The financial return on investing in an intentional company culture
Updated: May 16, 2019
¨This is just how we do things around here¨: Leaving culture to the default setting…
These days, company culture is often seen as the sole responsibility of HR, and implementing a new company culture is frequently reduced to a company-wide communication campaign. Many companies do not invest the time and resources it takes to design and embed culture in behavior across the organization. Culture often takes a back seat to strategy or gets confused with team building. Why is this the case? Except for a few powerful outspoken players in leading-edge companies, many executives, department heads, or team leads do not recognize the impact of culture on their bottom line. It is indeed hard to quantify the impact of culture — it is not a line item in an income statement, nor does it have a budget. However, the reality is, if companies do not intentionally create their culture, they are left to the default mode — business as usual.
What is company culture, anyway?
Culture is the collective knowledge and achievements of a group, expressed by things like customs of behavior, values, norms, systems, symbols, language, assumptions, beliefs, and habits. As Eric Siu described it perfectly in his blog on culture for Entepreneur.com:
“company culture is the personality of an organization…and includes the company’s mission, expectations and work atmosphere.”
Culture exists whether you design it or not because, as social animals, human beings need to understand the rules of the game, observing what is allowed, and how things are done.
Having a great company culture is no longer seen as a “nice to have”. Defining, designing and implementing strong company culture is more important to a company’s sustainable performance than having a strong and sound strategy.
Culture = currency
To highlight the importance of investing in creating culture, we have taken a stab at outlining a few of the significant and unnecessary costs that are a direct result of not intentionally designing culture and embedding it into day-to-day operations. Still, most companies do not address this, leaving their culture to ¨the default¨.
When we have no opportunity to look outside ourselves, to get feedback from others and to reflect on our own process, we are much more likely to stay stuck in a way of operating that does not work. When we are not connected to different people throughout the organization we fall back into our default mode, losing the power of collective knowledge and problem-solving. Even worse, when we adopt a culture of conformity, we may be communicating but not being honest about red flags or concerns we see in a project.
Here are 7 costs of not investing in creating an intentional, healthy culture. Do any of these look familiar to you?
1. Redundant work — without clear openness and communication within the company, you may have multiple departments or people doing the exact same thing. When a company is stuck in silos, people waste time trying to solve the same problems in their different roles.
2. Outdated, inefficient processes — when people don’t have the opportunity to investigate why they work together in the ways they do, they may inherit old ways of operating under the assumption that “this is just the way we do things here”. This lack of investigation can kill your company’s profit. A well-known example of this phenomenon is the ̈default meeting”- one of the biggest time sucks for companies. Teams without an opportunity to transform how they work together may continue to schedule and attend meetings even when they are not providing clear value.
3. Complex bureaucracy — processes and procedures are important to create consistency within a company, but when these are not critically examined, they often pile one on top of the other, creating an internal system that is harder to navigate than the challenges you are trying to solve in your business. Research published in Harvard Business Review found that the organizational drag caused by bureaucracy diminishes productivity, resilience and innovation and costs the economy more than $3 trillion each year in lost output.
4. Tunnel vision — when people are not on the same page in understanding what the company stands for, they are stuck only with their thoughts and assumptions and therefore in a default mode of thinking. Without access to different perspectives, they cannot source collective wisdom to solve problems.
5. Turnover & Disengagement — when people do not feel empowered to influence the way they work together, they soon lose their grit and motivation and, as a result, their performance suffers. Turnover and disengagement are some of the highest unnecessary costs of doing business. Gallup studies show that disengaged employees have a 37% absenteeism rate. Negative cultures have an 18% lower productivity rate. Companies with stressed and disengaged employees have a 50% voluntary turnover rate, which costs an average of 20% of the employee’s salary to replace them.
6. Repeating the same mistakes — making mistakes is no problem, but repeating them is simply a waste of time, energy and resources. Disengaged employees without clear and ongoing feedback culture make 60% more errors.
7. No sense of direction — working on too many things without priority — this results not only in ineffective work, but leads to feelings of overwhelm and finally burn out of your employees. A high-stress work environment is associated with 50% more health care expenses.
On the flip side, when you invest in designing a healthy company culture, you not only reduce these unnecessary costs but have a competitive advantage. Anyone can copy your strategy, but no one can copy your culture.
When you invest in intentionally creating company culture, you receive two benefits immediately:
1. People become aware of HOW they work together and are empowered to change things that do not work.
2. Your employees become clear on the vision of the organization, know HOW to contribute to strategy and achieve higher performance followed by generating genuine satisfaction from their job.
The financial return on investing in culture
There many ways on how you can design your organizational culture. However, in order to demonstrate the impact of an intentional company culture, we’ve chosen a few foundational principles and values that, when embedded in the day to day behaviors of companies, results in the positive financial outcomes: this is your return on investment in a strong culture:
- Helps people identify and solve problems faster — people are able to raise concerns or red flags about a project or process and therefore can mitigate larger issues
- Promotes clarity in understanding roles and processes
- Helps people escalating systemic flaws
- Nudges people to resolve rather than deny or suppress interpersonal conflicts
- Encourages continuous development of people through tools like real-time feedback
- Promotes learning from mistakes or failure
- Encourages trying on new ways of doing things or directions to see what works
Curiosity and openness:
- Sources new ideas from a greater variety of people — using knowledge and wisdom from within the company
- Builds a greater ability to pivot or change direction on a project or initiative
- Reduces blind spots and assumptions
Creativity across the organization:
- Drives employee performance and engagement
- Builds a sense of innovation from the entire company (rather than just the innovation lab)
- Catalyzes disruption — finding new ways of doing the same thing
Valuing diversity and bridging silos:
- Increases likelihood of new project discovery
- Reduces redundant work
- Promotes knowledge sharing
- Facilitates innovation through cross-functional communication
- Helps special projects efficiently scale
See the potential value of a strong culture, but not sure where to start? You’ve identified values but not sure how to weave them into the life of your organization? We focus on helping companies intentionally create a culture in line with their mission, and embed this culture in the day-to-day actions of the company. Reach out to firstname.lastname@example.org to discuss your companies challenges and see how we can help.
Meg Mateer & Grazyna Frackiewicz