The ROI of Culture

By John P. Foster

January 8, 2014

Does your organization have a defined culture or values?

If not, or if you don’t know, then January is a perfect time to think about how those two attributes can add to your top and bottom lines in the coming year. If they sound fuzzy and warm, they’re not. It has been proved that a values-driven culture can give you a competitive advantage and a stronger balance sheet.

For instance, have you ever thought about a values-driven culture as a recruiting and retention tool? It is. Best places to work generally have very well-defined, positive, collaborative cultures that lure the best candidates and keep productive employees. The Society for Human Resource Management estimates that it costs $3,500 to replace one $8-per-hour employee when all expenses -- recruiting, interviewing, hiring, training, reduced productivity and so on are considered. SHRM’s estimate was the lowest of 17 nationally respected companies who calculate this cost.

Other sources provide these employee replacement costs: 30 percent to 50 percent of the annual salary of entry-level employees, 150 percent of middle level employees, and up to 400 percent for specialized, high level employees.

Creating a culture that retains good people is clearly one example of its potential for ROI; there are others. Such calculations establish culture as a business asset, even a revenue center.

According to researchers Jeff Rosenthal and Mary Ann Masarech, values-driven culture contributes to business performance because they:

During almost 40 years in executive leadership positions, it has been my experience that beliefs are captured in values, and those values are exhibited in the form of behaviors. The sum of behaviors defines the culture.

So, if we believe being honest is important, it becomes a core value. If we identify behaviors that are consistent with honesty -- such as not lying, not being secretive, being open, transparent, forthcoming and trusting -- we will want to instill those behaviors into the culture. To have cultural integrity, we must define values so that we are all in agreement on their meaning.

Here are some key steps you must take to establish a values-driven culture:

A perfect example of a culture that is not working is one my consulting group came across recently in which managers proudly stated that their culture valued openness, opinions, positive disagreement and truth-telling. On closer examination, however, managers actually lacked what they called “mercy skills” in organizational interaction. Simply put, they shoot the messenger and punish all who speak up or disagree.

Where is your culture today, and where do you want it to be in 2014?

John P. Foster, managing member of the management consulting firm Pathfinder Group, has built several businesses and helps executives meet their goals by developing strategies to manage risk. He can be reached at john@governmentconsultants.com

(Image via mrkob/Shutterstock.com)


By John P. Foster

January 8, 2014

http://www.govexec.com/excellence/promising-practices/2014/01/roi-culture/76454/