Building a Culture in Small to Midsize Businesses (SMBs)
By Julia Borges & Kelly Cave
What is organizational culture?
Many may know the term ‘culture’ as a word that describes the behavior, thoughts, feelings, and traditions of a group of people or society (1). However, in organizational change and development, its definition means something slightly different. Culture, in the context of organizations, refers to the shared norms, beliefs, and attitudes that exist among the employees of the organization (2). For example, Southwest Airlines is famous for their friendly and helpful customer-oriented culture. At Southwest, employees are empowered to go the extra mile to make customers happy, which in turn leads to more employee buy-in of the common goal centered around excellence in customer-service. Organizational culture can manifest in various ways that either accelerate or decelerate organizational performance (3). The topic of organizational culture has become an increasingly popular area of focus, both in the management consulting industry and academia. This increasing popularity has resulted in the creation of management consulting firms who specialize solely in the transformation of organizational culture. Additionally, there are certifications, academic courses, and specializations dedicated to learning about organizational culture.
Why building a culture in a SMB can be challenging
A SMB refers to small and midsize businesses. For the purposes of this blog, we define a small business as consisting of 99 or fewer employees, and a mid-size business as one consisting of 100-999 employees. With their relatively small size, SMBs can offer more flexibility, visibility, and accessibility, which can be appealing both to clients and potential team members(4). Although SMBs have unique strengths, they still face challenges that larger firms also struggle with – one of which is establishing and maintaining a strong, fitting, and ideal culture. At first glance, it may seem like creating an ideal culture is a simple process, but there is a lot that organizations do to establish and maintain one, and this can be a challenge for SMBs for various reasons:
Financial Resources:
Although organizations do not necessarily need an abundance of financial resources to create a strong culture, it certainly helps. Given that income can be a function of company size, SMBs often differ from larger organizations in the availability of monetary resources (5). This limit in resources can hinder company culture because leaders may be unable to invest in culture-promoting elements that require financial investment such as off-sites, trainings and retreats, company events, thorough onboarding processes, or other HR initiatives.
Priorities:
Just like any organization, leaders of SMBs need to prioritize what key elements to drive and focus on. With SMBs, this has the potential to pose an even greater challenge as they generally have limited amounts of internal capabilities due to fewer financial resources (6). This shortage of internal capabilities (e.g., staffing) forces leaders to delegate their resources and team capabilities to only a few select priorities, and oftentimes, organizational culture does not make the top of the list.
Access to Expertise:
Finally, another barrier that SMBs face when enacting culture change is a lack of expertise to develop and facilitate the necessary change initiative. This lack of expertise likely arises as a symptom of fewer financial resources and internal capacities (5,6). While there are many consulting firms and independent contract workers with expertise in organizational culture change and development, their services are often costly, which may prove to be an unrealistic expense for many SMBs.
Tips for developing and maintaining a culture in a SMB
Get clear on the culture you want to establish. This may seem like a no-brainer, but it’s worth mentioning because it’s critical as this step builds the foundation for establishing and maintaining a culture (7). It is important that leaders of SMBs take the time to create their ideal culture.
Here are a few tips for creating your ideal culture:
-Ask yourself some key questions: Why are you in business? Who are you serving? How is your business unique? What type of team members do you want to attract?
-Seek inspiration from other companies and leaders
-Bounce ideas off of colleagues, mentors, or trusted friends
-Seek feedback from trusted peers
Refine your selection process.
Although you may have a full team, preparing for growth is essential and you’ll want to make sure you attract team members who are the right fit for your culture. Once you are clear about the type of culture you want to establish, it’s time to refine your selection process to follow. Having an effective selection process in place is essential to selecting the right candidates (8). Decide what characteristics you want future team members to possess and adjust your selection process accordingly. You can do this with the use of various personality, cognitive ability, situational judgement, and work sample assessments.
Establish your values and reinforce them often.
It is critical for leaders of SMBs to establish values that drive their organizations (9). Once these key elements have been established, the next step is to communicate them (7). Just like with any type of communication, it is important to have just the right frequency – often enough so the message is absorbed, but not too often so that it feels like overkill.
It is important to note that there is no ‘one size fits all’ for this cadence as every organization is unique – but here are a few ways to get started:
-Communicate values at monthly team meetings
-Hold value-reinforcing activities with your team a few times a year
-Encourage the integration of values into your client interactions, products, and/or services
-Incorporate values in internal and external communications
Celebrate and give positive recognition.
For those team members who take culture-aligning action, it is crucial to immediately and publicly celebrate and/or give positive recognition (7). Not only does it reinforce the behavior, but it also encourages other team members to do the same.
Immediately address and coach undesirable behaviors.
When team members take actions that don’t align with the culture, it is important to address it immediately (7). Along with this, other key elements are to get their perspective and coach them to desirable behavior. This ensures that you are not only addressing the undesirable behavior, but you are gaining a better understanding what led to it and ensuring that your team member feels heard.
Lead by example.
Leaders of SMBs play a critical part in establishing a culture as the rest of the organization will often look to them as a role model (7). They need to think of themselves as a catalyst for the culture they want to establish and have their behaviors align with this vision. A few important questions for leaders to ask themselves might be: How am I showing up to work? How am I reinforcing this culture with my actions? Am I being an ideal role model for my team members?
Whether it’s an organization of 20 or 900 team members, organizational culture has become an increasingly popular topic in both research and industry over the past few decades as it creates the foundation for an organization’s internal team dynamics and norms2. While there may be numerous challenges associated with establishing and maintaining a culture in a SMB, there are multiple ways leaders can overcome these to create a strong, thriving culture.
References
1. Jahoda, G. (2012). Critical reflections on some recent definitions of “culture”. Culture & Psychology, 18, 289-303.
2. Schneider, B., González-Romá, V., Ostroff, C., & West, M. A. (2017). Organizational climate and culture: Reflections on the history of the constructs in the Journal of Applied Psychology. Journal of Applied Psychology, 102, 468.
3. Schneider, B., Ehrhart, M. G., & Macey, W. H. (2011). Perspectives on organizational climate and culture. In APA Handbook of Industrial and Organizational Psychology: Building and Developing the Organization. Washington, DC: American Psychological Association, 373-414.
4. MacMillan, I. C. (1975). Strategy and flexibility in the smaller business. Long Range Planning, 8, 62-63.
5. Okuyama, K., Takayasu, M., & Takayasu, H. (1999). Zipf’s law in income distribution of companies. Physica A: Statistical Mechanics and its Applications, 269, 125-131.
6. Benito, G. R., Tomassen, S., Bonache-Pérez, J., & Pla-Barber, J. (2005). A transaction cost analysis of staffing decisions in international operations. Scandinavian Journal of Management, 21(1), 101-126.
7. Stouten, J., Rousseau, D. M., & De Cremer, D. (2018). Successful organizational change: Integrating the management practice and scholarly literatures. Academy of Management Annals, 12, 752-788.
8. Ployhart, R. E., Schmitt, N., & Tippins, N. T. (2017). Solving the Supreme Problem: 100 years of selection and recruitment at the Journal of Applied Psychology. Journal of Applied Psychology, 102, 291.
9. Ireland, R. D., & Hitt, M. A. (1992). Mission statements: Importance, challenge, and recommendations for development. Business Horizons, 35, 34-43.
