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Return on Culture

Culture payoff: Looking for ROI in all the right places

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Dartboard and dartsIs it better to invest and lost or never to have invested at all? That is a question many of today’s companies may be asking themselves as they review the ROI of the investments they are choosing to make in culture.

There’s no question that today’s executives believe in the value of culture.  In fact, a new “Return on Culture” research survey conducted by Grant Thornton and Oxford Economics finds that more than half of senior executives have taken steps to improve their organizational culture.  But are they investing in the right culture elements that serve to drive bottom-line performance?

Today’s culture-focused leaders may, in fact, be spending money on culture elements that don’t matter and don’t contribute to real culture ROI. Companies spend over $720 million each year on employee engagement, a number that’s projected to rise to over $1.5 billion. Despite this sizeable investment, many organizations are struggling to achieve high ROI on their culture efforts.  How is this possible? Because most initiatives are undertaken as a short-term fix which are neither tied to business objectives nor to employee needs.
 
“Company leaders should think about culture investments in terms of a longer-term journey,” explained Nicole Blythe, Grant Thornton National Managing Partner, People Experience. “They’re investing in the wrong things because they want a quick fix.  Culture takes work over time.  Some things are quick and have a high impact but others require a much more significant investment and you don’t see the payoff immediately.”

Invest in what mattersGrant Thornton’s research suggests that company leaders are indeed getting it wrong when it comes to investing strategically in culture.  Nearly 40% of executives report that the greatest impediments to building a strong organizational culture include understanding employee wants and needs and tracking which methods work best.  Nearly a fifth also cite balancing employee wants and needs with strategic business goals.

“It was surprising to learn the percentage of companies that invest in culture but are investing in the wrong places,” said Chris Smith, Grant Thornton Strategy & Transformation Practice Managing Principal. “One reason for this could be the growing divide between those who make policy and investment decisions with those employees on the ground.  It’s no surprise that in some of those companies that are investing in the wrong places, we saw a lower percentage of companies performing voice of the employee studies. It’s probably more damaging to invest in the wrong things because it shows how out of touch you are with your employees.”



Erica O’Malley, Grant Thornton Partner, Organizational Strategy agreed that it is critical that companies understand their employees’ needs. “If you’re making investments in people and you’re not using people as your source of those decisions, you’re not making the right investments,” she said.  “So, a lot of times organizations do things because everybody else is doing them versus figuring out whether that’s important for their culture.”

Graph - Executives investing in climate vs culture

The result is that there is a huge disconnect between what executives and employees value in organizational culture. Consider some of these key findings from the Grant Thornton survey related to what elements of company culture employees actually value. Half of employees cited clear career paths, sense of purpose and respect among coworkers and leadership as important to employee loyalty.  More than a third indicated that the nature of work--including job fit and training--would increase their likelihood of staying in their current job. Yet, company executives are clearly investing their culture dollars elsewhere.  Executives cited on-site amenities (72 percent) and a pleasing physical environment (57 percent) as important for employee loyalty but only 57 percent and 36 percent of employees, respectively, agree.  Moreover, while many companies are focusing on improving workplace design, only 35% of employees say they are satisfied with on-site amenities.

“What we found matters most in our study to employees are the nature of the work and the people they work with,” O’Malley said. “What matters least is the ability to work remote and the physical environment. Workplace environment matters the least to employees and executives feels it matters the most which then gets turned into investment dollars so they’re actually investing money they don’t need to spend.”

More manageable work hours, better pay and more opportunities for advancement also top the list of those culture elements employees value. Not surprisingly, in today’s 24/7, always-on business climate, more than half of employees report they value the opportunity to disconnect after hours and on vacation.  

“If you think about society today and the access to information, employees need to feel like there’s a time in the day when they can actually shut off and not be at work,” O’Malley said. 

Executives dont understand employee priorities

Many companies, in fact, focus on the needs of their Millennial and Gen Z workers when making culture investment decisions.  But Grant Thornton’s Smith suggests leaders should pivot their thinking and instead invest to support top talent across all generational levels.  “The status quo of culture is investing in common activities or elements that impact the most number of employees,” he explained. “But if you are actually trying to cater and invest to the lowest common denominator what’s happening to those who are your top performers, those who actually set the pace and tone for your culture of the future?”

