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Culture in Service versus Technical Organizations

Culture in Service versus Technical Organizations

  • 10 April 2019
  • Posted by Marcella Bremer

Is culture less important in a "tech company"? While it's crucial when you provide services, based on both research and practice, the answer is no. Culture matters everywhere.

The Supermarket

Organizations that provide a service to clients depend on culture. Services are "people work". The added value is created in interaction with the client and this results in an experience. Think of healthcare, legal advice, accountancy, government organizations, hospitality, recreation, consulting, but also retail.

A national retail corporation owned a large number of supermarkets. One of the executives at headquarters told me: "A supermarket is a supermarket. You need to buy food and many customers go to the nearest location, period. Pricing levels have only a limited influence. By and large, differences in monthly turnover and profit are a direct consequence of leadership and culture differences among our supermarkets. How's the atmosphere? How are you being treated?

We had a supermarket with bad numbers. When I asked the manager what was going on, he gave me a host of reasons that were outside of his control: the neighborhood was changing, the clients were demanding, his staff wasn't motivated, the advertising didn't appeal to his target audience, logistics were slow in replenishing stock, product quality went down - you name it.

His fellow supermarket manager in the next neighborhood probably faced the same issues but produced good results nevertheless. This complaining manager already received coaching and training. He wouldn't believe that he caused his business results by the way he led his people, the culture he developed by his interactions and actions.

So, I asked if he was open to swapping places for a few months. He could run the "easy" supermarket that was doing great and his fellow manager would take over his supermarket with slow staff and demanding customers. They both agreed.

It was fascinating. After 4 months, the great supermarket's number deteriorated substantially, employee turnover and absenteeism went up, financial turnover went down, customer satisfaction as well. The "difficult" supermarket flourished. It was the best illustration of the impact of culture and leadership I have ever seen."

In service industries, culture is key. How you treat your staff is how they treat the customer. According to Bersin by Deloitte, 95% of employees say that culture is more important than compensation. That aligns with the changing mindset of highly-educated professionals, amongst whom many Millennials who want to work for more than "just" a paycheck.

Employee Retention and Engagement

Employee retention is vital to keep knowledge, skills, and best practices onboard. The recruitment and onboarding process is costly, and if turnover is high, it weakens the culture. There’s a ton of research but let’s see one example. John Sheridan investigated the retention rates of 904 college graduates hired in six public accounting firms over six years. Those organizations had different cultures that had a significant effect on the rates at which the new hires quit their new jobs. These culture effects resulted in a six million dollars difference in human resource costs between firms.

Employee engagement defines the quality of services delivered. The annual employee engagement and satisfaction surveys may lead to improving some perks and work conditions - but real engagement is built daily by how people work together: through culture. One intervention to boost engagement won’t fix the issue. You have to work the culture!

The Machine Plant

When you provide a service, how you treat your associates influences how they treat the customers. But does culture matter in factories? What about technical industries that design and manufacture products, develop ICT, engineer machines, and do construction? Does culture matter there? You bet. Quality and customer satisfaction, production, and error rates are affected by the organizational culture.

Product and service quality is often defined as conforming to specifications and meeting customer expectations (Beverly, Diane & Wang, 2002). The higher the quality, the higher an organization’s performance in the long term. Cultures that focus on people, learning and development, have a direct effect on quality according to Zu, Robbins and Fredendall (2010), Yilmaz and Ergun (2008) and Hartnell (2010).

Even when you think that machines don't care how they are being treated - the plant workers do. I have a great case from a plant that improved quality and lowered error rates thanks to a positive, productive culture. (I'll share that some other time).

A people-oriented culture aims to involve both customers and suppliers (Hartnell, 2010) and it helps to receive feedback from customers and maintain good relationships. There is a positive relationship between a people-oriented culture and customer satisfaction (Hartnell, 2010, Zu, 2010, Gregory, 2009). Such a culture values teamwork, trust, and support and tends to produce better quality products. This goes for plant production lines but also for software development and construction. If you don't care about your people, they won't care as much about the product and the customers. The numbers will tell you.

Check your metrics to see if your culture could use an upgrade!

Got questions? Ask me!

Do you want to improve your organizational culture? Enroll in the Positive Culture Academy as an individual or with your team.

 © Marcella Bremer, 2019. All rights reserved.