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How to Measure the ROI of Company Culture

Company culture often gets a bad rap for being the soft, ethereal aspect of a business enterprise. But, there is much more to it than birthday parties and motivational posters. How you choose to create and maintain your culture and treat the people you hire impacts employee engagement, retention, and ultimately the product you develop.

Success requires an amazing product, but it also depends on the people making the product. Employees need to feel inspired by the company mission and values, because raw talent is meaningless without the will to create results.

In July, David Ossip, CEO of Ceridian, spoke with the New York Times about company culture, hiring, open communication, and the turnover numbers that should raise red flags at any company:

“I would say that if [your turnover is] under about 8 percent, you have a very good company culture. If you’re in the 8 to 12 percent range, you’ve got a good culture. If you’re in the 15 to 20 percent turnover range, you’ve got something wrong. Some companies and industries naturally have high turnover rates, but generally something is not right if the turnover is that high.”

Turnover numbers are not the ideal way to gauge culture, especially for companies in that dreaded 15-20% range. So, how do you perform a quantitative analysis of how company culture impacts metrics like employee performance and productivity, or the propensity for turnover?

As the CEO of a successful startup, I have learned that communication is the most important ingredient for scaling a business that people want to be a part of. For the team to perform well and feel included in the greater purpose of the company, managers must regularly ask employees questions, provide them feedback, and clearly articulate company-wide and individual goals.

There is a high cost associated with building a culture: team retreats, gym memberships, personal and professional development classes. All this is to facilitate the personal evolution of each person who contributes to the company.

And, what are our results? In three years, not one employee has voluntarily left, which is a phenomenon that we believe can be replicated at any organization. We have the receipts to show how much it cost, and we also have uncovered the more obscure internal metrics that impact employee satisfaction and prevent voluntary turnover.

This is how we calculate the ROI of our company culture:

1. The Values Survey

Company values aren’t just meaningless sayings that HR puts up on the wall. Managers need to consistently address them with employees so that they become gateways for company growth.

We have 10 core values, including “Hold and Be Held Accountable.” Other values, like “Dare to Dream” and “Maximize Your Zone of Genius,” show employees that their ideas, thoughts, and unique skills are highly valued and encouraged.

Intuition and logic dictate that type of support will lead to employee satisfaction and retention. As a startup, we measure everything. So, once each quarter, we use Survey Monkey to obtain specific data on how aligned the team is with our values:

how well are you living our values

Just in case employees have forgotten the detailed description of each value, we include that information in each survey. Then, we ask each employee how aligned they are with each of our values, on a scale of 1 to 10.

commit to customer success

Sure, company leaders can just ask employees to recite the values at meetings or during a performance review. But, even if they can remember them, are they actually living them? When you hear the national anthem at a game, are you necessarily motivated to be more patriotic? Why not? You committed all the words to memory.

Instead of just running through the numbers, ask questions, get the data, and take action. A low score is a great early indicator of employee dissatisfaction or impending downturns in productivity. This is especially true if the value in the question directly relates to the role. If my customer success manager is not feeling aligned with “Commit to Customer Success and Delight,” I need to have a conversation.

A person who does not embody a company’s core values creates tension where there should be ease. Some people can meld into the culture over time, but employees that don’t believe in your values (and remain undiscovered) can unravel the very fabric of your company.

2. The 90 Day Game

After this past Labor Day, we kicked off a 12 week intensive for company growth. Every week, employees established goals for the coming week, and they rated their completion of the previous week’s goals on a percentage scale.

The intensive was not just about the completion of specific company objectives (although that data was also incredibly useful). We included a goal and habit for each employee – a personal achievement – that required some action to achieve. Here are some examples:

  • complete 3 chapters of a novel
  • broaden social network
  • lose 20 pounds
  • add 6 pounds of muscle
  • create a healthier home environment

What does this have to do with company culture? Everything. Supporting employees in their personal goals has a direct impact on their performance in the office.

A person can show up for an hour of work just to get a project done and collect a check, but if they feel uninspired, then that hour of effort will produce a particular outcome. If another person sits down to work with the mindset that their company is awesome, and they feel committed and aligned with team and company goals and even supported in their personal goals, the output from that hour will be vastly superior in quality and quantity.

ten game habit scores

Performance data on the completion of personal goals is a great barometer for intangibles like satisfaction, morale, energy, and commitment. These are factors that contribute or detract from the state of your culture.