He added, “One of the slippery slopes of culture investments is actually putting too much investment in some of the activities that actually keep the lower performers and not the high performers.”  As an example, a company may invest in renovating an entire office space to increase overall employee satisfaction but a consequence of that investment may impact the bonuses of the top five percent high performers who may opt to leave the organization.

To make sure culture investments are the right ones, Smith suggests that companies get back to basics.  “Companies that are out of touch authentically with who they are tend to invest in areas that might not actually drive the needle.  It’s really important for companies to pause before spending or investing in culture and asking that fundamental question: ‘Do we really understand who we are and is that driven by what our customers think of us, what our employees think of us and what executives think of the company they’re leading?’”

Companies with healthy cultures invest in those areas that reinforce their core values and drive bottom-line performance.  Google has perhaps one of the most successful and unique cultures. One of the things Google does best is invest in culture elements based on data to make the most accurate decisions it can.  From retention algorithms that predict which employees are most likely to leave the company to studies revealing the optimal size and shape of cafeteria tables, Google knows how to gauge its personnel’s efficiency with hard numbers.

Consider the way in which they solved a retention problem with female employees. When they found that women were leaving the company at twice the rate of everyone else, it was discovered that a main issue was with the maternity leave plan for new mothers. When they changed the plan so new mothers could get five months’ paid time off instead of 12 weeks, Google’s attrition rate for women dropped by 50 percent.

Other companies are also investing in culture elements that align clearly with their mission and business strategy.  For example, LinkedIn hosts HR hackathons, where employees help break down and rebuild the people and HR functions to reflect both the work they actually do and need to do.  Adobe invests in real-time employee feedback programs, strengthens its diversity and inclusion efforts and provides employees access to consumer-grade technologies.

At VMware, tuition reimbursement programs have been revamped to better suit the needs of the company’s employees. Betsy Sutter, Chief People Officer for VMware, explained that a complete overhaul of the employee benefit was needed.  “The utilization rate of the program was low. Feedback from employees was that they needed not only our help removing any barriers to participate, but also wanted us to expand the learning choices made available to them.”

Following the redesign of the program, VMware employees can now access allocated dollars and apply it to whatever learning pursuit they want.  “It was just a different approach to the program,” Sutter said. “We said, ‘Look, we want you to learn. We want you to grow.  We want you to determine what works for you and give you the choice and flexibility.”

Five culture investments that matterEvery company culture is unique.  It should map to the organization’s defined vision and goals.  Investing in the right culture elements will help ensure the organization can generate true ROI from its culture initiatives.  Based on Grant Thornton’s research, here are five key culture elements that matter most to employees.  Once you’ve designed your culture strategy, consider how these elements can contribute to a healthy culture that drives business results.

  1. Cultivate better collaboration
    Today’s employees value collaboration across the company and across their teams. Less than half rate collaboration across the company effective and fewer than a third are satisfied with collaboration with their team. Find ways to provide opportunities for deeper collaboration, idea sharing and feedback from management.
  2. Training and development
    Compensation isn’t the only thing that matters to current generations of workers.  They also hunger for increased opportunities to learn and advance in their careers.  Focus on creating defined career paths or opportunities for advancement that will allow employees to remain fully engaged.
  3. Communicate and reinforce company vision
    Employees today value a sense of purpose, something that can be supported tied to a company’s core vision.  While 76% of executives believe they frequently communicate their value system, only 31% of employees agree.  Without a clear purpose, people get distracted and disengaged.  Make sure your company vision is authentic and addresses who you are and intend to be.  Reinforce the vision message frequently and consistently.
  4. Work life fit
    The ability to disconnect after hours and work flexible hours is at the top of the wish list for nearly half of employees surveyed.  Work at incorporating more flexibility in your organization’s structure to provide employees the opportunity to achieve better work life fit.
  5. Benefits that matter
    Review the benefits and perks your company provides to determine which ones have very low participation rates and identify any significant gaps in employee needs.

Investing in those culture elements that matter will help ensure your organization is building a healthy culture needed to thwart inevitable disruptions, attract top talent and differentiate in the marketplace.  Ultimately, the best measure of any healthy culture is the competitive advantage it provides.

Is your company investing wisely in culture?Take Grant Thornton’s culture benchmarking survey to determine your company’s current areas of strengths and weaknesses.  Designed to accommodate any given company’s unique profile, the benchmarking tool tests current performance against five key drivers that lead to healthier cultures including: workplace environment; direct investment in employees, diversity, sense of community and value systems.