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Corporate Culture and Investment Returns: The ROI of Company Culture

By Cathy McCullough

    Tue, Jan 28, 2020 @ 09:00 AM Accountable Leaders & Teams

    If ROI matters to you, then you might consider “cuddling up” to the power of your company’s corporate-cultureculture. I say this, of course, a bit tongue-and-cheek because so many executives just don’t want to take the time to truly dive into what they perceive to be this esoteric thing called “company culture.” Yet,  according to the research (and according to the vast success of some contemporary companies that are known for incredibly engaging corporate cultures), culture is highly relevant to your bottom-line.

    But first, let’s understand that getting a high-performance culture is hard work. It’s so much more than a benefits package or a shiny brand or a "fun" place to work or crazy perks. It’s so much more than a list of tasks to do or things to offer. It takes intention and a relentless pursuit of greatness to build a viable business culture that will give you a return on your investment. 

    Research on the power of corporate culture started years ago. One of the initial reliable studies was conducted by John Kotter, the Harvard Business Professor who is also known for his work in leading change. Over dinner with Kotter a few years ago, I asked him about his life’s work. Indeed, he doesn’t see himself as a social butterfly (by his own admission), so the results of his initial study (conducted along with James Heskett) surprised him. But Kotter loves data and he was fascinated by what the data told him about the power of this ‘soft stuff’ we call a company’s culture. Kotter’s work is fascinating and his perpetual endeavor to continually research what impacts a company’s economic engine is second to none. He’s an absolutely amazing presenter of the facts, sharing case studies of his own along the way. As a result, he’s become one of the most respected authorities on leading change as well as company culture.

    The study noted above focused on companies that strategically and continually worked hard to build and then sustain a high performing culture as a key part of their ongoing strategy versus companies that did not have a strategic focus on culture. Their research noted the following about the companies who recognized culture as a powerful strategic tool: 

    • Revenues increased in these companies four times faster
    • Job creation rates grew to seven times higher
    • Stock prices increased 12 times faster
    • Profits climbed 750% higher
    • New revenue grew 700%
    • Customer satisfaction doubled 

    In addition, companies with a high performing culture create an “Employee Brand” that served them very well. For instance:

    • They had an average of 22% reduced recruitment fees (Employee Branding Global Study Report)
    • A 50% cost-per-hire savings (LinkedIn Study)
    • 94% of prospective employees are likely to apply for a job with a company that has an engaging company culture (Glassdoor); the potential to have a virtual bench of candidates to choose from is any company’s dream!
    • Increasing employee engagement investments by 10% can increase profits by $2400 per employee (TLNT)
    • Employee retention is dramatically increased. This is important when you look at what turnover costs. For entry level employees, it costs between 30-50% of their annual salary to replace them; for mid-level employees, the cost is around 150% of their annual salary to replace them; for higher level or specialized employees, the average is about 400% of their annual salary to replace them (Forbes, 2014).

    None of this is new. The research is out and additional research continues to provide support for Kotter’s initial findings. When I talk with executives, many of them want to know the “right” culture to strive for, and in all honesty, I don’t think there’s one “right” culture. But what is important is that executives see the strategic value of building a high performance culture that permeates everything their mission, vision, and core values stand for. Doing this, as I said earlier, is very hard work. The endeavor is taken much too lightly by many executives. 

    To all those executives that say organizational culture doesn’t matter — well, the research just doesn’t support that perspective. And like it or not, your company has a culture. It might be dysfunctional or lackadaisical, but you have a culture. As Deal and Kennedy like to say, “Culture is the way things get done around here.” Individual behaviors all add up to equal a collective behavior of what’s acceptable and what’s not as a way of going about work. These are many times unwritten agreements that dictate what and, more importantly, how we go about our work. 

    Your culture is your company’s uniqueness, and it provides you with a competitive edge. It’s a social and psychological form of DNA that can become a catalytic mechanism for your company. 

    In the end, your company culture is your company’s soul. Therefore, it might be worth paying attention.

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    Photo Credit: iStock by Getty Images

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