By Candace Coleman, CultureWise Content Manager
“I know that culture is important, but how do we measure the ROI of a culture initiative?” It’s a valid question. As business leaders, we all want to make sure the investments that we make in our organizations pay off.
You may have a solid grip on how to measure the ROI on equipment purchases, IT development, or expanding your sales team—things that are easy to chart and compare. But what about something intangible like corporate culture?
There are studies that show some tantalizing statistics, claiming companies that focus on their culture have a 52% higher stock price, or are 28% more profitable, or have 36% more productivity. But those numbers are questionable. How can you isolate the many variables that may impact those increases?
Using ROI for Business Decisions
We hear these questions all the time at CultureWise, and our position is that the ROI on culture isn’t something you can accurately measure. But it may be your most important asset. Here’s why.
By its very nature, ROI is a calculation: you divide the net profit by the cost of the investment. While it can be a helpful tool for some decisions that business leaders need to make, it also has drawbacks.
Factors like interest, tax, and net vs. gross profit can muddy the outcome. And confusing cash flow with profit or neglecting to establish a true baseline can skew the formula. These conditions affect even the most concrete investments.
When it comes to measuring something intangible, like culture, the ROI formula lacks the scope to measure the whole picture. The standard calculation doesn’t offer a way to measure the sometimes subtle but significant ways that culture improves just about every aspect of a business.
ROI: Redefined for Culture
Business leaders who have invested in their culture, and consciously work on it, will tell you the ROI is evident in the way their people perform every day. A strong operational culture permeates every process, interaction, decision, and action. The impact of a strong culture is real, but it isn’t something that can be measured with a calculation.
Here are five of the many ways that culture makes a noticeable difference in a company—and all of them affect the bottom line.
1. Retention and Engagement
2. Winning More Business
3. Attracting Talent
4. Conflict Reduction
5. Improved Performance
RETENTION and ENGAGEMENT
After you spend time and money recruiting, training, and bringing employees up to speed, it’s critical to keep them in the fold. Companies with a revolving staff door are drained with continuous onboarding costs and risk lower production, lack of continuity, errors, and slumping morale.
A strong organizational culture creates a workplace environment that boosts job satisfaction. People are more likely to stay because they are more engaged.
Why? Because a high performing culture provides the framework and tools to make people feel purposeful and proud of what they do. A company with a strong operational culture offers:
- Dependable, highly functional processes that set people up to succeed
- Supportive, motivational management and training
- Meaningful acknowledgment for individual contributions
- Collaboration and transparent communication
Statistics back this up. A 2020 Gallop article lists corporate culture as one of the main factors influencing workforce retention. And happy employees are brand ambassadors. They’ll not only stay on board, they’ll wave your flag.
WINNING MORE BUSINESS
Companies are always looking for a competitive advantage. Business leaders will go to great lengths to perfect their products and services or their delivery options. But these are things that your marketplace opponents can copy. Everyone is essentially offering the same thing in your specific business sector. So how can you stand out?
A high performing company culture can be that extra element that your competitors can’t duplicate. If you define the behaviors that you know drive success, and your team consistently practices those behaviors as part of your company’s culture, you’ve created your differentiator.
An operationalized culture will enable your team to outshine others in many ways. They’ll be unmatched in their ability to:
- Honor commitments
- Provide exceptional service
- Deliver results
- Be resourceful
- Demonstrate integrity
- Produce with quality
- Focus on accuracy and precision
These things will resonate with customers as they weigh options. They build credibility. Given a choice between two companies that offer similar products and services, they’ll see that your people’s actions and attitudes separate your organization from the pack.
Culture often tips the balance in customers’ decision making. And competitors won’t be able to put their finger on why you’re winning more business. The behavior of your people is kind of a stealth asset because–it can’t really be measured.
A company with a dynamic culture is a magnet for talented recruits who are a better fit. But according to Monster.com, despite this increasingly important aspect of recruitment strategy, only 31% of business leaders say their culture makes them sufficiently competitive.
