Who you put first – employees, customers, or shareholders – defines the culture you create.
If you had to prioritize who should come first – employees, customers, or shareholders – who would it be? When these three stakeholders come into conflict, who do you make more important? When you need to make a decision that prioritizes one over the other, how do you decide?
The answer to these questions defines your organization’s culture. The below are the typical characteristics for the three corresponding types of company cultures – customer-first, employee-first, and shareholder-first – and what they might mean for the company as a whole.
Characteristics of customer-first company:
- Innovative and disruptive
- Fast and Aggressive
- Hardworking, “deliver at all costs”
- “Earn your stripes” culture
Right now, many innovation experts are advocating for a customer-first culture, which puts the client, customer, or patient at the center of the business. This tends to create an innovative, disruptive organization, but if left unchecked, it can also make the company a ruthless place to work. Amazon is a well-known example of this type of company – long hours, hard work, but with the incredible impact of revolutionizing e-commerce forever.
Another facet to consider – talent growth often comes at the expense of customer-centricity, as you need to take some risks in order to grow talent. For example, a client of mine who is very customer-centric has a culture where internal employees need to “earn their stripes” over the period of 12-18 months before they are allowed to interact face-to-face with a customer. This means that the opportunity to learn in real-time in front of a customer is diminished.
Companies often begin with a customer-first focus as they are founded on solving a customer need. These types of organizations tend to have intimate knowledge of their customers, focusing heavily on knowing the customer better than the competition. As they become more established and successful, people begin to talk about culture, talent development, benefits, and organizational structure – factors that signal a potential shift towards employee-first.
Characteristics of employee-first cultures:
- Warm and welcoming
- Familial and friendly
- Focused on talent growth and development
- Consensus-driven, slow, B-players often tolerated
Employee-first cultures tend to be very warm and cozy, almost like a family. One of my large tech clients explicitly states that they prioritize employees first, then customers, then shareholders. They believe that a company cannot adequately deliver for their customers or shareholders if the employees are not happy. For example, when faced with a decision such as, “Should we cut benefits in order to increase profits?” leaders who have the “employee-first” perspective would say no.
Another employee-first client has extensive rules in place to protect people’s jobs, ensuring that no one is laid off without at least six months’ notice and a long process of trying to help that person find their ideal role first. The intention of this is to create internal safety, but it also tolerates mediocre performance over long periods of time, which can adversely affect the rest of the team.
Employee-first cultures can become familial, seeking consensus to make decisions, which makes organizational shifts slow and onerous. It also means that having tough performance conversations can be difficult as it may feel disloyal to the organization’s employee-first culture.
If a company’s financial performance begins to slide, the leadership may put additional focus on the financials, the bottom line, and the shareholders, signaling a shift towards shareholder-first.
Characteristics of a shareholder-first culture:
- Operational efficiency emphasized
- Trying to streamline, focus, cut
- Fear, politics, bureaucracy
- Results and numbers driven
Often large mature companies start employee-first or customer-first but, over time, become shareholder-first. Though they may not admit to a shareholder-first mindset, their decisions tell another story. These companies are often in decline and to compensate for that, they become excessively results-focused, trying to cut operational costs year-over-year in order to save a deflating margin.
For example, one client chose to lay off thousands of employees purely for financial reasons and reduce offerings to customers in order to improve profits – a necessary step, the leaders argued. While this resulted in improved margin during the quarterly earnings and positive publicity from analysts, internal employees did not understand the benefit for customers or employees, so they lost trust in their leaders. In this example, many top performers chose to leave the company altogether, seeing this round of financial-based lay-offs as a step towards a slow decline for the company, and a loss of trust in the future of the business.
Companies in a decline that have fallen into shareholder-first prioritization can revive themselves by returning to a customer-first prioritization, by committing to re-learning their evolving customer and becoming ruthless in solving for their customer’s needs, even at the expense of short term shareholder satisfaction.
Of course, these three categories are simplistic, and ultimately each organization needs to find the right balance of the three stakeholders in order to be successful. Long-term, all three stakeholders need to be prioritized and important to the company. This will be different for different companies and industries; there is no perfect balance.
In spite of this ambiguity – the question is still valuable to ask as it determines the culture of the company: When the inevitable conflict arises, who does your organization put first? Every decision the leadership team makes sends a signal of the stakeholder they prioritize and influences the culture.