What Is The ROI Of Corporate Culture?

roi of corporate culture

If you do not manage culture, it manages you, and you may not even be aware of the extent to which this is happening. — Edgar Schein*

Culture, For Some, Is An Intangible

It’s elusive, difficult to define, and even more difficult to quantify. For some, the thought is that culture is not something that can be seen or measured; rather it’s something that can only be felt. And we all know how most executives feel about investing in the touchy-feely.

roi of corporate cultureWhile it may make some leaders cringe to talk about feelings, there is truth to them and ignoring them won’t negate the fact that they are influencing performance. Culture may go unnoticed when it’s serving you well, but it’s felt when it’s derailing your organization. The feel when it’s not there is painful. And it’s when we’re in pain that we begin to pinpoint more clearly what is causing the pain. When things are going well, we don’t focus on the specifics.

Consider yourself as an organizational system for a moment. When you’re healthy, how much time do you spend appreciating the energy you have as you approach your to-do list? The ease with which you can sit at your desk, without back pain? The grace with which you can walk, bend over, or reach for things as you move through your day? But when you have a cold, a hurt back, or an injured ankle or shoulder, you can pinpoint exactly what isn’t working and the implications it is having to your performance.

Culture Is Measurable

Organizational Culture can be defined as the beliefs and assumptions that exist within an organization and drive behaviors within and across teams. The implications of healthy and unhealthy cultures are felt, and are measureable within organizations.

Ask any company that has understood the impact of their culture as it relates to things like employee engagement, retention, process improvement, error rates, cost savings, and customer satisfaction. The ROI of corporate culture is undeniable. When the culture is healthy, these performance metrics are thriving. When elements of the culture are not aligned, either to the vision and mission, or across teams in the organization, these metrics start to decline.

Often, the responsibility for creating or communicating the culture of a company lies within HR or Training, and sometimes within Purchasing.  Oftentimes, those assigned to “mind the culture” are left scratching their heads while they do their best to answer questions like these- What do we include in our orientation? What is our employee brand? When can we purchase those cool Herman Miller Aeron chairs? Can we get a foosball table up in here?

While I would argue that the responsibility for culture begins with leadership and becomes a responsibility of each employee, these functions are in a position to communicate the implications of the culture. HR, Training and Purchasing are improving year-over-year in their ability to make evidence-based decisions about where and how to invest in strategic initiatives. And culture is among those. They are collecting and reviewing employee satisfaction measures, they are reviewing competency data to ensure the organization has the necessary capability to serve the customers, they are paying attention to costs and determining where to invest and where to save yet still be able to conduct business and deliver quality. What these functions don’t have ready access to is what, specifically, in the organization is driving these measures.

Consider the added value to your organization if your employees were able to make decisions at the level where the best information was available, without ignoring or passing along problems. What if people were able to coordinate projects across different parts of the organization, and did so in a consistent and predictable way? We might expect to see an increase in employee satisfaction and quality of work.

What if your leaders and employees identified new and improved ways to do work and adapted to competitors or changes in the business environment? What if they also sought to cut costs with as much diligence along the way? Customers might be more satisfied with your offerings, and sales growth has the potential to soar.

How good would it feel if your mission gave meaning and direction to the work your employees show up to do each day, and that they understood what needed to be done in order to succeed in the long run?

Being part of a profitable organization feels pretty good. In Corporate Culture and Performance, John Kotter and James Heskett provide insight into how the culture of an organization impacts its performance, for better or for worse, as evidenced in firms such as Hewlett-Packard, Xerox, ICI, Nissan, and First Chicago. In fact, they found that companies that invest in communicating their vision, mission and values recognize their profits climbing as much as 750% higher!

It Is Imperative That We Measure Culture

However intangible or touchy-feely it may seem, measuring the bottom-line ROI of culture is possible. And it begins and ends with having the right data on hand. The first step is to begin with a deep understanding of your organization’s current state as well as where your organization needs to go from a strategic perspective.

Without deliberate assessment of your current culture, you are, at best, making decisions based on feel. With the evidence provided through a collection of data, both self-reported feedback as well as organizational measures, leadership is better positioned to make decisions about how to prioritize other strategic initiatives, how to allocate investments, which levers to pull through the course of doing business and supporting clients in a consistent and quality manner.

It is a necessary corporate stewardship to arm those who are making decisions with data that reflects the current health of the corporate culture and the implications it’s having, or will have, on performance.

Investing in employee engagement? How do you know what levers to pull to ensure that sustains and continues to align with your vision/mission/strategy? Investing in LEAN process improvement? How do you know where to further refine or adjust process steps or ownership in order to maintain operational reliability and still serve the changing needs of the customer?

As you entertain the question of what ROI might be for your investment in culture, ask first what investment you have made toward sustaining or improving corporate performance. Then ask what the annual value would be if those investments could be optimized. Divide by the ‘$ per employee’ investment in undertaking a culture initiative, and multiply that by 100. You’ll have an indicator of your ROI for investing in culture, and you’ll be one step closer to a healthier, and more sustainable organization.

* Quote Citation: Schein, E. H. Organizational Culture and Leadership, 4th Ed. Wiley, 2010.

 

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Shawn Overcast

Partner at gothamCulture
Shawn Overcast is a respected leader in leadership and organizational development, connecting people processes to business impact. She has over 15 years experience working in complex human capital departments spanning a variety of sectors and industries, and across the scale of small-mid size companies and global, Fortune 100 organizations.

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