Corporate culture can be elusive, hard to define and quantify. A school of thought suggest that culture cannot be seen or measured, but it can be felt. Company culture defines how team members operate within the framework of a business and interact with each other. While many leaders shy away from talking about these soft issues, HR professionals understand the underlining effect of these actions on performance.
That being said, understanding the power of culture and translating the impact of culture on the performance of a business are two different things. Why? This is because of the intangible nature of culture. Therefore, executives are wary of investing in culture transformation programs as there is currently no robust methodology for equating the return on investments (ROI) of a positive company culture.
How can you measure your company’s ROI on culture?
This can be done using the basic formula for ROI (Net profit/cost of investment x 100). One way to know the ROI on company culture programs is to simply calculate how much you have invested versus how much return the culture behaviours you see are generating and then show the difference in percentage. For example, if you invest N1,000,000.00 and make N1,500,000.00 in return, your ROI is 50%. However, the challenge is that company culture is not a quantitative measure; it is a qualitative measure.
However, there are metrics that can point you in the right direction when measuring company culture.
Evaluate the quality of talent you attract: Strong positive cultures attract top talents. Companies that care about their employees will have their employees take care of their customers. That extra care given to customers can have a positive effect on an organisation’s reputation, help attract customers and ultimately increase revenue.
Evaluate Engagement, Productivity and Turnover: In 2012, Gallup researchers studied 49,928 work units and 1.4 million employees to find the correlation between employee engagement and a strong corporate culture. They found that work units in the top quartile in employee engagement which had a strong positive culture outperformed the bottom units by 10% in customer ratings, 22% in profitability and 21% in productivity. Furthermore, work units in the top quartile showed a significantly lower turnover of 25% in comparison to work units in the bottom quartile, which showed a high turnover of 65%. This study suggests that strong company cultures positively impact employee engagement, productivity, and turnover. Therefore, evaluating your organisation’s culture using these metrics to compare the departments can give you strategic insight on the direction to take.
While most businesses understand the value of strategy in creating success, most ignore the critical role culture plays in realising the strategy. Business leaders must pay closer attention to company culture by; assessing the current culture DNA and its ROI, identifying the culture needed to drive business success and aligning this culture with the business strategy of the business.
As the legendary quote by Peter Drucker says, “culture eats strategy for breakfast”.
For more information or advisory services on culture definition, alignment or ROI measurement, contact info@phillipsconsulting.net
Written by:
Charlotte Adeyemi
Analyst
References
Gallup (2012) Employee engagement rise in the U.S Accessed;[1]
Forbes Human Resource Council (2020) 10 Proven Methods For Measuring The ROI Of Company Culture Accessed;[2]