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142 — What’s the Cash Value of Developing Your Culture?

Today most executives agree that a well-developed company culture is a formidable competitive asset. However like all business decisions, the investment in developing your company’s culture should be weighed against the benefits.The pages below will help you calculate the cash return from investing in outside expertise to develop your company culture.

1. Assess Your Existing Company Culture 

Most managers are not familiar with thinking or talking about their company’s culture. This first question prepares you to answer the unfamiliar questions that follow. This question has statements about qualities or attributes of a well-developed company or business unit culture.

How are these qualities in your company or business unit? Check Agree   X   or Disagree   X  

People
Agree ___  Disagree ___    People here feel useful and productive.
Agree ___  Disagree ___    People here can be creative.
Agree ___  Disagree ___    People here see endless opportunities for improvements.
Agree ___  Disagree ___    People here know how they fit into the big picture.
Agree ___  Disagree ___    People here feel they belong.
Agree ___  Disagree ___    People here know they are valued for their work and contributions.
Agree ___  Disagree ___    People here have fun.
Agree ___  Disagree ___    Relationships at work are mature and non-political.
Agree ___  Disagree ___    People here have enough information to make good decisions.
Agree ___  Disagree ___    Most people here bring their full energy and creativity.

The Workplace
Agree ___  Disagree ___    This is a powerful company that engages employee’s hearts and minds.
Agree ___  Disagree ___    Procedures here are designed along with the people who will use them.
Agree ___  Disagree ___    Relationships and communications are fine.
Agree ___  Disagree ___    Power and control are widely shared.
Agree ___  Disagree ___    People are involved in decisions that affect them.
Agree ___  Disagree ___    The company creatively responds to challenges, suggestions, and change.
Agree ___  Disagree ___    Employees recommend working at this company to family and friends.

Leaders
Agree ___  Disagree ___   Leaders here put people first.
Agree ___  Disagree ___   Leaders here are good coaches.
Agree ___  Disagree ___   Leaders here ask people how they can help them.
Agree ___  Disagree ___   Leaders here set a clear direction — “This is where we are going.”
Agree ___  Disagree ___   Leaders here recognize, celebrate and reward desired behavior.
Agree ___  Disagree ___   Leaders here give everyone background information, the big picture.
Agree ___  Disagree ___   Leaders here protect people from abuse from the system above them.
Agree ___  Disagree ___   Leaders here make cooperative, team decisions.

Hopefully that got you thinking culturally.

2. Valuing Your Potential Company Culture

Studies indicate that most employees bring to work around 20% of their potential contribution. With a well developed company culture people will bring much more. Even with a conservative estimate doubling that 20% to say 40%, it’s clear why a more developed workplace, that more fully engages employees, is overwhelmingly competitive and profitable.

The six questions below describe some ways employees respond when leaders deliberately develop their company’s culture. Answering questions 2 thru 9 is difficult. Please try to put an approximate number against each item. You may not even know where the decimal point is. That’s OK. Remember, “Perfection is the enemy of the good.” Just make your best guess.

What would be the annual $ value to you or your company if all your managers and employees:

$ ________  Took full responsibility for identifying and solving problems in their work areas, without just passing them on to their boss?

$ ________  Watched and cut costs as carefully as you do?

$ ________  Look out for what is good for the company rather than just what serves themselves or their department best?

$ ________  Treated customers as if they cared about them personally, and customer loyalty doubled?

$ ________  Communicated so well up, down, and sideways that work always flowed smoothly across departments and throughout the company?

$ ________  Continually sought new, creative ways to improve work processes and build the business?

Nationally, The Cost of Underdeveloped Cultures is Enormous.
Nationwide the greatest loss to American business is the withheld energy and creativity of employees at all levels. If you assume even a minimal lost productivity of 5% (and it is probably closer to 50%), the annual national cost is in the trillions of dollars. Developing a powerful workplace culture — where people bring more of themselves to work — saves you your share of this terrible national waste. In many companies, reallocating a small part of the money now lost to low productivity, absenteeism, turnover, and dealing with unnecessary problems, would more than cover the costs of getting their people involved in a positive way.

3. Productivity

What would be the annual added value if employee, plant, business unit, or company productivity increased?

10% $ ___________        20% $ ___________      50% $ ___________       100% $ ___________

4. Labor related issues (If your facility is unionized)

Over the last 12 months what might have been saved if there were no discipline hearings, arbitrations, or attendance discipline issues?

$ _______________

5. Accidents and Safety

If applicable, what would be your annual savings if you had no major accidents and lost time injuries were well below one/million+ labor hours?

$ _______________

6. Attrition/Turnover/Retention

What would you save annually on recruitment, training, etc. if turnover was cut by 75%?

$ _______________

7. Reduced Management

Traditional workplaces have high control costs. In developed company cultures, employees take responsibility and control, solve workplace issues and feel freer communicating across boundaries and levels. These companies have low control costs, i.e. far fewer supervisors and middle managers. What would you save annually with 20% or 40% fewer supervisors and middle managers?

20%   $ ____________          40%   $ ____________

8. Your Culture Goals

Imagine that in 18 – 36 months you have the culture you want. What would that be? How would you like your company to be different? What four main results or outcomes would you want? (See also 312 — The Five Steps to An Unbeatable Culture,  1. Choose Your Culture Change Goal)

a. _________________________________________________________________________

b. _________________________________________________________________________

c. _________________________________________________________________________

d. _________________________________________________________________________

9. Estimate the Return

Everything described in 1. thru 8. is realistic and achievable. If you developed the culture you want, what would you estimate its annual added value would be to you, your company or your business unit? Keep in mind that the benefits of culture change are cumulative and ongoing. They begin appearing within the first eight weeks, are normally visible company-wide within the first 12 months, and solidly in place within 2 to 5 years. The three main variables are the industry type, the strength of top management support, and the company’s size.

Estimated Return/year   R $ _____________________

10. Select The Investment

Few managers are skilled in culture change. It is practically impossible to do without professional assistance. The figures on the chart below are drawn from my experience. However organizations vary enormously even within industry type, so the numbers are guides only. They represent only the investment in outside expertise. However the internal investment of top management time is relatively small, perhaps 3 – 4 hours per month, and that is mostly in the first six months of the culture change process. Employee problem-solving teams pay for themselves almost  immediately. After six months the culture change process naturally merges with normal operations and does not require additional management time.

Locate your company on this chart by # Employees (total FT payroll)
If you have say 500 employees, imagine a vertical line half way between 100 and 1,000 on the # Employees line. Your estimated Investment/year would be half way between $400k and $2,000k, i.e. $1,200,000. Write your Investment/year number into Question 11, 2nd space.

# Employees                                    10               100               1,000          10,000              100,000
Investment/employee/year         $9,000          $4,000           $2,000             $500                 $100
Years to complete change               1                  2                    3                    4                     5
Total Investment                            $90k            $800k           $6,000k        $20,000k         $50,000k
Investment/year                             $90k            $400k           $2,000k        $5,000k          $10,000k

11. Calculate Your ROI

Divide the Return/year (your estimate from Question 9)

R $ ________________________

by the Investment/year (taken from the above chart 10.)

I $ _________________________

R/I  =  _______ X 100 = _______ ROI %

Surprised? Typically the ROI in company culture is exceptionally high.

 

cc 142 — © Barry Phegan, Ph.D.

Posted in: About Company Culture — Why is Culture Important?

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