A lot of operational inefficiencies and performance flaws within a company result from misaligned expectations and ambiguous working relationships between colleagues. But even when staff are aligned on the obvious and essential factors, such as business processes, target financial numbers, and the distribution of duties, there can still be significant operational friction. There is such a thing as good friction, but here we’re talking about bad friction, the kind that slows down processes, erodes customer relationships, and slowly breaks down the fiber of an organization.

Sometimes the company’s people simply need a guiding light that goes beyond performance targets found in basic management textbooks. When a company defines its reason for existence in practical terms, it brings employees together, no matter where they’re located and what team they’re on, around a singular uniting force. This is a very strong force of alignment because it gets people to think not just about logical factors (“why does the company exist in the marketplace?”), but also about emotional factors (“how can I relate to the company’s purpose?”).

This isn’t about force-fitting some idealistic social enterprise “purpose statement” on a company’s website; rather, it’s about developing an honest narrative that describes the company’s position in the marketplace and why it deserves to maintain or grow its position in the marketplace. It’s easy for the company’s founders or chief executives to go to work with a sense of purpose because they’re in the driver’s seat, but as you work down an organization’s ranks it becomes tougher for people to understand these existential factors. It’s easy for the company’s founders or chief executives to go to work with a sense of purpose because they’re in the driver’s seat, but as you work down an organization’s ranks it becomes tougher for people to understand these existential factors. When people across the organization can tie their own job responsibilities to the business’s purpose, they are more likely to empathize with colleagues and customers.

But when a shared sense of purpose is missing, people define their own purpose and work towards different goals. In the worst case, each business function operates in “reactive mode,” where staff are perpetually putting out fires and defending themselves from a series of misaligned expectations. The sales team chases deals, the finance department looks to offset costs, the compliance team slows down processes to protect the company, the marketers are at the ready to help the sales executive that yells the loudest, and the human resources team struggles to recruit against high employee churn and uncertainty. In this misaligned state, teams look out for their own best interests, operational friction peaks, and business growth slows.

Shared purpose and company culture aren’t really easy to quantify. So in today’s data-hungry world, these human aspects of doing business tend to take a backseat to the calculations that can be crunched in a spreadsheet. The best venture capitalists and private equity firms understand these dynamics, but there are just as many investors and managers that simply don’t get it. I’ve seen big league private equity firms buy companies almost entirely on the merit of strong financial statements, failing to recognize the signs of destructive company cultures. In one acquisition I participated in, a private equity firm acquired a group of companies that looked valuable based on an analysis of financial statements. But, after the ink dried, newly hired executives arrived to find a sludge of tired staff, unsatisfied customers, industry-lagging product lines, and several unapproachable market sectors thanks to inconceivably-liberal perpetual license deals. This is what happens when softer, more social aspects of a business such as culture aren’t a priority. When a shared sense of purpose and desired cultural characteristics are not defined, weak cultures and unproductive behaviors develop. Game theory kicks in, social circles and alliances form, intracompany alignment drops, and overall morale nosedives.

You don’t have to look beyond today’s most successful companies to see that deliberate cultural definition should be a requirement for growth and scale. Netflix, Amazon, Zappos, Google, Patagonia, and IBM—all category-leading businesses—possess well-defined and broadly recognized cultural objectives.

It’s important to note, that the mere presence of formally defined cultural imperatives is not enough to unequivocally say that a company provides an idealistic and progressive place to work. In fact, it’s not hard to find firms that tout strong cultural values, but still screen new job candidates for something called “cultural fit,” which is often not anything more than a politically correct way to minimize diversity and maintain a stable status quo. So, when it comes to defining an organizational culture, we have to be careful about what we’re defining, and be clear about what we’re not defining.

Culture isn’t something we can create on paper, it is complex and built up over time, through experiences and interactions, and it is felt, observed, and thought. One can argue that a corporate office can never really define a company culture, but it can put words together that define the brand’s value in terms that are employee and customer-centric all at once. If there are unproductive and undesirable traits that lurk in the company’s bones, leaders must be deliberate about calling them out and establishing a plan for uprooting them. This isn’t done through statements on paper, it’s done by modeling good behavior and communicating effectively with empathy and honesty.

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This is an excerpt from the “Culture” chapter of my new book “Context: Reflections on the Essence of Doing Business with Humans.” The digital book is available today on Amazon, and the paperback will be available in late-May 2019. You can download a PDF sample of the book here.