The lights are getting brighter

In business, nobody likes to have anyone “breathing down their necks” as we like to say. It’s one of the most common behaviors of a micromanager–just ask any disengaged employee. And yet, it seems like in recent years, startup leaders are feeling more of that similar heat from investors when it comes to the pressure of increasing funds and strengthening the health of their business.

Why? Because regardless of whether we’re in a bull market today or headed towards a bear market tomorrow, savvy investors of all sizes (angel investors, venture capitalists, private-equity, crowdfunding to name a few) are always meticulously analyzing financial statements, market trends, and growth potential of companies before deciding where to put their money.

With that type of scrutiny, it’s no wonder you often hear startup leaders express the following:

““I have investors looking at my financial performance on a quarterly basis, I can’t do this [workplace culture] right now, nor do I see how it contributes to their evaluation.”

While the pressure to meet quarterly financial goals is a common concern for startup leaders with investors, dismissing workplace culture as irrelevant could be a shortsighted perspective. Doesn’t matter if you drive a Toyota Prius or Lexus RX, this is the blind spot within your business journey. Failing to address it now will lead smart investors to favor businesses that grasp the link between financial performance and a thriving work environment in the future.

The Evaluation 2.0

This week I attended a “business transformation” conference with about 100 leaders from various industries at Sofi Stadium (an innovation pyramid of steel) where a guest speaker talked on the importance of “change management” and it was so abstract that everyone around me publicly yawned (new phrase that I made up which means: looked down at their phones instead). The message fell flat.

Too many speakers are stuck in 20th century workplace practices that are not matching the needs, expectations and challenges of their workforce today. We get software upgrades on our phones every couple of months, so why not upgrade how we evaluate companies?

As company leaders become more transparent in how they make decisions, operate and manage their resources today, investors will need to shift their focus beyond traditional financial metrics to evaluate the strength of well-designed workplace cultures when making informed investment decisions.

Why is this so important for startup leaders to remember?

Simply because a company’s workplace culture shapes an organization from within, influencing everything from employee satisfaction to productivity and, ultimately, financial performance (see previous blog). This competitive advantage is what separates the thriving companies from the ones that are barely surviving. It’s what separates the grown-ups from the kids, the NBA from the D-League, the Delta Airlines from the Spirit Airlines, the Dr Pepper from Shasta–you get my point.

Here are some reasons why startup leaders should build & design a workplace culture, even in the context of quarterly financial evaluations:

1. Employee Productivity and Engagement:
   • A positive workplace culture can enhance employee productivity and engagement. Engaged employees are more likely to contribute effectively to the company’s success, leading to improved financial performance over time.
2. Talent Attraction and Retention:
   • A strong workplace culture can attract top talent and help retain valuable employees. High turnover and recruitment costs can negatively impact a company’s bottom line, so investing in a positive workplace culture can contribute to long-term financial stability.
3. Innovation and Creativity:
   • A positive culture fosters an environment where employees feel empowered to share ideas and take risks. This can lead to increased innovation and creativity, which are essential for staying competitive in the fast-paced startup ecosystem.
4. Customer Satisfaction:
   • A healthy workplace culture often translates to better customer service. Satisfied and motivated employees are more likely to provide excellent service, leading to higher customer satisfaction and, ultimately, increased customer retention and revenue.
5. Risk Mitigation:
   • A toxic or unhealthy workplace culture can pose significant risks to a company, including legal issues, reputational damage, and potential talent shortages. Addressing and improving workplace culture can help mitigate these risks in the long run.
6. Long-Term Financial Performance:
   • While investors may focus on short-term financial results, a sustainable and positive workplace culture contributes to the long-term success and financial health of the company. Ignoring culture in the short term may lead to challenges that impact financial performance in the future.

Win-Win

Turn on the fire hydrant of CNBC and you’ll catch a quick glimpse into the fast-paced world of investments and how easy we focus solely on the traditional financial metrics of a company. However, the investors and startup leaders’ blind spot—neglecting the importance of company culture—can lead to missed opportunities and unexpected risks for both parties. By acknowledging the profound impact of culture on financial performance, startup leaders & investors can make more informed decisions, fostering a win-win scenario where companies thrive and investors will reap the rewards of a holistic approach to due diligence.

So if you’re the head of a startup, ask yourself the following:

• To what extent do we believe our workplace culture influences our financial performance?
• Have we seen any tangible evidence or examples of how a well-designed culture has positively impacted our employee productivity, talent attraction, innovation, customer satisfaction, or other key business metrics?
• On the flip side, are there areas where our culture might be hindering our financial success, and if so, how can we address them?

And if you’re looking to invest in a startup, ask yourself the following:

• How does the startup under consideration currently address workplace culture?
• What steps is the startup taking to address any potential blind spots in its approach to workplace culture?
• How does the startup balance the short-term pressures of meeting quarterly financial goals with the long-term benefits of a positive workplace culture?

After all, a healthy culture isn’t just a feel-good element—it’s a strategic asset that can drive sustained success in the competitive landscape of the business world.

Article was written by John-Miguel Mitchell who is a Lead Consultant at Ekipo LLC. If you’d like to learn more about how to design and build out the ideal workplace culture for your business, email him at jmitchell@joinekipo.com.