The value and ROI of a workplace culture can be challenging to define and measure. Yet, there’s little that’s as important for a growing business to get right. In this read, we’ll shed light on how to measure the ROI of developing a thriving workplace culture for your business.
“What’s the ROI?” is a question that business owners and managers are constantly addressing and need to have answers for. After all, why is it that some teams work harder and deliver more than others? Why do some products or initiatives perform better? Measuring the ROI across every business function is imperative.
All things considered, there are proven links between a workplace culture that empowers people and the growth/ROI of a business.
And that’s not just a recent or modern philosophy. A 1992 study by James Haskett and John Kotter suggests that strong company culture can deliver income growth of up to 756% over an 11 year period (in this particular study). For business owners tackling slow growth, the case for investing in company culture has been in place for decades.
“Corporate culture is the only sustainable competitive advantage that is completely within the control of the entrepreneur.” David Cummings, Pardot
What is Workplace Culture
There are no easy answers to this question. There are hundreds of definitions of culture and workplace culture! For businesses that want to describe their workplace culture, terms like ‘agile’, ‘traditional’, ‘progressive’ or ‘transparent’ are often used.
While there is value to these terms, they don’t encompass what workplace culture is or why it’s important for ROI. It becomes even more challenging to define in an era where the workplace is being disrupted and remote working is becoming more prevalent.
At its simplest, the definition of a workplace culture is the sum of the values, beliefs, behaviours and actions of the business. It’s a major unique selling point of the organisation, and it’s what makes the business stand out from the crowd. Workplace culture consists of the shared values, beliefs, assumptions, and attitudes employees bring into the work environment. It is invisible yet acutely felt amongst employees and customers alike.
Often considered even more important than the business strategy, positive workplace culture is an integral part of any thriving business.
“Corporate culture matters. How management chooses to treat its people impacts everything for better or for worse.” Simon Sinek.
Why Workplace Culture Matters
Some business owners can be unsure about investing money or time into developing a more empowering workplace culture. And to those, we say “your culture matters” and the investment that’s made can quickly see returns that other business strategies simply can’t match. An empowered workplace culture leads to the following:
#1 – Improved Employee Performance
A positive and empowering workplace culture delivers better productivity and performance from employees. Engaged employees understand more about what’s expected of them, are happier in their work, have more loyalty to a brand, and are less likely to quit. A study by Gallup suggests that when employees are more engaged within an organisation, they are up to 21% more productive. Consider a business with thousands of employees all working at maximum efficiency and how that might reflect annual profits.
I used to believe that culture was ‘soft,’ and had little bearing on our bottom line. What I believe today is that our culture has everything to do with our bottom line, now and into the future.” Vern Dosch, author, Wired Differently
#2 – More Adaptability
The business world is in a constant state of change, and disruptions across all industries can appear out of nowhere. When a workplace culture is healthy and proactive, those business are going to be more well-equipped to adapt to even the biggest transformations. Even with remote and dispersed teams, managing change becomes much easier. Slow, disengaged cultures will rarely respond to industry changes or consumer trends.
#3 – Attracting Talent
If you want to build the best teams, you need to attract the top talent. It should never be overlooked just how essential company culture has become for the modern job seeker. If your company has a great reputation and compensation packages that go beyond your competitors, then those top candidates will be more drawn to you. For everyone but millennials, in particular, a positive and empowering company culture is one of the priorities when seeking employment.
#4 – Lower Turnover Costs
Employee turnover has cost US industries more than $630 billion. (Work Institute, 2020). And, each regretted resignation can cost a company up to a third of the worker’s annual salary. 67% of which often come from soft costs like reduced productivity but 33% come from hard costs like recruiting, hiring temp workers, and the like. (SHRM, 2019)
When you hire someone, and they eventually decide that your business isn’t the right fit for them, your talent acquisition team has to repeat that process all over again. Turnover costs can be excessive, and high employee turnover presents a great cost and risk to your business.
