlation between company culture and productivity, we must first understand the various ways that culture affects your employees because they are what ultimately drives productivity. To do this, let’s create two hypothetical companies — one with a great culture and the other with a lousy one.

Company A has a great culture, which can be defined as unified, cohesive and adaptable. There’s a strong emphasis on keeping employees happy, healthy and ensuring their mental well-being.

Company B has a lousy culture, which is polarized and employees are at odds with one another. It’s more of a cut-throat culture where team members are under perpetual stress and feel undervalued. The employer doesn’t really care about their employees’ health, happiness, etc., and is consumed solely by maximizing profits.


How Company Culture Affects Productivity

Which company do you think will be more productive?

It’s safe to choose company A. When you put it all together, company A is pretty much guaranteed to have happier and better-adjusted employees than company B. Research shows a definite link between employee happiness and profit.

There is an infographic from Growth Everywhere that puts things into perspective. It states that companies with happy employees:

  • Outperform the competition by 20 percent
  • Earn 1.2 – 1.7 percent more than peer firms
  • Are 2.1 percent above industry benchmarks


They also state, “Happiness makes people 12 percent more productive, and unhappy workers are 10 percent less productive.” Quantifiable data such as this makes it abundantly clear that company culture does in fact impact productivity in a big way.


Common Issues Associated with Poor Culture

If your culture stinks, it can hurt your business in several ways. There are five specific issues that are the most profound.

  • Stress
  • Health problems – “Health care expenditures at high-pressure companies are nearly 50 percent greater than at other organizations.”
  • Disengagement
  • Absenteeism – “Disengaged workers had 37 percent higher absenteeism.”
  • Increased turnover


The Benefits of a Great Culture

On the other hand, a positive company culture means happier, healthier, more engaged employees. They’re more unified and actually get something out of their jobs. They view it as more than just a means of earning a paycheck and are truly invested in the company they work for. Often, there’s a sense of loyalty to their employer and they’re genuinely compelled to work hard.

When you put all of this together, it means one thing — increased productivity. It goes without saying that having a productive workforce will positively impact your company in a host of different ways. This ultimately leads to increased revenue and a better overall bottom line.

Why Workplace Diversity Should Be a Priority in 2017

America is the quintessential melting pot. It’s a nation that has thrived on diversity, and that diversity has arguably played an integral role in our success. When it comes to the business world, there’s a sound body of evidence that suggests that workplace diversity offers major benefits and is something that should be a top priority this year.


Increased Financial Performance

A 2015 study from McKinsey & Company found, “Gender-diverse companies are 15 percent more likely to outperform those who lack diversity.” They also found, “Ethnically-diverse companies are 35 percent more likely to outperform their non-diverse counterparts.”

Although workplace diversity doesn’t lead to higher profits in and of itself, it does tend to correlate into acquiring high-level talent, a deeper talent pool, and more effective decision making. In the long run, this can translate into increased employee satisfaction, less turnover, and higher morale. When you combine all of these factors, it’s easy to see how it can positively impact a company’s financial performance.

McKinsey & Company also found, “In the United States, there is a linear relationship between racial and ethnic diversity and better financial performance: for every 10 percent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8 percent.” This is tangible proof that diversity in top positions can noticeably boost your business’s profitability.


A Catalyst for Creativity

Imagine two groups. Group one is homogeneous–all team members are of the exact same ethnicity, gender, etc. Group two is heterogeneous–team members differ by ethnicity, gender, and socioeconomic status. Which do you think would have fresher ideas and unique viewpoints?

Workplace diversity is ideal for enhanced creativity and for coming up with solutions to the wide variety of challenges that modern businesses face. Assembling a diverse team can lead to more breakthroughs and is likely to put you at a competitive advantage.

There’s even concrete data that proves there’s a correlation between diversity and innovation. A study from the University of Illinois tested the problem-solving performance between racially diverse groups and non-racially diverse groups. According to their findings, “The groups with racial diversity significantly outperformed the groups with no racial diversity. Being with similar others leads us to think we all hold the same information and share the same perspective.”


Additional Benefits

Running your business in a meritocratic fashion where individuals are hired and rewarded based on their abilities rather than their race, gender, etc., offers some other valuable benefits as well:

  • You can expand your talent pool
  • Your business will be better positioned to compete in our increasingly globalized marketplace
  • Increased morale
  • Increased employee retention
  • Reduced language barriers with foreign partners/vendors
  • Improved brand equity

Thriving in the modern business world is all about being adaptable and nimble. What better way to adapt than to place an emphasis on workplace diversity? This can be tremendously beneficial as you move further into the 21st century, fueling the growth of your business.



How PEOs Can Increase Small Business Productivity

Are you overwhelmed by the everyday tasks in your business? Whether you’re a new start up that needs guidance, or have an established business that’s growing – you can get help with the workload by using a Professional Employer Organization (PEO).

They provide an outsourced HR solution and handle tasks like payroll processing, benefits management and personnel administration – everything you need to keep employees happy and your organization compliant. Here are some ways that PEOs can increase small business productivity and promote long-term success.


Attracting Top Tier Talent

To truly thrive in any industry, your company needs a team of qualified professionals who are experts at what they do. Your team members must possess the right skills and talent, all while having the dedication to consistently perform their jobs at a high level. One of the best ways to attract top tier talent is for a business to provide benefits like a 401(k) or similar plans, health insurance, life insurance and flexible spending accounts.

Many times, these benefits are an influential factor for professionals when deciding between employers. Because retirement and similar plans are relatively rare for smaller businesses, having some in place can be a great selling point.

According to a 2011 Towers Watson Survey, “47 percent of employers cited retirement benefits as an important reason to stay with their current employer, and 35 percent viewed retirement benefits as an important reason they decided to work with their current employer in the first place.”

When a small to mid-sized business is able to use these benefits as leverage, it can expect to acquire a knowledgeable and capable workforce. Consequently, these employees should have what it takes to streamline daily tasks and it’s realistic to experience expedited growth. There is also a stronger likelihood of a higher retention rate among employees because of deeper job satisfaction. With a lower turnover rate, team chemistry can be developed and overall small business productivity should increase.


Gain Freedom to Focus on Other Key Tasks

By allowing HR specialists to handle arduous and sometimes difficult tasks like employee training, safety management and performance evaluation, it can quickly reduce your workload. Rather than spending an exorbitant of time in these areas, you have the freedom to work on other things that grow your company – like improving your marketing and your internal processes.

Whether it’s giving customers or clients more attention or launching a new marketing campaign, you can increase small business productivity. You can rest assured that their human resources tasks are left in the hands of qualified specialists. With an outsourced HR solution offering personalized service, your business can get the specific package needed to maximize efficiency.

Having happy employees and not being bogged down with excessive responsibilities are important for your business to thrive. Fortunately, outsourcing to the right PEO can be a huge help and provide the necessary tools to rise above the competition.


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