Updated: Apr 20
Companies spend billions of dollars on employee engagement and for good reason. In fact, research shows that disengaged employees cost their employers $3,400 in lost or reduced productivity for every $10,000 in salary.
Culture is difficult to get right, in part because you can’t directly influence culture. It’s not as if you can show up to the office one day and say, “from now on, this is our new culture”.
I like to think of culture as being like a sapling. You can’t force it into a specific shape because it will break if you push it too hard. You must support it, gently guide its growth and wait for it to develop into the mature tree that you want.
When it comes to culture, all you can do is set and support the direction, presenting the vision of what you want. You’ll never get a chance to reflect on it because, by the time you achieve it, your vision will have changed.
This is largely because the real world is an ever-changing place - even without COVID.
John Lennon famously said, “life is what happens when you’re busy making other plans”. If he’d been in business, he would have said the same thing about culture.
The Basics of Building Culture
The first thing that you need to do is to understand your current culture. That way, you can start to build backward and figure out how you can get from where you are to where you want to be. A company’s success is highly impacted by how well its people interact and communicate. However, it’s difficult to get it right because it’s so ephemeral.
In his book, The Performance Triangle, a friend of mine, Lukas Michel, shared a diagram that does a pretty good job of capturing the interactions. It looks something like the triangle below.
Culture is determined by leadership and systems. If you structure those two key ingredients well, you can usually achieve the culture that you’re aiming for.
If you have strong systems, they can partially compensate for weak leadership and vice versa. The problem is, if your strong system goes down or your strong leader takes some time off, then your organisation will have difficulty coping.
That’s why you need to have both strong leadership and strong systems. The systems act like scaffolding to support you along the way. When you get them both right, it all comes together to establish your company’s culture.
Our experience has shown us that the way to work on your culture is to initially set a vision, and then to be agile and reactive, watching what’s going on and then tweaking and supporting it on the way to where you want it to be.
How Poor Payroll Can Crush Culture
In our society, many people are living paycheque to paycheque. One study found that the figure is as high as 78% of people.
I mentioned in a previous article that I once sent out a survey that found most people thought that being paid on time was more important than being paid the right amount. That was because they needed the money to pay their rent and their bills.
This means that there can be huge consequences for people if they don’t get paid on time. It can mean that they miss a payment on their house or that they can’t afford their rent.
The implications of that are broader than you might think. It can affect their credit score, meaning that they’ll pay higher interest rates on any loans – if they’re able to get a loan at all.
There are other impacts, too. For example, a late payment can mean that someone can’t afford to eat or that their lights go out. It’s easy to picture a scenario where someone tells their friend that they can’t go out because they haven’t been paid yet.
It won’t take long for their friend to say something like, “what a crappy job. If I were you, I’d quit and go and work for someone who paid me on time”.
On top of that, word spreads and before you know it, you can end up with a reputation for not paying people. One of the most interesting trends in recent years is something called the Great Resignation or the Big Quit.
These are terms that are being used to describe the phenomenon of people quitting their jobs in response to the COVID-19 pandemic. They’re basically deciding that it’s just not worth it anymore to work for an employer that doesn’t value them.
If there’s anything about your company that people can look at and point to as a reason why they don’t want to work for you, it’s going to have a significant impact on recruitment.
On-time payment isn’t the only focus though. Correct payment is also critical, even just from the perspective of the opportunity cost.
Let’s say that you’re “only” underpaying people by a dollar a week. That’s $52 per year. If they’d taken that money at the end of 2010 and bought Bitcoin, at the time of writing, (February 2022), it would be worth $8,418,219.69. This is an extreme example but it helps to make a point.
By underpaying people, you’re taking opportunities away from them.
The Cultural Consequences of Underpaying
We can all agree that paying people properly is the right thing to do. By underpaying people, you’re denying them the opportunity to make their lives better but you’re also shooting yourself in the foot when it comes to culture. Remember that culture is influenced by the collective experience of the people who work for a company.
Some people will tell you that the most basic responsibility of a company is to make a profit. However, I’d argue that paying people properly is even more important. That’s the first thing that needs to happen and then all your other expenses come after that.
If you haven’t made a profit, you’ll have to start cutting back on costs or look at making your products or services more desirable so that the selling price is higher but never skimp on paying employees the right amount at the right time.
This is the most foundational aspect of any business. When a company is shown to default on that, people are going to start to question its integrity, both from a structural point of view and the integrity of its ethics and morals.
Underpaying leads to attrition. This is one of the key indicators that you can look at to determine whether you have a problem in the first place. If you can’t pay people correctly, they’re just not going to stick around.
It also has a negative effect on people’s work ethic. Employees will stop going the extra mile to get the job done.
This will lead to the whole organisation starting to become dysfunctional. When people don’t trust you to pay them properly, they’ll focus on protecting themselves and setting up artificial internal barriers. That will slow the system down and leave you with clients who are frustrated because they’re getting poor service. No one’s getting back to them. A dysfunctional organisation is doomed to fail.
And so, the moral of the story? Pay your people properly!
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