That’s because smart recruits aren’t attracted by a culture that relies on values posted on their website or fun perks for the staff. Top job seekers are looking for a cultural atmosphere where they can thrive and have a meaningful career. They want to work for a place that triumphs in the market because of the way things are done, not just by what things are done.
Only a strategically designed culture initiative can deliver this option. A culture-driven staff is empowered by a common language and set of behaviors that engage everyone in the organization.
The culture provides a platform for individual as well as organizational success—an appealing equation for top job seekers.
And the best talent will know right away if they are a good fit. That’s important because a bad fit, no matter how skilled they may be, won’t hang around. And if your company has a reputation for its specific culture, people who aren’t a good fit aren’t likely to come knocking at your door.
We’re human. And whenever people work together, occasional conflict is inevitable. What sets one organization apart from another is the way people respond to conflict when it happens.
Think about the disagreements and resentments that arise in your workplace. Often they bubble up over a clash of egos, or finger-pointing when something goes wrong. They can happen when someone misconstrues a comment or makes the wrong assumption about someone’s actions.
Whether they’re petty or substantial, conflicts can be an enormous drain on a workforce. When they happen, people retreat into a defensive, self-preservation mode. Their focus shifts away from what’s best for the company, and this can be costly. The delay in productivity and excessive time it takes to patch things up waste precious resources.
But if a team is given the tools to constructively view, discuss, and resolve conflicts when they arise, energy can be redirected toward overall goals and healthier relationships. A strong operational culture can provide this kind of structure for conflict resolution.
Culture provides leaders with a better coaching platform. And it gives clashing team members a shared language and ideology that gets them on the same page faster. The unified approach to addressing problems reduces the need for drama as things are sorted out. Molehills don’t turn into mountains, and things are resolved much faster.
A culture built on fostering positive and productive behaviors is an invaluable asset. It’s emotional ROI that helps everyone stay on track to push the company ahead.
You may have a lot of great people working for your company. But no matter how talented and driven they are, if they aren’t joining forces to hit organizational goals, they’re wasting potential.
We talked about how culture increases engagement. And it’s not hard to connect the dots between vested employees and improved individual performance. But culture heightens a company’s performance in another critical way—it teaches talented individuals how to excel as a team.
We’ve all witnessed the magic of a sports team clinching a championship. It doesn’t happen because a bunch of superstars are on the field together. It happens when those talented individuals work as a unit to achieve win after win. That doesn’t mean individual efforts aren’t cheered, but teamwork is what makes those stand-out performances count.
The same thing holds with a workforce team. CultureWise Implementation Specialist Logan Nance puts it this way: “It’s not about losing the individuality of your people; it’s about getting them to see company success as their own success.” He offers more insight along with a great sports analogy in his blog, “Transforming High-Performing Individuals into a High-Performing Team.”
A strong culture can galvanize your employees into a championship team that consistently outperforms the competition in your field.
The Bottom Line
These are just five of the areas that high performing culture significantly contributes to the financial health of an organization. And none of them fit into a black-and-white ROI calculation. But just because you can’t measure them directly, doesn’t make them less real.
As the old adage reminds us, “Not everything that counts can be counted, and not everything that can be counted, counts.”
At CultureWise, we offer a complete operating system for culture that has the potential to improve every facet of your organization. It’s an investment that not only pays dividends in the short term by infusing your staff with new energy. Your operationalized culture will steadily increase your company’s ability to be more profitable.
Most of our clients say that practicing Fundamentals is one of the most impactful things they’ve done in the history of their companies. Even if we can’t isolate the variables, they see greater productivity, lower turnover, and higher profitability.
They can also see it every single day in the way their employees work together, the way they treat customers, the pride they take in the quality of their work, and the passion they demonstrate.
Contact us to learn how CultureWise might be the most meaningful investment you can make in your company.