Are the Best Company Cultures Internally or Externally Focused?

Best Company Cultures
The best company cultures attract and retain top talent while simultaneously making it easy to execute their business strategy.  We define company culture as the way things get done in an organization on a day-to-day basis – especially when no one is looking over your shoulder.  It is the way employees behave on the job and is based on intangibles such as the pervasive values, beliefs and attitudes that characterize a company and guide its practices.

What the Best Company Cultures Deliver
Our organizational alignment research found that the best company cultures account for 40% of the difference between high and low performance in terms of revenue growth, profitability, customer loyalty, employee engagement and leadership performance.  The best company cultures act as the glue that aligns a company’s business strategy with their people strategy.  The best company cultures are a strategic asset.

Company Cultures Vary
From one company to another and even across different regions and functions, there can be a variety of workplace cultures.  How would you define your predominant culture?  More structured or fluid?  Healthy or toxic?  Risk averse or risk-taking?  Collaborative or siloed?  Fact- or intuition-based?  Internally or externally focused?  There is no one single correct answer.

The most important cultural question to answer: is your culture helping or hindering your business strategy?

Internal Company Cultural Focus
We define an internally focused company culture as one in which internal processes, systems, and employees matter most.  They often expect partners and customers to conform to their way of doing things.  Examples include Walmart, the US Postal Service, Ikea, and Union-based shops.  Internally focused leaders feel that they are better at controlling costs, engaging employees, and scaling.

Many companies who focus internally strongly believe in the service-profit-chain theory which links employee satisfaction directly to higher levels of customer loyalty and profitability.

External Company Cultural Focus
An externally focused organization typically emphasizes external forces, market share and customer experiences.  Examples include Amazon, Southwest Airlines, and TD Bank.  Externally focused companies put the customer at the center of everything that they do and feel they are better suited to deliver extraordinary customer experiences and stay ahead of emerging opportunities and threats.

As a way of doing business, customer-centric companies excel at proactively anticipating client needs with the ability and genuine desire to help.  And it matters.  According to the Harvard Business School, companies that increase customer retention rates by just 5% increase profits by up to 95%.

Are the Best Company Cultures Internally or Externally Focused?
One company culture is not better than the other.  They are just better suited to support different business strategies.  This is where too many HR leaders miss the mark.

Company cultures are not necessarily good or bad.  They are aligned or unaligned.  The best company cultures are purposefully designed to accelerate their specific and unique business strategies.

Do You Have to Make a Choice?
Yes.  But on a spectrum.  We believe that leaders should agree on where and how far to directionally lean across four focused-based cultural dimensions to ensure that their culture is 100% aligned with their go-to-market strategy.

1. Customer Needs versus Internal Processes?
Are you more willing to change internal processes to meet customer needs or do you expect customers to modify expectations to conform to your way of doing things?

2. Maximizing Revenue versus Minimizing Costs?
Do you need to pay more attention to increasing revenues or minimizing costs?

3. Customer Solutions versus Internal Systems?
Should you focus more on perfecting and improving customer solutions or on perfecting and improving internal systems?

4. External Focus versus Internal Focus?
Does it make more sense to focus on external sources or internal sources of information?

The Bottom Line
The clearer you can be about where you need to be culturally on each dimension vis-à-vis your strategic plans for success, the easier it will be for people to agree upon how the important work should get done in a way that makes sense.  This sets you up to align your culture and your talent with your strategy to outperform your peers.

Is your culture helping or hindering your strategy?

To learn more about how to build the best company cultures, download How to Create a Purposefully Aligned Culture