By investing in a workplace culture that employees will want to stay in for as long as possible, those high turnover costs can dramatically drop. Training costs will reduce, onboarding will not have to be carried out as often, and companies aren’t losing revenue through missing skills.
Tips for Measuring the ROI of a Company Culture
Of course, measuring the ROI of company culture has its challenges. After all, it’s an intangible concept, and there is a distinct lack of obvious measurables in place that can help gauge ROI. However, there are ways to access those insights.
#1 – Measure what Matters
Data can give you many answers and insights, and there’s a good reason for that. Businesses have access to vast amounts of data, and it can come from a multitude of diverse sources. When it comes to measuring the ROI of company culture, businesses need to have an agreed and unified set of KPIs to measure, such as talent acquisition cost, attrition rate, and even things like time-to-hire, number of job applicants, etc.
“Anything that is measured and watched, improves.” Bob Parsons, Founder, Godaddy group
If a workplace has a positive and empowering culture, engagement and productivity will increase, and turnover will improve. The evidence will be visible in the brand’s bottom line.
If the data shows that turnover is up and productivity is down, that’s a clear sign of a culture issue. It could be due to values misalignment, ineffective coaching, communication gaps, or many other underlying problems.
Identifying that there is an issue is the first step to finding a solution,
#2 – Ask Employees
It might seem obvious, but too many managers and leaders bring up the issues of a negative workplace culture without looking for solutions. The single best way to access solutions is to get the opinions of your employees. You could implement either one-on-one confidential meetings focus groups or company-wide surveys, or a combination of both.
“Our secret weapon for building the best culture is open and honest feedback.” Gina Lau, HelloSign
What’s important is that suggestions, criticisms, positive comments, and everything in between are all addressed and acted on. Listen to what’s being said and respond in the most positive ways. And most importantly, take actions that demonstrate you’ve understood and actually listened to their issues and challenges.
#3 – Have a Defined Culture
To build a thriving culture, you need to define 2 or more key Culture Pillars that will set you on the right path to unearthing what is really uniquely positive and authentic about your Culture.
- Your Purpose – this is your story, your WHY and it describes what you are fighting for. It is something that may never be achieved or a fundamental reason why you started the business in the first place and why you do what you do.
- Your Values – these describe your beliefs and principles you know to be true and are critical to live by. They set up the social contract people sign up to and guide behaviours that you want to see because you know they will ultimately help you achieve your goals.
- Leadership Principles – these set the standard for your collective leadership team. They allow you to define how people will show up as leaders and should reflect what people want from a leader in today’s world. This is one of the keys to ‘happy people’ making sure everyone has a great leader and has a great experience with leadership.
Case Study: How Improving Workplace Culture Saved Xerox
It’s safe to say that Xerox has made some mistakes in their history. The decision to focus on being a copier company rather than a computer company almost killed off the Fortune 500 company.
To tackle the massive drop in revenue and the growing fears of employees, former CEO Anne Mulcahy took over the company in 2000. At the time, the company was $18billion in debt. In a single day of bad trading, shares of the company went down by 26 points.
The existing business model was outdated and unsustainable. Mulcahy tackled this by championing the values of the company. Focusing on the needs of employees and customers alike, Xerox made cultural changes that have dramatically transformed the profits of the once-again-growing brand.
By speaking directly with board members, stakeholders, and employees, Mulcahy was able to more clearly define what was needed for the company to regain its potential. Using the ideas generated by in-house input, a more empowering company culture was developed that boosted innovation and productivity.
Now, Xerox is once again a top brand and now appears in multiple top US companies to work for lists. In 2020, the company reported profits of $7billion.
It’s not easy to build and maintain a positive, empowering, and high-performance company culture. It takes time and investment. It certainly goes beyond giving people more days off, sending tokens of appreciation, and introducing more fun activities.
Developing a more empowering company culture involves looking at everything from recruitment processes and onboarding to in-house communications and collaboration. The right compensation packages need to be in place, as well as career options for the best performers.
Measuring the ROI of workplace culture requires a commitment to developing that culture. It can be a relentless process, but the returns on the investment can transform the future of any business model.