3. The Survey Says…

At the beginning of last year, we started using TINYpulse with the team. They send 3 questions each week that can be answered anonymously. Anonymity is at odds with our cultural value of granting trust and transparency, which strengthens the bonds between employees and management. But, their platform allowed us to gather and analyze measurable data on the state of our culture:

how would you rate your culture

The better the culture, the lower the voluntary turnover. On a scale of 1 to 10, our team repeatedly rates our culture a 9.9. Is it any wonder that everyone also reported a desire to remain on the team for years to come?

4. Objectives and Key Results

Behavioral economist Dan Ariely gave a Ted Talk and shared his research that employees are motivated by a feeling of connection to a greater purpose and by ownership and pride in their work. The link between a person’s ownership over a task and their engagement is a fundamental human need that goes beyond workplace dynamics.

The lesson for managers and executives is that employee engagement is fueled by both challenge and ownership. It is imperative to create objectives every quarter, implement metrics to measure them, communicate along the way, and then analyze employee performance.

We developed performance-based management software and implemented these Objectives and Key Results (OKR) with the team. The OKR process basically works like this:

  • The company sets 3-5 objectives for the year and for each quarter.
  • Each team sets 3-5 goals that are aligned with these overarching company goals.
  • Each employee sets 3-5 objectives and key results for each objective, aligned with team and company goals.

objective and key results

  • Employees and managers gain mutual agreement and set OKRs as stretch goals that are not easily achievable and are not tied to performance evaluations.
  • Employees evaluate goals (score them) at the end of each quarter. The target set by the company is typically between 60-70% successful.

objective and key results2

  • Employees and managers decide whether employees should continue incomplete objectives (which occurs only if they are still important to the business).

OKRs provide employees with a sense of ownership and pride in their work, and managers connect each action and initiative to the deeper purpose. We do this by checking in regularly to make sure the team is inspired and the company philosophy is alive and well.

The CEO is responsible for setting the direction of his or her company, not only to develop yearly and quarterly objectives, but to be the chief advocate of the company mission, vision, and values. Asking survey questions about culture and values and measuring personal and professional goals can provide valuable data to anticipate and impact employee performance and retention at any organization.

Investing in company culture means creating an environment where employees feel supported and where their needs are met. I am not suggesting that you blow your potentially limited budget on employee perks. Not everyone can re-create the Google cafeteria (I hear the tri-tip is oh so tender). But, recognize that your culture and your business are kept alive by your people.

For some companies, like Amazon, culture is so important they are willing to literally throw away money in order to preserve it. In their Pay to Quit program, the company offers fulfillment-center (warehouse) employees one-time payments to leave voluntarily. Each employee gets the offer once a year, and it can be as high as $5,000.

That may sound expensive, but Amazon’s cultural ROI is through the roof. They are guaranteeing that those who remain are fully driven to collectively achieve the company purpose. That level of commitment is priceless.

About the Author: David Hassell is the founder and CEO of 15Five, the leading web-based employee feedback and alignment solution that is transforming the way employees and managers communicate. Named “The Most Connected Man You Don’t Know in Silicon Valley” by Forbes, Hassell also has been featured in The New York Times, The Wall Street Journal, Inc., Entrepreneur, WIRED, Fast Company, and Financial Post. You can learn more about 15Five and David Hassell at www.15five.com.

  1. For me the most important culture is the work environment, when you surrounded by smart and passionate people, that is the best workspace.

  2. laurence Ainsworth Feb 06, 2015 at 7:41 am

    I found your article interesting not the least because it seams to me to confuse employee engagement with Company Culture. The reality is that the two are completely different. There is no necessary relationship between engagement and culture. Also attrition is but one measure of culture and it may change due to external factors more than cultural factors.
    For example during this extended recession the vast majority of businesses were in the 8-12% attrition range, which according to your analysis would put them in the “good Culture” bracket. The reality of course was that there was nowhere else for disgruntled employees to go so they just didn’t leave.

  3. Interesting Post. I’m curious to know, what is the performance-based management software that you used to set the OKRs?

  4. I would love to learn more about the OKR software as well!

4 comments

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